In India, the Commission for Agricultural Costs and Prices recommends the minimum support prices (MSP) for agricultural commodities (currently for 23 products). On the basis of the recommendation, the Government of India announces the MSPs at the beginning of the sowing seasons. The MSP is a form of market intervention by the government which guarantees highest prices at which the government is ready to buy the entire products of certain crops directly from the farmers.
The most important purpose of it is to protect them from a sudden fall of prices of agro-products, particularly, in the period of bumper products. But if the market prices are higher than MSP the farmers can sell their products in the market. It is expected that introduction of proper MSP will minimise distress sale of the farmers and help procuring grains for the public distribution system.
The Commission considers a lot of factors to decide the MSPs. These factors vary among the regions. The cost of cultivations per hectare and quintal and structure of cost, prices of inputs and their changes, expected prices of the products in the internal markets, area of cultivation, amounts of import and export, level of stocks, total and per capita consumption, international prices and its changes, derivative prices of some of the goods like sugar cotton, edible oil and jute and cost of marketing etc. are important factors to determine the MSPs.
Increase in MSP by 50%
The union government has decided to increase the MSP, which will cover all cost of cultivations plus 50% of that. But it is reported that only paid –out cost and cost of engaged family labour is going to be considered for determining total cost. A section think that if the imputed rental value of farmers’ land is not added the total cost computation will remain undervalued. The NITI Ayog has undertaken a thorough study on MSP that has pointed out a lot of weaknesses of the MSP system. Therefore, one has to think the of the steps to be taken to have the benefits of the MSP.
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