MSP(Minimum support price) India & How is fixed?

MSP(Minimum support price) India 

    The minimum support price (MSP) is an advisory price signal that is part of a larger set of agricultural policies in parts of India. This informal "support" price (as opposed to procurement or issue price) is recommended by the government and aims to safeguard the farmer to a minimum profit for the harvest while at the same time increasing food security in the country. MSP was initially an incentive for farmers to adopt technology with an aim of increasing the productivity of agricultural land in the 1960s, however in the 2000s it is seen as a market intervention and farmer income scheme. The effectiveness of such a price policy has varied widely between states and commodities. Awareness among farmers of the existence of an MSP is poor at 23%, while awareness of MSP procurement agencies is also poor with only about 20-25% of wheat and paddy produce being sold at MSP.

      The Indian government sets the price for about two dozen commodities twice a year. MSP is fixed on the recommendations of the Commission for Agricultural Costs and Prices (CACP),an apex advisory body for pricing policy under the Ministry of Agriculture. CACP in turn recommends the pricing according to a diverse range of factors including national requirements, available resources, farmer wages, cost of living and product competitiveness. However sometimes there are large differences between what the CACP recommends and the prices that the government recommends.resulting in the price policy being used as a political tool.Food Corporation of India (FCI) and the National Agricultural Co-operative Marketing Federation (NAFED) are involved in implementing the MSP at the state level.While providing a support price to farmers, MSP also supports the public distribution system which provides subsided food.

How MSP(Minimum support price) India is fixed? 

     The centre announces the MSP ( which is not legally guaranteed) for 22 man dated corps ( and Fair & Remunerative Price, or FRP, for sugarcane) on the basis of the recommendations of the CACP. These include 14 kharif corps (paddy, jowar, bajra, maize, ragi, tur/arhar, moong, urad, groundnut, soyabean, sun-flower, sesamum, nigerseee, cotton), six are rabi corps

(Wheat, barley, gram, ma-sur/lentil, rapeseed and mustard, and safflower) and tow are commercial crops (jute and copra). 

      The CACP takes into account various factors including demand and supply; cost of production; market trends; a minimum 50% margin over cost of production; and likely implications of MSP on consumers.

 

      The CACP calculates three types of costs-A2, A2+FL and C2 - for each man dated crop for different states. The lowest of these costs is A2, which is the actual paid-out cost incurred by a farmer. Next is A2+FL, the actual paid-out cost plus im puted value of family labour. The highest of the three costs is C2, defined as 'Comprehensive Cost including Rental Value of Own Land (net of land revenue and interest on value of own fixed capi tal assets (excluding land). 

      Although all three costs are calculated, the CACP eventually recommends - and the government announces - MSP on the basis of A2+FL. Protesting farmers have been demanding MSP based on C2, besides a legal guarantee.