Why in MSP discussion?
The farmer’s movement is today (February 17,) on 5th day. The farmers of Punjab have been fed on the Shembh Borders with the power of Delhi. During this movement, a farmer from Heart Attack and an all-inspector has died from the knee.
Minimum Support Price Minimum Support Price
IntroductionThe minimum support value (MSP) is the rate on which the government buys the crop from farmers and it is less than the production cost of the farmers. ‘Minimum Support Price’ is the ‘Minimum Value’ for any crop that the government considers beneficial for farmers and hence through the ‘Support’ of the farmers.
Crops under MSP: ‘Agricultural Cost and Price Commission’ is recommended to ‘Minest Support Price’ (MSP) for 22 admissible crops (Mandated Crops) and ‘Fixed and Profitable Price’ (FRP) for sugarcane.
Agriculture Cost & Price Commission (CACP) is an attached office of the Ministry of Agriculture & Farmers Welfare. Advanced crops include 14 kharif crops, 6 rabi crops and two other commercial crops. Also the minimum support values (MSPs) of Lahi and Coconut are determined based on the minimum support values (MSPs) of mustard and dried coconut respectively.
Recommended factors of MSP:
While recommending the minimum support value (MSP) for any crop, various factors are considered by the ‘Agricultural Cost and Price Commission’ including agricultural costs. It also considers factors such as the terms of supply and demand for crop, market price trends (home and global), implications of consumers (currency), environmental (oil and water use) and trade conditions between agriculture and non-agricultural sectors.
Three kinds of production cost:
Three types of production costs are estimated for each crop at both state and all India levels by CACP.
‘A2’: Under this, the farmer covers direct expenditure on seed, fertilizers, pesticides, labour, leased land, fuel, irrigation etc.
‘A2+FL‘A2’ as well as an installed value of unpaid family labour is included under it.
‘C2‘: This is a more comprehensive cost, as under the ‘A2+FL’, the farmer’s self-help land and real estate rent and interest are also included.
Both ‘A2+FL’ and ‘C2’ costs are considered by CACP while recommending minimum support value (MSP). The cost of A2+FL is calculated only by CACP. While the ‘C2’ costs are used primarily by CACP as benchmark costs, to see if the MSPs recommended by them cover these costs in few major producer states at least.
The Cabinet Committee of Economic Affairs of the Central Government (CCEA) makes the final decision on the level of MSP and other recommendations made by CACP.
MSP Requirement: Due to the events that two consecutive droughts (Droughts) in 2014 and 2015, farmers suffered a consistent decline in commodity prices since 2014.
Vimonetisation and ‘Guide & Service Tax’ has made rural economy, mainly non-agricultural sector as well as agriculture sector. After the year 2016-17, the scenario for most of the farmers has been released due to the slowdown in the economy and then Kovid pandemic.
High input prices for diesel, electricity and fertilizers have further enhanced their crisis.
Problems associated with MSP arrangements in India: Limitation: Unlike the official announcement of MSP for 23 crops, only two- rice and wheat are purchased as both of these food grains are distributed under NFSA. It is most important for other crops remaining.
Ineffectively applicable: Shanta Kumar Committee reported in its report in the year 2015 that "Farmers could get only 6% of MSP, which means 94% of farmers in the country are deprived of the profit of MSP.
As a purchase price: Existing MSP arrangement has no connection with domestic market prices. The only purpose of this is to meet the requirements of NFSA, thereby its existence as a purchase price rather than a minimum support value. Agriculture with wheat and paddy: The MSP system leans more in favor of rice and wheat leads to over-production of these crops and discourages farmers to cultivate other crops and horticulture products, while their demand is higher and can contribute significantly to the growth of farmers’ income.
Moderator-dependent arrangement: The MSP-based purchase system is dependent on arbitrators/intellectors, commission agents and APMC officers, which small farmers find hard and complex for their access. Further approach is required for a real minimum support price that the government always intervenes when the market prices fall below the predefined level, mainly in case of additional production and more supply or when the price falls due to international and national factors.
MSP can also be used as an incentive value for many crops that are desirable for nutrition protection (e.g. coarse grains, lentils and edible oils) and for which India is dependent on imports. To invest more nutritional quality animal husbandry and fruits and vegetables will be prudent. The best way to invest is to encourage private sector to build efficient price series based on a cluster approach. The Government must make changes to the Agricultural Pricing Policy where agricultural pricing is partially state-backed and partially market-inspired.
