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MSP - Shanmugam IAS academy in coimbatore - UPSC/TNPSC


What’s in news?

The Centre has hiked the minimum support price (MSP) for paddy by less than 4% to ₹1,815 per quintal for the 2019-20 season. The ₹65 per quintal increase is much lower than last year’s hike of ₹200 per quintal, but will ensure that the MSP remains exactly 50% above the cost of production, not including land costs.

Key data’s:

  • The Cabinet Committee on Economic Affairs were hiked for 14 major crops of the kharif or summer season, to ensure they remain at a level that is 1.5 times the cost of production.
  • The only commodities with MSP that will ensure a higher than 50% return over input costs are bajra (85%), urad (64%) and tur dal (60%). But it was lesser than previous year.
  • The new MSPs stood at Rs 2,550-2570 for Jowar, Rs 200 for Bajra, Rs 3,150 for Ragi, Rs 1,760 for Maize, Rs 5,800 for Tur (Arhar), Rs 7,050 for Moong and Rs 5,700 for Urad. The MSP for cotton is now Rs 5150-5450 per quintal. Among oilseeds the MSPs for Groundnut, Sunflower seed, Soyabean, Sesamum and Nigerseed are Rs 5,090, Rs 5,650, Rs 3,710, Rs 6,485 and Rs 5,940 per quintal respectively.
  • In 2018 the MSPs for Ragi, Jowar, Bajra and Maize had jumped by 57 per cent, 42.9 percent, 36.8 per cent and 19.2 per cent respectively when compared to 2017.
  • Farmers groups pointed out that MSPs do not actually help the farmer unless procurement can be increased. There is no guaranteed procurement mechanism for most crops.
  • Farm organizations of Punjab have termed the Centre’s hike in the minimum support price (MSP) for kharif crops announced as a “cruel joke” on them, saying there was a “big difference” in the way the Centre calculated costs borne by farmers for growing the 14 crops of the season and the actual expenditure. 

Minimum Support Price (MSP):

  • In theory, an MSP is the minimum price set by the Government at which farmers can expect to sell their produce for the season. When market prices fall below the announced MSPs, procurement agencies step in to procure the crop and ‘support’ the prices.
  • The MSP is the rate at which the Centre procures these crops from farmers. 
  • The government must guarantee buyback at that rate so that the benefits reach 100% of farmers, or it is useless.
  • It is important because, Price volatility makes life difficult for farmers.
  • Though prices of agriculture commodities may soar while in short supply, during years of bumper production, prices of the very same commodities plummet. MSPs ensure that farmers get a minimum price for their produce in adverse markets. MSPs have also been used as a tool by the Government to incentivise farmers to grow crops that are in short supply.
  • Government announces minimum support prices (MSPs) for 22 mandated crops and fair and remunerative price (FRP) for sugarcane. The mandated crops are 14 crops of the kharif season, 6 rabi crops and two other commercial crops.
  • The list of crops are as follows.
    • Cereals (7) – paddy, wheat, barley, jowar, bajra, maize and ragi
    • Pulses (5) – gram, arhar/tur, moong, urad and lentil
    • Oilseeds (8) – groundnut, rapeseed/mustard, toria, soyabean, sunflower seed, sesamum, safflower seed and nigerseed
    • Raw cotton
    • Raw jute
    • Copra
    • De-husked coconut
    • Sugarcane (Fair and remunerative price)
    • Virginia flu cured (VFC) tobacco

Drawbacks of MSP:

  • Whatever the government has announced may cover costs, but is available to so few farmers that it is almost a ritual.
  • No guaranteed procurement mechanism for most crops.
  • Excess storage.
  • Effects of Inflation.
  • MSPs have unequal access.
  • The Crop production is still unviable despite of so many years of crop production.

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