A stable price environment is considered important to boost agricultural production. To bring that about, a central government body, Commission for Agricultural Costs & Prices (CACP), recommends MSP for 23 commodities. MSP is decided on the basis of seven criteria, of which cost of production is the most important.
MSP is a part of the package to ensure food security and keep adequate food stocks in the public distribution system. After harvest, the Centre’s Food Corporation of India (FCI) procures commodities at MSP for use in the PDS.
In practice, MSP and procurement are effective for only two commodities, paddy and wheat.
Do all farmers get to sell at MSP?
No. Barely 12% of paddy growers, for example, benefit from procurement at MSP. This is because the effort put in by state governments influences where the grain is procured. The last mile aggregation is often done by state governments. Where they have been successful, the farmers benefit more. But the bill for the procurement is picked up by the Centre.
In Punjab, more than 95% of paddy growers benefit from MSP, whereas in UP only 3.6% of farmers benefit.
What are Agricultural Produce Marketing Committees (APMCs)?
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