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Subject: Agriculture

  • Why the dairy sector needs more private players

    One of India’s largest dairy cooperative societies has just raised its milk prices for consumers by Rs 2/litre and this has become national news.

    Sparking off a debate

    • Many in the media are debating how this will push up Consumer Price Index causing inflationary pressures, which may soon force the RBI to change its “accommodative stance” on monetary policy.

    Why such hues over Milk?

    Milk is an important case study for our overall agriculture sector.

    • First, milk is our biggest agri-commodity in terms of value, greater than paddy (rice), wheat, and sugarcane combined.
    • Second, India is the largest producer of milk in the world with an estimated production of about 208 million tonnes in 2020-21, way above its closest competitor, the US, whose milk production hovers around 100 million tonnes.
    • Third, our dairy sector is dominated by smallholders with an average herd size of 4-5 animals.
    • Fourth, and this is important, there is no minimum support price (MSP) for milk. It is more like a contract between the company and the farmers.

    How is the milk price determined?

    • The price of milk is largely determined by the overall forces of demand and supply.
    • Increasing costs of production enter through the supply side, but the demand side cannot be ignored.
    • As a result of all this, the overall growth in the dairy sector for the last 20 years has been between 4-5 per cent per annum, and lately, it has accelerated to even 6 per cent.

    Concerns of dairy farmers

    • For dairy farmers, this increase in milk prices is not commensurate to the increase in their feed and other costs, and they feel that their margins are getting squeezed.
    • They also feel that this price still does not count their logistics cost.

    Transformation since Op Flood

    • It is well known that “Operation Flood” (OF) that started in the 1970s transformed this sector.
    • The institutional innovation of a cooperative model, steered by Verghese Kurien, changed the structure of this sector.
    • However, even after five decades, cooperatives processed only 10 per cent of the overall milk production.
    • India needed the double-engine force of the organised private sector to process another 10 per cent.
    • The doors for the private sector were opened partially with the 1991 reforms, but fully in 2002-03 under the leadership of Vajpayee, when the dairy sector was completely de-licenced.

    Rise of dairypreneurs

    • Many start-ups “dairypreneurs” have come in promising a farm-to-home experience of milk.
    • There is one company that delivers fresh milk at the consumer’s doorstep and gives quality testing kits at home.
    • These have digitized cattle health, milk production, milk procurement, milk testing, and cold chain management.

    Effective breeding

    • Sexed semen technology helps in predetermining the sex of offspring by sorting X and Y chromosomes from the natural sperm mix.
    • This can solve the problem of unwanted bulls on Indian roads.
    • Although the current cost of sexed sorted semen is high, Maharashtra has taken a bold step in subsidizing it for artificial insemination.

    Way forward

    • The upshot of all this is that let prices be determined by market forces, with marginal support from the government or cooperatives in times of extreme.
    • The major focus should be on innovations to cut down costs, raise productivity, ensure food safety, and be globally competitive.
    • That will help both farmers and consumers alike.
    • The cooperatives did a great job during OF, and are still doing that, but the private sector entering this sector in a big way has opened the gates of creativity and competition.

  • [pib] India to become self-reliant in Phosphatic Fertilizers

    The Department of Fertilisers is ready with an Action Plan to make India Aatmanirbhar in Rock Phosphate, the key raw material of DAP and NPK Fertilizers.

    What are Phosphatic Fertilizers?

    • Phosphorus is the eleventh most abundant element on the earth. Commercial phosphate fertilizers are manufactured using phosphate rock.
    • Approximately two-thirds of the world’s phosphate resources are derived from sedimentary and marine phosphate rock deposits.
    • Ground rock phosphate has been used as a source of phosphorous for soils in the past.
    • However, due to the low concentration of phosphorous in this native material, high transportation costs, and small crop responses, the usage of rock phosphate has reduced considerably in agriculture.
    • On the other hand, the usage of phosphorous based fertilizers has grown significantly.

    Which are the most common Ph fertilizers?

