Minimum Support Prices for Agricultural Produce

NITI Aayog to work on mechanism for MSP implementation


Mains Paper 3: Agriculture | Issues related to direct & indirect farm subsidies & minimum support prices

From UPSC perspective, the following things are important:

Prelims level: Minimum Support Price, NITI Aayog, Market assurance scheme, Price deficiency procurement scheme, Private procurement and stockist scheme

Mains level: Issues related to crop prices and MSP


A mechanism for implementation of the Minimum Support Price (MSP)

  1. Government think-tank NITI Aayog said it will work out a mechanism for implementation of the Minimum Support Price (MSP) for different crops in the country
  2. The Aayog noted that the procurement by central and state agencies is limited to rice and wheat and some amount of coarse cereals

Three concepts discussed

  1. The first option related to market assurance scheme, which proposes procurement by states and compensation of losses up to a certain extent of MSP after the procurement and price realization out of the sale of the procured produce
  2. Second option related to price deficiency procurement scheme
  3. Under this scheme, if the sale price is below a modal price then the farmers may be compensated to the difference between MSP and actual price subject to a ceiling which may not exceed 25 percent of the MSP
  4. No compensation would be due if the modal price in neighboring states is above the MSP
  5. Third option related to private procurement and stockist scheme
  6. It relates to procurement by private entrepreneurs at MSP and government providing some policy and tax incentives and a commission to such private entities

Better prospects via private procurement

  1. The option of private procurement and stockist scheme offered great promise as it reduces the fiscal implications for the government, involves private entities as partners in agriculture marketing and improves the competition in the market
  2. The government’s liabilities for storage and post-procurement management and disposal are also avoided
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