What is MSP? Full form, how it is decided, benefits, formula, problem

Minimum Support Price (MSP) : Many of us will not be aware of what an MSP is. Or how it is decided, what is the benefit to farmers from MSP.  In today's article, we are telling you what is MSP and what is the formula to decide it.

What is Minimum support price

The MSP's full name is the minimum support price. The MSP government guarantees the prices of some crops along with the grain of the farmers. To provide food to the needy people under the ration system, at this MSP, the government buys their crops from farmers.

Whatever the rate of that crop in the market, the government will buy it only at the prescribed MSP.  It is beneficial that farmers get to know about a certain price of their crop and how much their crop prices are increasing. 

However, the prices of a single crop in the market can be up or down. It is dependent on the willingness of the farmer to sell the crop to the government at MSP or to the merchant at a mutually agreed price.

Who decides MSP?

The minimum support price for crops is determined by the CACP ie the Agricultural Costs and Prices Commission. The CACP fixes prices for almost all crops. 

However, the sugarcane commission decides the support price of sugarcane. The Commission over time sends its suggestions to the government by fixing the minimum price of crops on the basis of cost of cultivation. The government announces the MSP after studying these suggestions.

Which crops are fixed by MSP?

MSP is fixed for some crops of Rabi and Kharif.  The MSP is calculated every year before the season harvest.

Currently, the government fixes the minimum support price for 23 crops. These include 7 grains, 5 pulses, 7 oilseeds and 4 commercial crops. 

The government fixes the prices of crops like paddy, wheat, maize, barley, millet, gram, arhar, moong, urad, lentils, mustard, soyabean, sunflower, sugarcane, cotton, jute etc.

What is the advantage of MSP?

The biggest advantage of deciding the MSP is that even if the price of the crop falls in the market, it is a matter of satisfaction that the government will get a fixed price on selling that crop.

MSP fixation formula

Often people wonder what is the formula to decide this msp. So let's know.

When the Modi government came to the Center, it took the initiative to adopt a new formula to fix MSP one and a half times the cost of the crop. The Swaminathan Commission for Agricultural Reforms was formed in 2004. 

The Commission had suggested several formulas for deciding the MSP. Dr. MS Swaminathan Committee recommended that MSP should be at least 50 percent more than the average production cost.

The NDA government led by Prime Minister Narendra Modi implemented the Swaminathan Commission recommendation and announced an MSP of at least one and a half times the production cost in the 2018-19 budget.

How to buy from farmers on MSP

Every year, the minimum support price for crops is fixed before sowing. The MSP is scheduled for every Kharif and Rabi season. Many farmers sow the crop only after seeing MSP.

The government purchases food grains from farmers through various agencies on MSP.  The government makes a buffer stock of grain by purchasing at MSP. 

After government procurement, this grain is stored with FCI and NAFED. This grain is used for Public Distribution System (PDS).

If any grain grows in the market, the government removes the grain from its buffer stock in the open market and controls prices.

What is wrong with MSP system?

It is difficult to determine the cost of farmers' crops. Most small farmers are unable to sell their crops on MSP. The middlemen take advantage of MSP by purchasing the crop from the farmer.  Many crops are still outside the purview of MSP.  But still say anything, the problem in msp is less and farmers have more benefits.

Various Info Conclusion

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