Minimum Support Prices for Agricultural Produce

[pib] Market Intervention Scheme

Note4Students

From UPSC perspective, the following things are important :

Prelims level : MSP, MIP

Mains level : Fixation of MSP and its legal backing

The Union Cabinet has approved the extension of Market Intervention Scheme (MIS) for apple procurement in Jammu and Kashmir (J&K) for the current season.

UPSC can ask a question on the difference between MSP and MIP. All the agricultural and horticultural commodities for which Minimum Support Price (MSP) are not fixed and are generally perishable in nature are covered under Market Intervention Scheme (MIS).

Market Intervention Scheme

  • MIS is a price support mechanism implemented on the request of State Governments for the procurement of perishable and horticultural commodities in the event of a fall in market prices.
  • It is implemented when there is at least a 10% increase in production or a 10% decrease in the ruling rates over the previous normal year.
  • MIS works in a similar fashion to Minimum Support Price based procurement mechanism for food grains but is an ad-hoc mechanism.
  • Its objective is to protect the growers of these horticultural/agricultural commodities from making distress sale in the event of the bumper crop.
  • Under MIS, support can be provided in some years, for a limited but defined period, in specified critical markets and by purchasing specified quantities. The initiative has to emerge from the concerned state.

Commodities covered

  • The MIS has been implemented in case of commodities like apples, garlic, oranges, grapes, mushrooms, clove, black pepper, pineapple, ginger, red chillies, coriander seed, chicory, onions, potatoes, cabbage, mustard seed, castor seed, copra, palm oil etc.

Remuneration under MIS

  • MIS provides remunerative prices to the farmers in case of the glut in production and fall in prices.
  • Proposal of MIS is approved on the specific request of State/UT Government, if they are ready to bear 50% loss (25% in case of North-Eastern States), if any, incurred on its implementation.
  • Further, the extent of total amount of loss shared is restricted to 25% of the total procurement value which includes the cost of the commodity procured plus permitted overhead expenses.

Implementation of MIS

1) Market Intervention Price (MIP)

  • The Department of Agriculture & Cooperation is implementing the scheme.
  • Under the MIS, a pre-determined quantity at a fixed MIP is procured by NAFED as the Central agency.
  • There are other agencies designated by the state government for a fixed period or till the prices are stabilized above the MIP whichever is earlier.
  • The area of operation is restricted to the concerned state only.

2) Funds transfer

  • Under MIS, funds are not allocated to the States.
  • Instead, central share of losses as per the guidelines of MIS is released to the State Governments/UTs, for which MIS has been approved, based on specific proposals received from them.

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