    • The most commonly used phosphatic fertilizers are Diammonium Phosphate (DAP), Monoammonium Phosphate (MAP), NPKs, and SSP.
    • DAP is the world’s most widely used phosphorus fertilizer. It is popular due to its relatively high nutrient content and its excellent physical properties.
    • DAP is an excellent source of phosphorus (P) and nitrogen (N) for plant nutrition.
    • It provides the correct proportion of phosphorous and nitrogen for the farming of grains such as wheat, barley, fruits, and vegetables.
    • NPKs, also called compound fertilizers, are fertilizers that contain all three nutrients, nitrogen, phosphorus, and potassium in different proportions.

    Also read

    [pib] Nutrient Based Subsidy (NBS) for Phosphatic & Potassic (P&K) Fertilizers

    Why need Phosphorus?

    • Phosphorus is an essential nutrient required for plant growth. It helps in root development, plant maturation, and seed development.
    • If soils are deficient in phosphorus, food production becomes restricted, unless the nutrient is added in the form of fertilizers.
    • Hence, to increase food production, an adequate amount of phosphorus is required.
    • Along with nitrogen and potassium, phosphorus is one of the most important elements for plant life.
    • Soil gets depleted of phosphorus due to several reasons including being washed away by rain. Therefore, modern farming is reliant on the use of phosphorus-based fertilizers.

    Consumption in India

    • Rock Phosphate is the key raw material for DAP and NPK fertilisers and India is 90% dependent on imports.
    • Volatility in international prices affects the domestic prices of fertilisers and hinders the progress and development of the agriculture sector in the country.

    Answer this PYQ in the comment box:

    Q.What are the advantages of fertigation in agriculture? (CSP 2020)

    1.Controlling the alkalinity of irrigation water is possible.
    2. Efficient application of Rock Phosphate and all other phosphatic fertilizers is possible.
    3. Increased availability of nutrients to plants is possible.
    4. Reduction in the leaching of chemical nutrients is possible.

    Select the correct answer using the code given below:
    (a) 1, 2 and 3 only

    (b) 1,2 and 4 only

    (c) 1,3 and 4 only

    (d) 2, 3 and 4 only

  • Fighting hunger needs fighting climate change

    The article suggests pathways to achieve SDG-2 by the adoption of climate-friendly agriculture practices.

    Food and SDG

    • Food is a common thread linking all 17 UN Sustainable Development Goals (SDGs) and critical to achieving overall goals within the timeframe.
    • NITI Aayog recently released the SDG India Index 2020-21, highlighting the national and states’ progress on SDGs.
    • The report states that 34.7% children aged under five in India are stunted.
    • 40.5% of children between 6-59 months are anaemic.
    • 50.3% of pregnant women between 15-49 years are anaemic.
    • India shares a quarter of the global hunger burden.
    • Four out of 10 children in India are not meeting their full human potential because of chronic undernutrition or stunting.
    • NFHS-5 shows many states have not fared well on nutrition indicators.
    • In addition to the malnutrition challenges, India’s food system faces negative consequences of the Green Revolution technologies.

    Pathways to follow in meeting the targets under SDG-2 (Zero Hunger)

    • Crop diversification especially in those areas where the existing practices are ecologically unsustainable should be promoted.
    • While Indian agriculture is a significant contributor to GHG emissions.
    • As per third Biennial Update Report submitted by Government of India to UNFCCC, agriculture sector contributes 14% of the total emissions.
    • Some of the climate-smart interventions like conservation agriculture, organic farming and agro-ecological approaches can effectively address the environmental concerns while ensuring food security and nutrition.
    • Crop-residue burning has become a huge problem in parts of the country.
    • This is mainly propelled by monoculture and a package of subsidies.
    • Conservation agriculture offers solutions to such problems with good agronomy and soil management such as zero-tillage or no-till farming, crop rotation, in-situ crop harvest residue management/mulching, etc, and industrial uses like baling and bio-fuel production.
    • Use of botanical pesticides, green-manuring, biological pest control, etc. are nature-friendly and such practices lead to eco-conservation.
    • The organic movement, fortunately, is catching up in Sikkim, Himachal Pradesh, and a few other states.
    • Modifying consumer behaviour forms an essential ingredient to transform Indian food systems and correlate positively with crop and diet diversity.
    • POSHAN Abhiyaan, India’s national nutrition mission, can play an effective role in addressing the issues of persistent malnutrition.
    • According to FAO estimates, 40% of the food produced in India is either lost or wasted in every stage of supply chain.
    • Winning the fight against food loss and waste can save India $61 billion in 2050 through increased industry profitability and reduced food insecurity, as well as reduced GHG emissions, water usage, and environmental degradation.
    • Shifting towards a circular economy can enable India progress towards the SDGs including halving food waste by 2030 and improving resource efficiency.

