MSP Full Form is abbreviated as Minimum Support Price. The minimum support price is the price below which the farmer’s crop cannot be purchased in the government mandi. MSP is essential for farmers because it ensures that the farmer will get a price higher than the cost price of his crop. The Government of India’s agency Commission for Agricultural Costs and Prices, i.e. CACP, sets a minimum support price for that crop every year before it is sown to get the right price for their crop.
- 1 MSP Full Form and What is the Minimum Support Price?
- 2 How is the MSP Calculated?
- 3 MSPs & Inflation
- 4 Why is MSP Important for Farmers?
- 5 Who does MSP benefit?
- 6 Conclusion
- 7 A Quick FAQ to MSP
MSP Full Form and What is the Minimum Support Price?
The minimum support price is the price below which the government agencies cannot purchase the crop. The government agencies buy the crop from the farmers at MSP for sale in the market. The Government has the right to accept any crop in the country at the MSP, and the rest of the farmers are allowed to sell their crop at any price. All the crops like jowar, moong, ragi, urad, Masur, mustard, and cotton have a price support price. The higher the cost of that crop, the higher will be the MSP for that crop. However, the higher the MSP, the better the price of the crop in the market. The focus of the government agencies is to ensure that the farmers get the right price for their crops.
How is the MSP Calculated?
The CACP evaluates various factors to come up with the MSP of a crop. The cost The input cost, labor, and operating expenses on the field are looked at by the CACP. The productivity of the farmer is also taken into account. The Production Potential Based on the area of the farmer’s land, CACP also factors the crop’s potential in terms of yield. The farmers can improve their production potential by adopting appropriate farming methods. The Global Market Price The CACP has studied the recent market price trends in the international market to predict the commodity price for the farmer. The cost of the commodity sold in the international market is compared to the global market price to calculate the MSP.
MSPs & Inflation
The basic concept of MSP is to protect the farmer’s interest and provide a cushion to him when the produce prices go down. When the MSP of an item is higher than the actual market rate, the Government will buy the crop at that price and sell it to the end consumer at that price to ensure that the farmer receives a higher price than the market rate. In other words, the farmers get the price that he deserves for his produce. This is a beneficial instrument in the economic interest of farmers because it ensures that the farmers receive a fee that they can cover their expenses and living expenses and, above all, have enough money to make investments in the production of crops.
Why is MSP Important for Farmers?
Since farmers take loans to buy seeds, fertilisers, pay rent and purchase farm inputs, the cost of cultivation is always higher than the profits that the farmer gets from the crop he cultivates. MSP ensures that farmers get a minimum price for their crops irrespective of the cost of agricultural commodities in the market. Farmers who take loans usually do not get a better price for their crop than the MSP if the MSP is not high enough. Since a lower MSP means a lower profit, farmers who cannot sell their crop immediately at the MSP may have to take a loan at high-interest rates from the money lenders to pay off the loan before they can even think of procuring their crop. What are the benefits of MSP?
Who does MSP benefit?
The farmers, to get the MSP, has to follow specific rules and norms as well. For example, the minimum support price for paddy has to be declared by September 15 every year. Besides this, the Government also appoints a committee to oversee this process and conduct a survey to determine the MSP. The farmers will have to wait for some time as the process takes time to get over. Once the MSP is declared, the farmer can purchase the required quantity of the product from the government mandis. To have a successful MSP, the farmers need to keep a record of the transaction. This is done to make sure that the input cost has been taken care of properly. This will help the farmer to get his right price.
The Government should also ensure that the farmers are given high and appropriate prices for their crops. The Government must also take measures to ensure that all farmers can grow in the right areas and that prices are not such that they cannot afford to grow their crops.
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A Quick FAQ to MSP
What is the Full Form of MSP?
MSP full form stands for Minimum Support Price.
Who fixes MSP in India?
The Indian government sets the price for 23 commodities twice a year. MSP is fixed on the recommendations of the Commission for Agricultural Costs and Prices (CACP) since 2009.
How MSP is calculated?
1.5 times MSP Formula = 1.5 times the A2+FL costs
The CACP considers both C2 and A2+FL costs to determine the MSP. CACP considers the A2+FL formula for return and C2 formula as a benchmark reference costs to make sure that the MSP covers the production cost.
Why is there no MSP in Farm Bill?
The MSP is basically a guarantee to the farmers that if they don’t a better price in the markets for the covered crops, the government would buy their agricultural produce at a fixed rate – the MSP. This came to be perceived as protection against loss for the farmers.
Who decides MSP rate?
Based on the recommendations of the Commission for Agricultural Costs and Prices (CACP), the Department of Agriculture and Co-operation, Government of India, declares Minimum Support Price (MSP) for 22 crops before the sowing season.
Is MSP good or bad?
It is the demand to make MSP a legal right and criminalize any purchase of agri-produce even outside government mandis. Such a measure will only debilitate agriculture in this country even further.