MSP Should Continue till Markets Become Efficient

IAS Current affairs - MSP Should Continue till Markets Become Efficient

‘MSP should continue till markets become efficient’

For Prelims

  • MSP recommended by Commission for Agricultural Costs & Prices (CACP) which is under the Ministry of Agriculture and Farmers Welfare.
  • MSP given to 23 different crops.
  • Final MSP is decided by Cabinet Committee on Economic Affairs (CCEA).
  • MSP is calculated using the formula MSP= 1.5 x (A2+FL)
  • A2: It is the out-of-pocket expenses which is incurred by farmers like a loan for fertilisers, fuel, machinery, irrigation, etc. and cost of leasing land.
  • FL: Is the estimated value of the unpaid labour for harvesting crops like the contribution of family members, etc.
  • However, Swaminathan committee recommended using the formula MSP = 1.5 x C2
  • C2: Comprehensive Cost which is the actual cost of production. It takes into account rent and interest foregone on the land and machinery owned by farmers further in addition to the A2+FL rate.
  • Deficiency Pricing Payment (DPP): Under DPP, the difference between the open market price and MSP is given to farmers.
  • The difference between open market price and MSP was about 12-15%.

            Source The Hindu

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