Minimum Support Prices for Agricultural Produce

Issues related to MSP

Note4Students

From UPSC perspective, the following things are important :

Prelims level : MSP system, Crop Seasons in India

Mains level : MSP Mechanism

The Centre has increased the Minimum Support Price (MSP) for various crops ahead of the upcoming rabi season harvest.

Answer this PYQ from CSP 2018

Q.Consider the following:

  1. Areca nut
  2. Barley
  3. Coffee
  4. Finger millet
  5. Groundnut
  6. Sesamum
  7. Turmeric

The Cabinet Committee on Economic Affairs has announced the Minimum Support Price for which of the above?

(a) 1, 2, 3 and 7 only

(b) 2, 4, 5 and 6 only

(c) 1, 3, 4, 5 and 6 only

(d) 1, 2, 3, 4, 5 and 7

 

Post your answers here.
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What is the Minimum Support Price (MSP) system?

  • MSP is a form of market intervention by the Govt. of India to insure agricultural producers against any sharp fall in farm prices.
  • MSP is price fixed by GoI to protect the producer – farmers – against excessive falls in price during bumper production years.

Who announces it?

  • MSP is announced at the beginning of the sowing season for certain crops on recommendations by Commission for Agricultural Costs and Prices(CACP) and announced by Cabinet Committee on Economic Affairs (CCEA) chaired by the PM of India.

Why MSP?

  • The major objectives are to support the farmers from distress sales and to procure food grains for public distribution.
  • They are a guaranteed price for their produce from the Government.
  • In case the market price for the commodity falls below the announced MSP due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced MSP.

Historical perspective

  • Till the mid-1970s, Government announced two types of administered prices:
  1. Minimum Support Prices (MSP)
  2. Procurement Prices
  • The MSPs served as the floor prices and were fixed by the Govt. in the nature of a long-term guarantee for investment decisions of producers, with the assurance that prices of their commodities would not be allowed to fall below the level fixed by the Government, even in the case of a bumper crop.
  • Procurement prices were the prices of Kharif and rabi cereals at which the grain was to be domestically procured by public agencies (like the FCI) for release through PDS.
  • It was announced soon after harvest began.
  • Normally procurement price was lower than the open market price and higher than the MSP.

Crops Covered

  1. Government announces minimum support prices (MSPs) for 22 mandated crops and fair and remunerative prices (FRP) for sugarcane.
  2. The mandated crops are 14 crops of the kharif season, 6 rabi crops and two other commercial crops.
  3. The list of crops is 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

Exception for Sugar

  • The pricing of sugarcane is governed by the statutory provisions of the Sugarcane (Control) Order, 1966 issued under the Essential Commodities Act (ECA), 1955.
  • Prior to the 2009-10 sugar season, the Central Government was fixing the Statutory Minimum Price (SMP) of sugarcane, and farmers were entitled to share profits of a sugar mill on a 50:50 basis.
  • As this sharing of profits remained virtually unimplemented, the Sugarcane (Control) Order, 1966 was amended in October 2009 and the concept of SMP was replaced by the Fair and Remunerative Price (FRP) of sugarcane.

Back2Basics: Rabi and Kharif Crops

Rabi Crops Kharif Crops
·         Rabi crops are sown at the end of monsoon or the beginning of winter. They are also known as winter crops. ·         Kharif crops are sown at the beginning of the rainy season and are also known as monsoon crops.
·         Flowering requires a long day length. ·         Flowering requires a short day length.
·         These crops need a warm climate for seed germination and cold climate for growth. ·         These crops require a lot of water and hot weather to grow. They depend on rainfall.
·         Unseasonal rainfall can damage Rabi crops. ·         Kharif crops depend on rainfall patterns.
·         The harvesting months are March and April. ·         These crops are harvested in September and October
·         Examples: Mustard, wheat, cumin, coriander etc. ·         Examples: Rice, bajra, groundnut.

Zaid Crops

  • The wide range of crops that grow in the short season between Kharif and Rabi crop seasons are known as Zaid crops. These are the months of March till July.
  • Examples: Pumpkin, cucumber, bitter gourd etc.

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Kaviya Kumar
Kaviya Kumar
1 month ago
Post your answers here." Read more »

b

Vivek thakur
Vivek thakur
1 month ago
Post your answers here." Read more »

b

Rishika singh
Rishika singh
1 month ago
Post your answers here." Read more »

B