Minimum Support Price (MSP) : CACP

Why in News :

Recently, Parliament passed three new Agri-reform Bills, which created fear among farmers that these legislations will ultimately lead to the dismantling of the MSP regime. The primary reason for farmers fear is the non-statutory nature of MSP.

Also Read : New Agri. Bills

More in News :

For Rabi Crops :

Recently, the Cabinet Committee on Economic Affairs (CCEA) chaired by the Prime Minister Shri Narendra Modi approved the increase in the Minimum Support Prices (MSPs) for all mandated Rabi crops for marketing season 2021-22. This increase in MSP is in line with the recommendations of Swaminathan Commission.

The higher increase in MSP has been announced for lentil (Rs. 300 per quintal) followed by 

gram and rapeseed & mustard (Rs. 225 per quintal each) and

 safflower (Rs. 112 per quintal) 

For Barley (Rs. 75 per quintal)

For Wheat (Rs. 50 per quintal) respectively has been announced.

The increase in MSP for Rabi Crops for marketing season 2021-22 is in line with the principle of fixing the MSPs at the level of at least 1.5 times of the All-India weighted average Cost of Production as announced in Union Budget 2018-19. 

 For Kharif Crops :

Hon'ble Prime Minister Shri Narendra Modi chaired the Cabinet Committee on Economic Affairs (CCEA) has approved the increase in the Minimum Support Prices (MSPs) for all mandated Kharif Crops for marketing season 2020-21. It ensures remunerative prices to the growers for their produce.

The highest increase in MSP proposed for nigerseed (Rs. 755 per quintal) followed by sesamum (Rs. 370 per quintal) and cotton (long staple) (Rs. 275 per quintal). 

What is MSP ?

• The MSP is the price at which the government purchase crops from the farmers, whatever may be the price for the crops.

• The government has announced to ensure the Minimum Support Price to farmers for mandate crops. 

• Commission for Agricultural Costs and Prices (CACP) under the Ministry of Agriculture recommends MSPs for 24 crops. 6 crops belong to Rabi Crops and 14 crops from Kharif Crops (Sugarcane falls under the purview of Fair and Remunerative Price Act).

Objective of MSP :

• Assured Price : To give fix prices and assured market to the farmers & save them from the price fluctuations.

• Improve Productivity : It encouraging higher investment & adoption of modern technology in agricultural activities.

• Consumer Interest : To safeguard the interest of consumers by making available supplies at reasonable prices.

How is MSP decide ?

CACP recommend MSP by the following factors -

• Input Cost - it means cost of cultivation (A2 + FL method).

• Demand and Supply situation for the commodities.

• Domestic and Global market price trend of the crops.

• Inter-crop price parity.

• Study of consumer behaviour.

• Effects on cost of living of the population.

• Cost of marketing - storage, transportation, processing, marketing services etc.

Mostly, MSPs are announced by Government at the began of the sowing season. These recommendations are not binding and can be modified by the Cabinet Committee.

Advantages of MSP :

• It ensure farmers income from new sowing season.

• The MSP system has been beneficial in transferring incomes to rural areas and to counter farm level inflation.

• The MSP of crops will encourage the farmers to grow nutritional crops. This will help in changing the cropping pattern.

• It provide incentive for farmers to produce the crop which is in short supply.

• This would empower farmers to invest in necessary  infrastructure and equipment.

• It prevent farmers from lower price of crops in the market due to higher production of the crops & lower demand crops.

• It procure the crops for public distribution by fair price shops.

• The differential remuneration is aimed at encouraging crop diversification.

Disadvantages of MSP :

• Lack of Awareness - according to NITI Aayog only 10% farmer aware of MSP before harvesting and 60% farmer aware after harvesting.

• Recently, increain MSP for pulses, but there are no clear correlation between higher MSP and area under pulses.

• Many States unable to pay cost of cultivation from MSP announced by Central Government.

• Distorting Cropping Pattern - mono-cropping e.g. Rice, wheat, sugarcane.

• It has limited ability to change cropping pattern.

• Reducing water resources, soil degradation.

• Subsidy burden on fiscal health of the nation and inflationary trends.

• Delay in the payment MSP.

In the current situation of health pandemic, all concerted efforts are being made by the Government to alleviate the problem faced by the farmers, various steps taken by the Government are as follows :

• Along with increase in MSP, procurement process has been strengthened so that maximum number of farmers may get its benefits.

• Procurement centres for wheat and for pulses-oilseeds are  by 1.5 times and 3 times respectively during COVID-19 pandemic.

• During pandemic 390 lakh tons of wheat has been procured at a cost of Rs. 75,000 crore which is 15 precent more than the last year.

• With the initiation of PM KISAN SAMMAN NIDHI YOJANA around 10 crore farmers have benefitted. Total disbursed amount is around Rs. 93,000 crore.

• Nearly 9 crore farmers have received around Rs. 38000 crore during COVID-19 pandemic under PMKISAN.

• 1.25 Crore new KCCs have been issued in the last 6 months.

• Summer season sowing is 57 lakh hectare, which is 16 lakh hectare more than the last year. Kharif sowing is also 5% higher than that of last year.

• Number of eNAM markets has increased from 585 to 1000 during COVID-19 pandemic. Last year, e-platform  witnessed trade of Rs. 35000 crore.

• Rs. 6850 crore will be spent for creation of 10,000 FPOs over the period of five years.

• In the last 4 years under FASAL BIMA YOJANA, farmers received a claim of Rs. 77,000 crore against paid premium of Rs. 17500 Crore.

• FASAL BIMA YOJANA is made voluntary.

• Kisan Rail has been started.

According to NITI Aayog report on MSP, 21% of the farmers of the sample States expressed their satisfaction about MSP declared by the Government whereas 79% expressed their dissatisfaction due to various reasons. Although, majority of the farmers of the sample States were dissatisfied on the MSP rates, still 94% of them desired that the MSP rates should be continued.

Way Forward :

• There is a need to adopt a more scientific approach to agriculture.

• Allocate higher budget for agricultural infrastructure and Research & Development.

• The NITI Aayog provide timely information through the Krishi Vigyan Kendras (KVKs).

• The MSP fixing rate criteria must be current cost basis.

• There is a need of local level procurement especially at the Panchayat level.

• Use of modern storage facilities, weighing bridges.

• The Shanta Kumar Committee & Dr. Swaminathan Committee  recommendation to fix the MSP at the cost of production + 50% so as to have a definitive roadmap for fiscal expenditure and better remunerative output for farmers rather than ad hoc method.

• Farmers must be made to understand the benefits of crop diversification so as to maintain the soil fertility, ensure nutritional security, & food security.

• The small and marginal farmers can be provided with some exemption in Fair Average Quality (FAQ) norms to provide them with a source of income.

_True & _False

1. MSPs are announced by the Government at the time of harvesting.

_False

2. The MSPs recommendations by CACP is not binding and can be modified by the Cabinet Committee.

_True

3. The Government has announced to ensure the Minimum Support Price to farmers for all crops.

_False

4. CCEA has approved the increase in the Minimum Support Prices (MSPs) for all mandated Kharif Crops for marketing season 2020-21.

_True

5. MSPs are also safeguard the interest of consumers by making available supplies at reasonable prices.

_True

References

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