    Conclusion

    India’s success is essential to achieve the planetary goal of Zero Hunger. There is a need for transformation towards sustainable, nutritious and resilient food systems to achieve the goal of zero hunger.

    Source:-

    https://www.financialexpress.com/opinion/fighting-hunger-needs-fighting-climate-change/2279369/

  • What is AgriStack?

    The Department of Agriculture, Cooperation and Farmers Welfare has entered into an MoU with Microsoft Corporation to start a pilot project in 100 villages to create a ‘Unified Farmer Service Interface’ through its cloud computing services.

    AgriStack

    • The AgriStack is a collection of technologies and digital databases proposed by the Central Government focusing on India’s farmers and the agricultural sector.
    • The central government has claimed that these new databases are being built to primarily tackle issues such as poor access to credit and wastage in the agricultural supply chain.
    • Under AgriStack’, the government aims to provide ‘required data sets’ of farmers’ personal information to Microsoft to develop a farmer interface for ‘smart and well-organized agriculture’.
    • The digital repository will aid precise targeting of subsidies, services and policies, the officials added.
    • Under the programme, each farmer of the country will get what is being called an FID, or a farmers’ ID, linked to land records to uniquely identify them. India has 140 million operational farm-land holdings.
    • Alongside, the government is also developing a unified farmer service platform that will help digitise agricultural services delivery by the public and private sectors.

    Issues with the move

    • Agriculture has become the latest sector getting a boost of ‘techno solutionism’ by the government.
    • But it has, since then, also become the latest sector to enter the whole debate about data privacy and surveillance.
    • Since the signing of the MoUs, several concerns related to sharing farmers’ data with private companies the major one being Microsoft whose owner Bill Gates is said to be the largest private farmland owner in the US.
    • In all the MoUs, there are provisions under which the agriculture ministry will enter into a data sharing agreement with the private companies of the likes of Amazon, Microsoft and Patanjali.
    • The development has raised serious concerns about information asymmetry, data privacy and consent, profiling of farmers, mismanaged land records and corporatization of agriculture.
    • The formation of ‘Agristack’ also implies commercialization of agriculture extension activities as they will shift into a digital and private sphere.

    Why such concerns?

    • The project was being implemented in the absence of a data protection legislation.
    • It might end up being an exercise where private data processing entities may know more about a farmer’s land than the farmer himself.
    • Without safeguards, private entities would be able to exploit farmers’ data to whatever extent they wish to.
    • This information asymmetry, tilted towards the technology companies, might further exploit farmers, especially small and marginal ones.

    What are some major threats?

    • One of the biggest worries is the threat of financial exploitation.
    • We have already seen how microfinance firms have wreaked financial havoc in rural hinterlands.
    • Now, once Fintech companies are able to collect granular data about the farmers’ operations, they may offer them usurious rates of interest precisely when they would be in the direst need for credit.
    • With this, the risk of commodifying agriculture and farmer data ran high.

  • How green are India’s agri-exports?

    The article highlights the unsustainability of agri-exports owing to their water-intensive nature and subsidies provided in their production.

    India’s agri-exports

    • Agri-exports touched $41.8 billion in FY 2020-21, registering a growth of 18 per cent over the previous year.
    • Amongst the various agri-commodity exports, rice ranks first with 17.7 million tonnes valued at $8.8 billion, roughly 21 per cent of the total value of agri-exports.
    • It is followed by marine products ($6 billion), spices ($4 billion), bovine (buffalo) meat ($3.2 billion) and sugar ($2.8 billion).

    Trend analysis of agri-exports

    • During the last seven years, agri-exports have remained lower than the level reached in FY2013-14 ($43.3 billion).
    • That was when the highest agri-trade surplus (exports minus imports) was generated ($27.8 billion).
    • That was also when Indian agriculture was most globally integrated, with agri-trade (exports plus imports) touching 20 per cent of the agri-GDP.
    • It has slid to 13.5 per cent by FY2020-21, indicating India is becoming less globally competitive in exports and more protectionist in imports, presumably in the name of Atmanirbhar Bharat.
    • It is high time to review current agri-trade policies and accompanying tariff structures.

