Meaning of Minimum Support Price

What is Minimum Support Price


The details about Minimum Support Price are explained here. 

Minimum Support Price(MSP)

Minimum Support Price is the price at which government purchases crops from the farmers, whatever may be the price for the crops. Minimum Support Price is an important part of India’s agricultural price policy.

 The MSP helps to incentivize the framers and thus ensures adequate food grains production in the country. MSP gives sufficient remuneration to the farmers, provides food grains supply to buffer stocks and supports the food security programme through PDS and other programmes.

Procurement Price

 Sometimes, the government procures at a higher price than the MSP. Here, the price will be referred as procurement price. The procurement price will be announced soon after the harvest. Normally, the procurement price will be higher than the MSP, but lower than the market price. The price at which the procured and buffer stock food grains are provided through the PDS is called as issue price.

MSP is announcement

 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). Support prices generally affect farmers’ decisions indirectly, regarding land allocation to crops, quantity of the crops to be produced etc. It is in this angle that the MSP becomes a big incentive for the farmers to produce more quantity.

Objectives of MSP

 Government’s agricultural policy has three important components- the MSP, Buffer Stocks and issue of food grains through the PDS. The interconnectivity between the three is very clear. MSP helps to procure adequate food grains through FCI, state agencies and cooperatives. The PDS network through the policy of issue price delivers it to the weaker sections.

MSP is price fixed by Government of India to protect the 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 objective of the MSP is thus to ensure remunerative prices to the growers for by encouraging higher investment and production. It also aims to bring a balanced realization of sufficient food production and consumption needs at the same ensuring adequate and affordable food grains to all the people.

Thus the minimum support price is aimed to:

  • Assure remunerative and relatively stable price environment for the farmers by inducing them to increase production and thereby augment the availability of food grains.
  • Improve economic access of food to people.
  • Evolve a production pattern which is in line with overall needs of the economy.
  • History and trend

 The MSP was declared used first time in 1965 as a tool for agricultural price policy to meet the various objectives. Since then, the MSP performs an important function in realizing the various objectives related to agricultural price policy.

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