MINIMUM SUPPORT PRICE (MSP)

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 MINIMUM SUPPORT PRICE (MSP)

Cereal

It is a minimum rate assured remunerative price by the government to its farmers for their agricultural produces to sale in the markets not below this minimum rate. It means that there are a fix rate of agricultural produces in a financial year for both Kharif and Ravi crops to assure the farmers that if there is no market available for farmers to sale their produces as they want on profit or getting loss on stress selling at very low price in markets then in that situation government entities will procure their products at predefined minimum rate with at least 50% remunerative ( profit) of their  average actual costs production across country. 

"In 2018-19, during budget announcement   finance minister Mrs Nirmala Sitharaman announced the fixing of the MSP at a level of at least 1.5 times of the all indian weightage average cost of production"

Explanation: let us assume, a farmer produces wheat in a season and total expense occurred on his head is Rs 10 / quintal including all type of expenditure finally. 

  • Now, he wants to sale his wheat in the market and sold it Rs20/quintal hence he gained profit of Rs10 for that wheat and he satisfied with market conditions and feel happy.
  • If farmer wants to sale it in market but traders or buyers are willing to procure it at just Rs8/ quintal and he is compelled to sell it at that rate and gaining  loss  of Rs2, then he is not satisfied with market conditions and will decide not to farm in next season or will choose to get suicide in distress. To protect the farmer's profit government assures/ promises farmers in a prescribe form before every season that if there would not be market available at remunerative prices then government will procure their produces at least on 50% profit so farmers should got involved in farming without future distress selling.

Comprehensive costs of production(C2). It is a comprehensive measure of costs of production called C2, which includes assumed cost of capital invested, including machinery and rent on land plus value of family labour.

Comprehensively, it includes: all paid on costs such as those incurred on account of :

  • hired labour 
  • Bullock labour 
  • Machine labour
  • Rent paid for lease in land
  • Expenses incurred on material inputs:
    • Seeds
    • Fertilizers 
    • Manures
    • Irrigation charges
  • Depreciation on implements and farm buildings 
  • Interest on working capital 
  • Diesel/ electricity for operation of pump sets
  • Miscellaneous expenses and
  • Value of family labour.
Purposes:

  • To protect the farmer's interests 
  • To increase the production of specific crop(such as pulses, oil seeds) increasing more MSP of that particular compare to other to become self reliant 
  • To make a benchmark for private traders 
  • To increase the farmers enthusiasm of farming 
  • To stop farmer's suicide 
  • To procure grains for public distribution system at subsidised rate to the people of India to reduce the malnutrition and poverty.
  • To enhance the cropping areas
  • To meet the food demand
  • To increase crop diversification by differential remunerative 
Historical background

Green revolution: after independence in August 1947 India faced acute shortage of food grains for its people to feed them. Then, just after 13Years in 1960s, India had taken various measures to tackle food grain shortage following are:
  1. Farmers were given seeds of high-yieldiing varieties of rice and wheat.
  2. Punjab and Haryana were chosen because the region already had a network of Irrigation systems 
  3. Critical inputs such as power, Fertilizers, pesticide and machinery were provided at subsidised rates.
  4. Minimum Support Prices were offered to farmers output for first time.
Resulted in enormous production of grains and  food shortage India changed into food grains surplus India, this movement called green revolution. Since then, the concept of MSP is running.
Challenges regarding MSP 

  • MSP primarily work in case of grains, such as rice and wheat because government buys nearly 40% of the produce at assured rates which are increased annually.
  • MSP lead farmers first choice to choose rice and wheat crops for farming.
  • Resulting in very less production of other crops, such oilseeds and pulses causing deficiency in oil production and Daal because buying of these crops are very less.
  • Incentivised production of rice in Punjab and Haryana due to MSP led rapid reduction in ground water level causing may be environmental disasters in future. 
  • Government pays higher MSP every year than previous resulting in produce is non-competitive in global market.
  • India facing difficulties in wheat export because it is more expensive than others  exorting countries.
  • It hurts nutritional security in India. 
  • High production of rice and wheat are leading air pollution by burning stubbles.
Note:India ranked 94 out of 107 nations according to global hunger index 2020.

Measures taken by India to reduce such challenges :
  • There is shifting of Higher MSP for non- cereal crops, such as pulses, oil seeds than cereal crops such as rice and wheat
  • 3 new farm laws implemented.

What is Kharif crops?

All those crops which are harvested in winter season are called Kharif crops and are sown in summer monsoon season such as Paddy, Pulses (Tur, Urad, Moong), Oilseeds (Soybean, Groundnut), Cotton and Sugarcane.

What is Rabi crops?

All those crops which are harvested in hot(sunny)/ summer season and are sown in winter monsoon season are called  Rabi (sunny ) crops. for example, Wheat, Barley, Gram, Lentil, Rapeseed, and Mustard, Safflower.  

MSP for Rabi crops has been decided by the government of India for the year 2021-22.
    • wheat  with 2% increase to Rs.2015 per quintal
    • barley with 2.2% increase to Rs1635 per quintal
    • Gram with2.5% increase to Rs5230 per quintal 
    • Lentils with 7.8% increase to Rs5500 per quintal
    • Mustard/ rapeseed with 8.6% increase Rs5050 per quintal
    • Safflower with 2.1% increase to Rs5441 per quintal







Reference 

https://pib.gov.in/PressReleasePage.aspx?PRID=1725613

      https://www.globalhungerindex.org/







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