    Why sustainability of agri-exports is a concern?

    • From a strategic point of view, however, one must ask whether this growth rate can be sustained over a longer period, and the implications it has for Indian agriculture.
    • Water consumption: India is a water-stressed country with per capita water availability of 1,544 cubic metres in 2011, down from 5,178 cubic metres in 1951.
    • It is well known that a kg of sugar has a virtual water intake of about 2,000 litres.
    • In 2020-21, India exported 7.5 million tonnes of sugar, implying that at least 15 billion cubic metres of water was exported through sugar alone.
    • Rice, needs around 3,000 to 5,000 litres of water for irrigating a kg, depending upon topography.
    • Also, rice cultivation contributes to more than 18 per cent of the GHG emission generated from agriculture.
    • Subsidies: Power and fertiliser subsidies account for about 15 per cent of its value in states like Punjab and Haryana.
    • If these subsidies are withdrawn, rice will not be as preferred a crop with farmers as it is today.

    Way forward

    •  Farming practices such as alternate wetting drying (AWD), direct-seeded rice (DSR) and micro-irrigation will have to be taken up on a war footing.
    • Farmers may be incentivised and rewarded to save water, switch from paddy and sugar to other less water guzzler crops, and reduce the carbon footprint.
    • It is high time that policymakers revisit the entire gamut of rice and sugar systems from their MSP/FRP to their production in an environmentally sustainable manner.
    • At least in the case of rice, procurement will have to be limited to the needs of PDS, and within PDS, it is high time to introduce the option of direct cash transfers.

    Consider the question “Rice and sugar forms the part of India’s agri-basket. However, there are concerns over their sustainability. What are the reasons for concerns and suggest the measure to deal with these concerns” 

    Conclusion

    To maintain the sustainability of the agri-exports, crops must be produced efficiently and with minimal subsidies. The government needs to take steps to ensure that with rice and sugar.

  • [pib] Nutrient Based Subsidy (NBS) for Phosphatic & Potassic (P&K) Fertilizers

    The Union Cabinet has approved the proposal of the Department of Fertilizers for fixation of Nutrient Based Subsidy Rates for P&K Fertilizers for the year 2021-22.

    Key Points

    About Di-Ammonium Phosphate (DAP):

    • DAP is the second most commonly used fertiliser in India after urea.
    • Farmers normally apply this fertiliser just before or at the beginning of sowing, as it is high in phosphorus (P) that stimulates root development.
    • DAP (46% P, 18% Nitrogen) is the preferred source of Phosphorus for farmers. This is similar to urea, which is their preferred nitrogenous fertiliser containing 46% N.

    About Subsidy Scheme for Fertilisers:

      • Under the current scheme, the MRP of Urea is fixed but the subsidy can vary while MRP of DAP is decontrolled (i.e subsidy is fixed but the MRP can vary).
      • All Non-Urea based fertilisers are regulated under Nutrient Based Subsidy Scheme.

    About Nutrient-Based Subsidy (NBS) Regime:

      • Under the NBS regime – fertilizers are provided to the farmers at the subsidized rates based on the nutrients (N, P, K & S) contained in these fertilizers.
      • Also, the fertilizers which are fortified with secondary and micronutrients such as molybdenum (Mo) and zinc are given additional subsidy.
      • The subsidy on Phosphatic and Potassic (P&K) fertilizers is announced by the Government on an annual basis for each nutrient on a per kg basis – which are determined taking into account the international and domestic prices of P&K fertilizers, exchange rate, inventory level in the country etc.
      • NBS policy intends to increase the consumption of P&K fertilizers so that optimum balance (N:P:K= 4:2:1) of NPK fertilization is achieved.
        • This would improve soil health and as a result the yield from the crops would increase, resulting in enhanced income to the farmers.
        • Also, as the government expects rational use of fertilizers, this would also ease off the burden of fertilizer subsidy.
      • It is being implemented from April 2010 by the Department of Fertilizers, Ministry of Chemicals & Fertilizers.

