Minimum Support Price (MSP)

The minimum support price is the amount paid by the government for the crops from farmers, regardless of the market price. It is a form of support the government provides to the farmers, offering them a fair price and protection from sudden fluctuations in the marketplace. The announcement of the prices is before the sowing/planting season. Almost two dozen commodities are priced by the government each year with the recommendations of the Commission for Agricultural Costs and Prices. 

 

The Advent of MSP 

The Bihar famine of 1966–67 resulted from droughts and war and was a major part of the Indian food shortage era. MSP was first introduced as an incentive to farmers to increase productivity and adopt technology. However, with the onset of the early 2000s, it became an income source. 

The government has been working on awareness programs for the MSP acknowledgement among farmers. 

 

What are the Key Objectives of MSP?

• Definite income to farmers 
• No distress sales in the fear of price crash
• Adequate crop production
• Food security 
• Stable agricultural prices 

 

Who makes the Minimum Support Price Decisions?

The Commission for Agricultural Costs and Prices (CACP) is the community behind MSP-related decisions. 

The governing factors behind MSP-related decisions are:

• The cost of production of goods 
• Demand and supply
• The current market price trends 
• Inter-crop price parity 
• The impact on consumers and inflation 

 

What are the Challenges faced by the MSP?

The MSP is met with specific challenges, such as state disparity. For example, in a year, only a few states benefit from the scheme while others take the fall. 

The challenges met by the MSP are:

• The scheme is largely confined to rice and wheat
• The promotion of the rice-wheat system leads to water scarcity and stubble-burning
• The food and fertiliser take up ⅛ of the budget
• Inflation 

 

See Also 

• 14 principles of Henri Fayol's management 
• What is commerce?
• Organized and Unorganized sector
• Demat Account

 

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Frequently Asked Questions (FAQs)

What is the significance of MSP?

The minimum support price is the amount paid by the government for the crops from farmers, regardless of the market price. It is a form of support the government provides to the farmers, offering them a fair price and protection from sudden fluctuations in the marketplace. 

Who is the deciding committee behind the MSP?

 The Commission for Agricultural Costs and Prices (CACP) is the community behind MSP-related decisions. 

What are the crops that are majorly covered under the MSP?

The MSP has a system covering 23 crops, which are cereals, wheat, pulses, oilseeds, and commercial crops.