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The Minimum Support Price (MSP) is a crucial component of India's agricultural policy, designed to safeguard farmers against sudden drops in market prices. It represents a floor price set by the government, above which farmers sell their produce freely but below which the government agrees to buy all surplus quantities produced.
Key Features:
- Market Intervention: MSP functions as a safety net for farmers, ensuring they receive fair compensation for their efforts.
- Procurement Mechanism: If market prices drop below the MSP, the government purchases the entire quantity offered by farmers at the announced rate.
- Commodity Coverage: Currently, 23 commodities across cereals, pulses, oilseeds, raw cotton, raw jute, copra, de-husked coconut, sugarcane, Virginia flue-cured tobacco, and other commercial crops are included within the MSP framework.
Recent Developments:
On September 9, 2021, the central government increased the MSP for several rabi crops, including wheat, mustard, safflower, and lentils. These decisions were made after considering recommendations from the Commission for Agricultural Costs and Prices (CACP).
Calculation Methodology:
When determining the MSP, the CACP takes into consideration various factors, such as the cost of production, changes in input prices, inter-crop price parity, effect on industry costs, effects on the cost of living, international price situations, and the impact on issue prices and subsidies.
Implementation Issues:
Despite its importance, challenges remain regarding the implementation of MSP. For instance, low levels of awareness among farmers—only around 23% are fully informed about MSP—contribute to limited participation in selling their produce at these rates· Additionally, discrepancies exist between the MSP recommended by the CACP and the final declaration by the government, often influenced by political considerations.
In conclusion, the Minimum Support Price plays a vital role in protecting farmers from economic hardship caused by fluctuating market conditions. Despite some limitations, the MSP remains a critical tool in maintaining agricultural stability and promoting equitable growth in India.
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