Why in the News?
The Cabinet Committee on Economic Affairs chaired by Prime Minister has approved the increase in the Minimum Support Price (MSP) for 14 kharif crops for 2025-26.
What is the Minimum Support Price (MSP)?
- MSP in India originated in response to food shortages in the 1960s, notably during the Bihar famine of 1966–1967.
- Agricultural Price Commission (APC) was established in 1965 to implement price policies like procurement at pre-decided prices and MSP.
- Over time, the APC evolved into the Commission for Agricultural Costs and Prices (CACP) in 1985, with broader terms of reference.
- Announcement: The government bases its announcement on the recommendations given by the Commission for Agricultural Costs & Prices (CACP).
Steps involved in Fixing MSPs:
|
How is MSP fixed?
- Formulae for Calculation:
- A2: Costs incurred by the farmer in production of a particular crop. It includes several inputs such as expenditure on seeds, fertilisers, pesticides, leased-in land, hired labour, machinery and fuel
- A2+FL: Costs incurred by the farmer and the value of family labour
- C2: A comprehensive cost, which is A2+FL cost plus imputed rental value of owned land plus interest on fixed capital, rent paid for leased-in land
- National Commission of Farmers also known as the Swaminathan Commission (2004) recommended that the MSP should at least be 50 per cent more than the weighted average Cost of Production (CoP), which it refers to as the C2 cost.
- The government maintains that the MSP was fixed at a level of at least 1.5 times of the all-India weighted average CoP, but it calculates this cost as 1.5 times of A2+FL.
- Crops covered are: CACP currently recommends MSPs for 23 key crops:
-
- 7 Cereals: Paddy, Wheat, Maize, Sorghum (Jowar), Pearl Millet (Bajra), Barley, and Ragi
- 5 Pulses: Gram (Chana), Tur (Arhar), Moong, Urad, and Lentil (Masur)
- 7 Oilseeds: Groundnut, Rapeseed-Mustard, Soybean, Sesame, Sunflower, Safflower, and Nigerseed
- 4 Commercial Crops: Copra, Cotton, Raw Jute and Sugarcane (Fair and Remunerative Price (FRP) is announced by CACP.)
| [UPSC 2020] Consider the following statements:
1. In the case of all cereals, pulses and oil-seeds, the procurement at Minimum Support Price (MSP) is unlimited in any State/UT of India. 2. In the case of cereals and pulses, the MSP is fixed in any State/UT at a level to which the market price will never rise. Which of the statements given above is/are correct? Options: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2* |
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
