MSP: Need for improved methodology and institutional reforms

There were long drawn farmer protests in 2020 demanding legalising minimum support price (MSP) and that demand appears to have regained momentum recently. Notwithstanding formal legalisation, MSP continues to remain at the core of the discourse on remunerative prices and other farmer related issues.

- C S C SEKHAR

There are two contentious questions related to MSP. First, how is the MSP fixed? Second, how to ensure that farmers get the recommended MSP?

While the government is mainly working on the second issue, many farmer groups raise their concerns about the first issue, the way MSP is fixed, and contend that MSPs do not adequately cover the expenditures incurred by the farmer.

MSP is recommended by the Commission for Agricultural Costs and Prices (CACP), set up in 1965, initially mandated to advise on price policy for 11 agricultural crops. The mandate of the CACP has been continually expanded and currently recommends MSPs for 23 crops, although effective procurement is limited to a handful of crops.

The mandate of CACP focuses on important aspects of agriculture, which include production, inter-crop price parity and sustainability and inflation, among others. However, farmers' concerns related to farm income, viability of farming, disparities between agricultural and non-agricultural income, input prices and infrastructure are conspicuous by their absence in the CACP's mandate(https://cacp.da.gov.in/ViewContents.aspx?Input=1&PageId=33&KeyId=0).

MSP is determined on the basis of a host of factors including cost of production, domestic and international prices, supply-demand scenario, inter-crop price parity, nation's requirements, etc. However, cost of production is a very important factor.