Our country is no stranger to sudden environmental, economic or financial changes that affect the lives of all. But one group that is majorly affected by all these changes is the farmers. The farmers of India face many natural as well as market uncertainties when producing and selling agricultural products. As India is an agricultural country, protecting our farmers has to be on the top list of the government. This is why, to protect farmers from such uncertainties, the Minimum Support Price or MSP was introduced by the government of India in the year 1966-67. But what does this MSP really mean and how does it protect the farmers of our country? To understand this, let's go through the Minimum Support Price or MSP concept in detail.
What is the Minimum Support Price or MSP?
Minimum Support Price or MSP was introduced first by the Center in 1966-67. This was after India faced a major deficit in cereal production at the time of Independence. The less production was not able to meet the population's high demand. Therefore, after struggling for over a decade, the government of India finally decided to go for extensive agricultural reforms. As a first step towards this agricultural reformation, the Minimum Support Price or MSP was introduced.
The Minimum Support Price or MSP is a safety net for the farmers as it works towards protecting them from the uncertainties of the market and of the natural kind. The introduction of the Minimum Support Price or MSP was a revolutionary step for the agricultural industry of India, which transformed the country from a food deficit to a food surplus nation. Since then, MSP has proven to be of great help to the farmers to stay safe from financial fluctuations.
When heading towards the Green revolution, it was realised that the Indian farmers needed more incentives for the production of food crops. This was necessary, especially to grow crops like Wheat and Paddy that needed a lot of labour. Therefore, in an effort to provide higher incentives to the farmers, which would also boost production, the Center decided to introduce the Minimum Support Price or MSP. The first-ever crop to get an MSP decided was wheat, which got an MSP fixed at 54 per quintal.
Today, there are 23 crops that get the MSP. These crops include Bajra, Wheat, Maize, Paddy, Barley, Ragi, and Jowar, pulses like tur, chana, urad, moong, and masoor, oilseeds like safflower, mustard, niger seed, soya bean, groundnut, sesame, and sunflower. Other than these, commercial crops like cotton, copra, raw jute, and sugarcane are also provided with a Minimum Support Price or MSP.
How is the Minimum Support Price determined?
As you must already know, India's two major cropping seasons are the Rabi and Kharif cropping seasons. The Central Government of India fixes and announces the Minimum Support Price or MSP for the crops at the start of these Rabi and Kharif cropping seasons. This decision is made after the government carefully and extensively studies the major points made by the Commission for Agricultural Costs and Prices.
When farmers grow crops, they incur some implicit as well as explicit costs. The implicit or unpaid costs include the family labour and the rent paid by the farmers. All these costs are considered while calculating and fixing the Minimum Support Price or MSP. When talking in more calculative and technical terms, you can consider the variables A2, FL, and C2. The Commission considers these variables for Agricultural Costs and Prices or CACP in the following manner:
A2 This includes all the expenses incurred by the farmers for buying the chemicals, fertilizers, seeds, and hired labour for the growth, production, and maintenance of the food crops.
A2 + FL This covers the actual costs incurred along with the implicit costs in the form of family labour.
C2 This includes A2 + FL along with the fixed capital assets and the rent paid by the farmers.
Along with the above factors, some other important things considered by the Commission of Agricultural Costs and Prices or CACP in deciding the Minimum Support Price or MSP are as follows:
- Cost of cultivation per hectare and the costs of the crop in other regions of the country to compare the two and take note of the differences.
- Cost of production per quintal and costs of the same in other regions, again to compare and check the differences.
- Market prices of all the concerned crops and any changes within them.
- Other production costs and labour costs and any changes within them as well.
- The prices of any commodities sold or purchased by the farmers and any changes in these prices.
- Information regarding the supply of the produce. This includes area, yield, production, imports, exports, domestic supply, availability of the produce and any stocks present with the public agencies, government or industries.
- Information regarding the demand across the region. This includes the total and per capita consumption, trends and capacity of the processing industry.
- Information regarding the demand and supply within the global market and the prices of the produce in the international market or any changes in them.
- The prices of the farm product derivatives like jute goods, jaggery, sugar, cotton yarn. Edible or non-edible oils and many more.
- The costs and changes in the costs of processing of the agricultural products.
- Costs and changes in the costs of marketing, storage, transportation, taxes or fees, marketing services, etc.
- Information about the macro-economic variables like the consumer price indices and general level of prices.
All the above factors play an important role and are taken into consideration before calculating and fixing the Minimum Support Price or MSP during the Kharif as well as Rabi cropping seasons.
All in all, the concept of Minimum Support Price or MSP has worked in favour of the farmers and acted as their safety net for several years now. This is also why this concept is widely supported by Indian farmers all across the nation.
MSP for MFP
This latest scheme has been introduced by the Ministry of Tribal Affairs. It seeks to fix MSP for certain Minor Forest Produce in all states. TRIFED is the nodal implementing agency for the same.