    Issues Related to NBS:

    1.Imbalance in Price of Fertilisers:

    • Urea is left-out in the scheme and hence it remains under price control as NBS has been implemented only in other fertilizers.
    • There is an imbalance as the price of fertilizers (other than urea) — which were decontrolled have gone up from 2.5 to four times during the 2010-2020 decade.
    • However, since 2010, the price of urea has increased only by 11%. This has led to farmers using more urea than before, which has further worsened fertilizer imbalance.

    2.Costs on Economy and Environment :

    Fertilizer subsidy is the second-biggest subsidy after food subsidy, the NBS policy is not only damaging the fiscal health of the economy but also proving detrimental to the soil health of the country.

    3.Black Marketing :

    • Subsidised urea is getting diverted to bulk buyers/traders or even non-agricultural users such as plywood and animal feed makers.
    • It is being smuggled to neighbouring countries like Bangladesh and Nepal.

    Implications of Increasing the Subsidy on DAP :

    • As farmers will start sowing operations for Kharif Crops, it is highly important for them to get the fertilisers at subsidised rate so as to keep inflation at check.
    • Politically, too, to turn down the farmer protests, during the time of the Covid’s second wave, is the last thing the government would want.

  • Mustard oil blending is now banned

    The Food Safety and Standards Authority of India had decided this on March 31. This would end the practice to add other edible oil (like palms, rice bran, etc) to mustard oil.

    Why such move?

    • This is good news for mustard farmers whose fortunes were adversely hit as up to a fifth of mustard oil volume could earlier be blends of other oils.
    • But why did India start the practice in the first place? And how has it affected consumer health?

    Answer this question from CSP 2018:

    Q.Consider the following statements:

    1. The quantity of imported edible oils is more than the domestic production of edible oils in the last five years.
    2. The Government does not impose any customs duty on all the imported edible oils as a special case.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

    Why did the blending begin?

    • The Union health ministry had allowed blending in edible vegetable oil in a notification in 1990.
    • In 1998, Delhi and other north Indian states witnessed the dropsy epidemic — a disease that caused swelling in the body due to the build-up of fluid in tissues.
    • At least 60 people died and 3,000 were hospitalized in the national capital.
    • Researchers believed the consumption of mustard oil caused the disease.

    Adulteration is hazardous

    • Upon investigation, it was found to be adulterated with Argemone Mexicana, a kind of weed that grows with yellow flowers.
    • The adulteration, however, was highly suspicious: While mustard is a rabi crop that is cultivated in the winters, Argemone Mexicana grows in April-May.
    • This meant that the possibility of mixing mustard seeds with that Argemone mexicana was rare.
    • The suspicious adulteration stoked fear among the masses.  It started a campaign against the consumption of oil.
    • Several studies have found mustard oil unsafe for consumption.

    The 1990 decision

    • Experts have claimed that the blending of mustard oil was not only dangerous to health but also adversely impacted mustard farming.
    • Some groups have also flagged the blending of refined oil.
    • Following the Union health ministry’s 1990 notification allowing for the blending of edible vegetable oil, the FSSAI rolled out regulations in the regard in 2006.
    • Producers and other companies involved in blending were regularised through the Agriculture Produce (Grading and Marking) Act (AGMARK).
    • It also made it mandatory to write the kind of oil used for blending over the packet.
    • The companies involved in blending strongly advocated for the cause, despite reports about its excess and unregulated use. The governments over the years have been tight-lipped about it.

    Has blending led to dependence over the import of oil?

    • In 1990-91, India was self-reliant in mustard oil production and produced 98 percent of the oil needed.
    • Blending mustard oil with other edible oils considered to bolster nutritional profile, taste, and quality.
    • Despite the harmful effects, the processing industry took advantage of blending.
    • Cheap palm oil would be blended up to 80 percent in mustard oil sometimes.
    • As a result, profits of mustard farmers dried up, which discouraged them from cultivating the crop.
    • This could be one of the reasons behind India’s increasing dependency on oil imports over the last two decades.

  • [pib] Sub-Mission on Agricultural Mechanization (SMAM)

    To empower the farmers through the Sub-Mission on Agricultural Mechanization (SMAM) scheme, the government has released funds for various activities of Farm Mechanization.

