The Indian Government recently instigated an increase in the Minimum Support Price (MSP) for six different Rabi crops, including wheat, for the marketing season of 2024-25. Wheat, a primary rabi crop and the second-largest crop in terms of area covered in India, has seen the most significant increase, with a Rs 150 per quintal hike – the highest since 2007-08. This crop plays a vital role in the country’s economy.
What is the Minimum Support Price?
MSP stands as the guaranteed sum that farmers receive when the government procures their produce. The Commission for Agricultural Costs and Prices (CACP) – an office under the Ministry of Agriculture and Farmers Welfare established in January 1965 – recommends MSPs based on several elements. These factors include production cost, market price trends, inter-crop price parity, supply and demand among others. The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister, provides the final approval on MSP levels. The main aim of the MSP is to ensure remunerative prices for growers and facilitate crop diversification.
The Variety of Crops under MSP and Production Cost Types
The CACP proposes MSPs for 22 mandated crops – including 14 kharif and six rabi crops alongside two other commercial crops – and a Fair and Remunerative Price (FRP) for sugarcane. The CACP also outlines three types of production costs named A2, A2+FL and C2. These costs account for aspects such as paid-out costs directly incurred by farmers, imputed value of unpaid family labour, and rentals and interest for owned land and fixed capital assets respectively.
The Necessity of Minimum Support Price
The implementation of MSP was crucial following the economic hardships caused by twin droughts in 2014 and 2015, Demonetisation, the GST rollout, and increased input prices. MSP ensures that farmers receive a fair price for their crops, thereby reducing agricultural distress and poverty. This is especially vital in states where farming is the chief livelihood source.
Concerns Regarding the Implementation of MSP in India
Despite its benefits, MSP implementation has sparked certain concerns. The system is limited in extent, with only rice and wheat extensively procured and distributed under the National Food Security Act (NFSA). Even though MSP is officially announced for 23 crops, the majority of non-target crop farmers don’t benefit due to ad-hoc and insignificant implementation. Ineffective implementation, skewed crop dominance, dependency on middlemen, and the financial burden on the government are issues needing to be addressed.
Proposed Solutions to Improve MSP Implementation
There are several paths forward to enhance the MSP process. Expanding the list of crops eligible for MSP support can encourage crop diversification. Focusing on setting MSPs for crops essential to food security and ones that impact farmer livelihoods can optimize resource allocation. Finally, modernizing procurement mechanisms, reducing middlemen, and expanding the reach of procurement agencies can ensure better access to MSPs for more farmers.
Relevant Questions from UPSC Civil Services Examination
In previous years, questions relating to MSP have appeared in the UPSC Civil Services Examination. These include queries about the unlimited procurement at MSP for all cereals, pulses, and oil seeds across India and MSP fixed level to which the market price will never rise. Another question focused on MSP provision for niger seeds, and the cultivation and use of these seeds. Both queries required an analysis of MSP, showcasing its continuing relevance and importance.
