Minimum Support Price Detailed Analysis

Why in News ?

Reason for this Minimum Support Price Detailed Analysis is

1. After the Farmers Bill was passed there was a huge protest against the bill . One of the protest is related to the Minimum Support Price.
2. The government announced minimum support prices (MSP) for six rabi crops of 2020-21, to be marketed in rabi marketing season 2021-22.

What is Minimum Support Price ?

• If the open market has lesser price than the cost incurred during cultivation the farmers will get minimum set price for their crops.
• Agriculture Price Commission (Now Commission for Agricultural Costs and Prices (CACP)) was established in the year 1965, based on Jha committee recommendations to suggest support prices for crops after considering the cost of cultivation to account.
  • To ensure remunerative prices to farmers and reasonable prices to consumers and promote sustainable use of resources towards socially desirable crop mix.
  • During the Green Revolution, Government of India for the first time in 1966-67 for wheat Minimum Support Prices were announced.
  • Later MSP was expanded to a number of crops that was a boost for the Green Revolution.

Who is Deciding the MSP and How they calculate ?

• The central government notifies MSPs based on the recommendations of the Commission for Agricultural Costs and Prices (CACP)
• About CACP ?
  • Commission for Agricultural Costs & Prices (CACP) since 1985  and earlier named as Agricultural Prices Commission)
  • It came into existence in January 1965.
  • The Commission comprises of
    • Chairman,
    • Member Secretary,
    • One Member (Official) and
    • Two Members (Non-Official)
    • The non-official members are representatives of the farming community
      • They usually have an active association with the farming community.
  • It is mandated to recommend minimum support prices (MSPs)
• How they calculate ?
  • CACP considers factors
    • The cost of cultivation and production, productivity of crops, and market prices for the determination of MSPs.
    • National Commission on Farmers under Prof. M. S. Swaminathan also called as M.S Swaminathan Committee in 2006 had recommended that MSPs must be at least 50% more than the cost of production.
    • In 2018 year’s budget speech the Finance Minister said that MSPs would be fixed at least at 50% more than the cost of production.
  • CACP calculates cost of production at three levels
    1. A2, which includes cost of inputs such as seeds, fertilizer, labour
    2. A2+FL, which includes the implied cost of family labour (FL)
    3. C2, which includes the implied rent on land and interest on capital assets over and above A2+FL.

Which are the various crops under MSP ?

• • CACP recommends MSPs of 23 commodities comprises
    • 7 cereals : paddy, wheat, maize, sorghum, pearl millet, barley and ragi.
    • 5 pulses : gram, tur, moong, urad, lentil.
    • 7 oilseeds : groundnut, rapeseed-mustard, soyabean, seasmum, sunflower, safflower, nigerseed.
    • 4 commercial crops : copra, sugarcane, cotton and raw jute.
  • The above crops are 14 crops of the kharif season, 6 rabi crops and two other commercial crops.

Issues related to MSP

• All farmers do not receive benefits of increase in MSPs.
• The CACP in 2018-19 price policy report shows the inability of farmers to sell at MSPs is one of the key areas of concern.
• Farmers who are unable to sell their produce at MSPs have to sell it at market prices, which may be much lower than the MSPs.
• In 2018-19, just 12% of the 33.6 million farmers who were growing wheat availed of the government’s MSP.
• Small and and marginal farmers sold in their produce in  mandis which was usually controlled by middlemen and where market prices are often below government MSPs.

About the recent price increase six rabi crops of 2020-21 News

• The wheat MSP has seen an increase of just 2.6 per cent the lowest increase in 11 years.
• The MSPs for the other crops : barley, gram, lentil (masur), rapeseed and mustard, and safflower.
• The hike have seen a lower hike compared to last year.
• This increase in MSP is in line with the recommendations of Swaminathan Commission.
• Wheat MSP for the rabi crop of 2020-21 has been fixed at Rs 1,975 per quintal and 2.6 per cent higher than Rs 1,925 in 2019-20.
• Expected returns to farmers over their cost of production for these crops
  • Wheat (106%) followed by rapeseed & mustard (93%), gram and lentil (78%).
  • For barley, return to farmers over their cost of production is estimated at 65% and for safflower, it is 50%.

How Procurement process done ?

• Mode of purchase : The stocks shall be purchased by Cooperative Societies, Farmers’ Producer’s Organizations (FPO), Farmers’ Producer’s Companies, Panchayati Raj Institutions directly from farmers to eliminate possibility of middlemen taking advantage of the scheme.
• Area of operation : Purchase will be made from only those farmers who come into the area of operation of that particular purchase centers.
• Payment to Farmers : The paymentsto the farmers shall be made by ECS and cheques only,against their sale within three days from actual deliveryto the procuring agency.
  • The bank account of one individual farmer shall not be used for making payments of other farmers.
• Limitation on holding the stock : The procured material shall be stored only to its biological life but not exceeding six months.

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Source : Indian Express

Topic

GS II : Developmental Initiative

1. Government policies and interventions for development in various sectors and issues arising out of their design and implementation

GS III : Food and Agriculture

1. Issues related to direct and indirect farm subsidies and minimum support prices; Public Distribution System- objectives, functioning, limitations, revamping; issues of buffer stocks and food security; Technology missions; economics of animal-rearing

Current Affairs Compilation : 22 September 2020