    Sub-Mission on Agricultural Mechanization (SMAM)

    • The Agri ministry has launched this mission in 2014-15 with the objectives of increasing the reach of farm mechanization to small and marginal farmers and to the regions & difficult areas where farm power availability is low.
    • Under this scheme, it has been proposed to established Village Level farm Machinery Bank (VLFMB), Custom Hiring Centres (CHC) and High Tech Hubs (HTH) in order to facilitate easy availability of farm implements and machinery for hire by farmers.

    Why need such a scheme?

    • Agricultural Mechanization plays a vital role in optimizing the use of land, water energy resources, manpower and other inputs like seeds, fertilizers, pesticides etc to maximize the productivity of the available cultivable area and make agriculture a more profitable and attractive profession for rural youth.
    • It is one of the key drivers for the sustainable development of the agriculture sector.
    • Sustainable Agriculture mechanization growth will require appropriate and precision agricultural machinery adequately supported by the latest technology.

  • Beed Model of Crop Insurance in Maharashtra

    Maharashtra CM has urged the Prime Minister for state-wide implementation of the ‘Beed model’ of the crop insurance scheme Pradhan Mantri Fasal Bhima Yojana (PMFBY).

    Consider this question:

    Q.Payouts released often exceed the premium collected in PMFBY. Discuss this limitation of the PMFBY where insurance firms refuse to bid in drought prone regions.

    What is PMFBY?

    • Launched in 2016, the flagship PMFBY insures farm losses against inclement weather events.
    • Farmers pay 1.5-2% of the premium with the rest borne by the state and central governments.
    • It is a central scheme implemented by state agriculture departments as per central guidelines.
    • For farmers, the low rate of premium and relatively decent coverage make the scheme attractive.
    • Prior to 2020, the scheme was optional for farmers who did not have loans pending, but mandatory for loanee farmers.
    • Since 2020, it has been optional for all farmers. In Maharashtra, over the years, more non-loanee farmers have enrolled, although it was optional for them.

    Issues faced in Maharashtra

    • Voices were raised in Maharashtra about the need to change the scheme.
    • Delay in claim settlement, failure to recognize localized weather events, and stringent conditions for claims were among the concerns. Another complaint was about alleged profiteering by insurance companies.
    • For Maharashtra, where farmers predominantly depend of monsoon rains to water their crops, the scheme soon turned out to be non-profitable for insurance companies given the high payments they had to make.
    • Payouts were close to or exceeded the premium collected in some years, leading to losses to insurance companies.

    What is Beed model the state government wants implemented?

    • Located in the drought-prone Marathwada region, the district of Beed presents a challenge for any insurance company.
    • During the 2020 kharif season, tenders for implementation did not attract any bids. So, the state Agriculture Department decided to tweak the guidelines for the district.
    • The state-run Indian Agricultural Insurance Company implemented the scheme.
    • Under the new guidelines, the insurance company provided a cover of 110% of the premium collected, with caveats.
    • If the compensation exceeded the cover provided, the state government would pay the bridge amount.
    • If the compensation was less than the premium collected, the insurance company would keep 20% of the amount as handling charges and reimburse the rest to the state government.

    Greater role for States

    • In a normal season where farmers report minimal losses, the state government is expected to get back money that can form a corpus to fund the scheme for the following year.
    • However, the state government would have to bear the financial liability in case of losses due to extreme weather events.

    Why is the government pushing for it for the entire state?

    • The reason why Maharashtra is pushing for this scheme is that in most years, the claims-to-premium ratio is low with the premium being paid to the company.
    • In the Beed model, the profit of the company is expected to reduce and the state government would access another source of funds.
    • The reimbursed amount can lead to lower provisioning by the state for the following year, or help in financing the paying the bridge amount in case of a year of crop loss.
    • For farmers, however, this model does not have any direct benefit.

    Challenges ahead

    • The chances of the model being implemented for the present Kharif season appear slim.
    • Questions remain on how the state government is going to raise the excess amount, and how the reimbursed amount would be administered.

  • Centre announces hike in MSP

    The Central government has hiked the minimum support price (MSP) for the coming Kharif season. The decision was taken by the Cabinet Committee on Economic Affairs.

    Answer this PYQ from CSP 2018 in the comment box:

    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

    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 fall 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 price (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 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 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.