Minimum Support Price

Prelims level : Economics E1 - Agriculture, Ignorance, Subsidy, Marketing Mains level : GS3E - Issues related to direct and indirect farm subsidies and minimum support prices; Public Distribution System - Objectives, Functioning, limitations, Revamping; Issues of Buffer Stocks and food security; Technology missions; Economics of Animal-Rearing.
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Recently cabinet has announced MSP for 14 Kharif crops

What is MSP?

  •  Minimum Support Price (MSP) is a form of Market Intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.
  • The MSP is announced by the Government of India at the Beginning of the Sowing Season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
  • MSP is a Guarantee Price for their produce from the Government.
  • The major objectives are to Support the Farmers from Distress Sales and to Procure Food Grains for Public Distribution.
  • In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price.

Factors Determining the MSP:

  • Cost of production
  • Changes in input prices
  •  Input-output price parity
  • Trends in market prices
  • Demand and supply
  •  Inter-crop price parity
  • Effect on industrial cost structure
  • Effect on cost of living
  • Effect on general price level
  • International price situation
  • Parity between prices paid and prices received by the farmers.
  • Effect on issue prices and implications for subsidy.
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