What is Minimum Support Price ( MSP ) & related all information

What is Minimum Support Price ( MSP ) ?

The Minimum Support Price (MSP) Scheme is a scheme of the Government of India (GOI) to safeguard the interests of the farmers. Under this Scheme the GOI declares the minimum support Prices of various agricultural produces and assures the farmers that their agricultural produce (of FAQ) will be purchased at the MSP, thereby preventing its distress sale.

The government uses the MSP as a market intervention tool to incentivise production of a specific food crop which is in short supply. It also protects farmers from any sharp fall in the market price of a commodity. MSPs are usually announced at the beginning of the sowing season and this helps farmers make informed decisions on the crops they must plant.

Who and how MSP is decided ?

MSP is computed on the basis of the recommendations made by the Commission for Agricultural Costs and Prices (CACP). CACP submits its recommendations to the government in the form of Price Policy Reports every year, separately for five groups of commodities namely Kharif crops, Rabi crops, Sugarcane, Raw Jute and Copra. The government, in turn, circulates the CACP reports to state governments and concerned central Ministries for their comments. After receiving the feed-back from them, the Cabinet Committee on Economic Affairs (CCEA) of the Union government takes a final decision on the level of MSPs and other recommendations made by CACP. Once this decision is taken, CACP puts all its reports on the web site for various stakeholders to see the rationale behind CACP’s price and non-price recommendations.

How does CACP recommends the MSP ? 

While recommending price policy of various commodities under its mandate, the CACP keeps in mind the various Terms of Reference (ToR) given to CACP in 2009. Accordingly, it analyses

1) demand and supply;
2) cost of production;
3) price trends in the market, both domestic and international;
4) inter-crop price parity;
5) terms of trade between agriculture and non-agriculture; and
6) likely implications of MSP on consumers of that product.

It may be noted that cost of production is an important factor that goes as an input in determination of MSP, but it is certainly not the only factor that determines MSP.

Who Manages the Procurement of Grains ?

The Food Corporation of India (FCI) acts as the Nodal Agency of the GOI for procurement, along with State agencies who establishes purchase centres for procuring food grain under the price support scheme.

Where Can I find current information about MSP ?

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