- Recently, the Centre has approved the Minimum Support Prices (MSP) for the Khari season 2022-23, stating that the rates are at least 1.5 times of the weighed average cost of production.
- The rates for 14 Kharif crops have been increased, the hikes ranging from 4% to 8%.
- Crops are sown from June to July and Harvesting is done in between September-October.
- Crops are: Rice, maize, jowar, bajra, tur, moong, urad, cotton, jute, groundnut, soyabean etc.
- States are: Assam, West Bengal, coastal regions of Odisha, Andhra Pradesh, Telangana, Tamil Nadu, Kerala and Maharashtra.
- The MSP is the rate at which the government purchases crops from farmers, and is based on a calculation of at least one-and-a-half times the cost of production incurred by the farmers.
- MSP is a “minimum price” for any crop that the government considers as remunerative for farmers and hence deserving of “support”.
- The Commission for Agricultural Costs & Prices (CACP) recommends MSPs for 22 mandated crops and fair and remunerative price (FRP) for sugarcane.
- CACP is an attached office of the Ministry of Agriculture and Farmers Welfare.
- The mandated crops include 14 crops of the kharif season, 6 rabi crops and 2 other commercial crops.
- In addition, the MSPs of toria and de-husked coconut are fixed on the basis of the MSPs of rapeseed/mustard and copra, respectively.
- The CACP considers various factors while recommending the MSP for a commodity, including cost of cultivation.
- It takes into account the supply and demand situation for the commodity, market price trends (domestic and global) and parity vis-à-vis other crops, and implications for consumers (inflation), environment (soil and water use) and terms of trade between agriculture and non-agriculture sectors.
Need of MSP
- The twin droughts of 2014 and 2015 forced the farmers to suffer from declining commodity prices since 2014.
- The twin shocks of demonetisation and the rollout of GST crippled the rural economy, primarily the non-farm sector, but also agriculture.
- The slowdown in the economy after 2016-17 followed by the pandemic further ensured that the situation remains precarious for the majority of the farmers.
- Higher input prices for diesel, electricity and fertilisers have only contributed to the misery.
- As against the official announcement of MSP for 23 crops, only two, rice and wheat, are procured as these are distributed in NFSA (National Food Security Act). For the rest, it is mostly ad-hoc and insignificant.
- The Shanta Kumar Committee, in its report in 2015, stated that only 6% of the MSP could be received by the farmers, which directly means that 94% of the farmers in the country are deprived from the benefit of the MSP.
- The current MSP regime has no relation to prices in the domestic market. Its sole raison d’être is to fulfil the requirements of NFSA making it effectively a procurement price rather than an MSP.
- Skewed MSP dominated system of rice and wheat leads to overproduction of these crops and discourages farmers to grow other crops and horticulture products, which has higher demand and subsequently could lead to increase in farmers income.
- The MSP-based procurement system is also dependent on middlemen, commission agents and APMC officials, which smaller farmers find difficult to get access to.
- A true MSP requires the government to intervene whenever market prices fall below a predefined level, primarily in case of excess production and oversupply or a price collapse due to international factors.
- MSP can also be an incentive price for many of the crops which are desirable for nutritional security such as coarse cereals, and also for pulses and edible oils for which India is dependent on imports.
SOURCE: THE HINDU,THE ECONOMIC TIMES,MINT