Minimum Support Price (MSP) meaning: Over the years, the MSP has helped the farmers in India to stave off the effects of financial fluctuations.
Minimum Support Price (MSP) meaning: The Minimum Support Price or the MSP is commonly known as the way of protecting the farmers in India from the uncertainties of the markets as well as those of the natural kind. A ‘safety net’ for the farmers, the MSP is the core of the agricultural revolution that saw India transforming from a food-deficient to a food-surplus nation. Over the years, the MSP has helped the farmers in India to stave off the effects of financial fluctuations. The MSP has become a major talking point after the farmers’ protests reached the national Capital. At FE Knowledge Desk, we deconstruct the concept behind the Minimum Support Price.
When was the MSP introduced in India?
At the time of Independence, India was staring at a major deficit in terms of cereal production. After the struggling first decade, India decided to go for extensive agricultural reforms. It was the first time in the year 1966-67 that the Minimum Support Price was introduced by the Centre. At Rs 54 per quintal, the MSP for wheat was fixed for the first time.
What was the need of introducing MSP?
On the path of the Green Revolution, Indian policymakers realised that the farmers needed incentives to grow food crops. Otherwise, they won’t opt for crops such as wheat and paddy as they were labour-intensive and didn’t fetch lucrative prices. Hence, to incentivise the farmers and boost production, the MSP was introduced in the 1960s.
How many crops are covered under the MSP?
At present, the Centre provides the MSP for 23 crops. These include cereals such as bajra, wheat, maize, paddy barley, ragi and jowar; pulses like tur, chana, masur, urad and moong; oilseeds such as safflower, mustard, niger seed, soyabean, groundnut, sesame and sunflower. The MSP also covers commercial crops of raw jute, cotton, copra and sugarcane.
How the govt decides on the MSP?
In India, there are two major cropping seasons, namely ‘Rabi’ and ‘Kharif’.
- The government announces the MSP at the start of each cropping season.
- The MSP is decided after the government exhaustively studies the major points made by the Commission for Agricultural Costs and Prices.
- These recommendations are based on some pre-fixed formulae. This includes the actual cost incurred, implicit family labour as well as the sot of fixed assets or rent paid by the farmers.
- In technical terms, these variables are called A2, FL and C2. The MSP is calculated by the government by often adding all these.
Is MSP legal?
Short answer – No. While Centre has been providing the MSP to the wheat and paddy farmers since mid-60s to tide over the food crisis, the fact remains that the MSP doesn’t have any legal stature.