Minimum Support Price (MSP)

#GS3 #Agriculture


One of the major criticisms of the recently enacted Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill is that it does not give any statutory backing to MSP. Forget making it a legal right, there isn’t even a mention of either “MSP” or “procurement” in the Bill.


What is MSP?

  • Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.
  • The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
  • MSP is price fixed by Government of India to protect the producer – farmers – against excessive fall in price during bumper production years. The minimum support prices are a guarantee price for their produce from the Government.
  • The major objectives are to support the farmers from distress sales and to procure food grains for public distribution. In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price.


About MSP 

  • The Minimum Support Price is not a legal right till now. Unlike subsidised grains through the PDS, MSP isn’t an entitlement for farmers. They cannot demand it as a matter of right.
  • It is only a government policy that is part of administrative decision-making. The government declares MSPs for crops, but there’s no law mandating their implementation.
  • The Centre currently fixes MSPs for 23 farm commodities — 7 cereals (paddy, wheat, maize, bajra, jowar, ragi and barley), 5 pulses (chana, arhar/tur, urad, moong and masur), 7 oilseeds (rapeseed-mustard, groundnut, soyabean, sunflower, sesamum, safflower and nigerseed) and 4 commercial crops (cotton, sugarcane, copra and raw jute) — based on the CACP’s recommendations.
  • But the CACP itself is not any statutory body set up through an Act of Parliament. This, despite its coming to existence in 1965 and MSPs being announced since the time of the Green Revolution, starting with wheat in 1966-67.
  • The CACP is just “an attached office of the Ministry of Agriculture and Farmers Welfare, Government of India”. It can recommend MSPs, but the decision on fixing (or even not fixing) and enforcement rests finally with the government.
  • The government can procure at the MSPs if it wants to. There is no legal compulsion. Nor can it force others (private traders, organised retailers, processors or exporters) to pay.
  • The only crop where MSP payment has some statutory element is sugarcane. This is due to its pricing being governed by the Sugarcane (Control) Order, 1966 issued under the Essential Commodities Act.
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