Data Story : Minimum Support Price (MSP)

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It is the minimum price at which government agencies procure particular crops from the farmer at MSP. It is announced by the government on 23 commodities including 22 mandated crops and fair and remunerative price (FRP) for sugarcane.

Who announced MSP?

• The Cabinet Committee of Economic Affairs announces MSP based on the recommendations of the Commission for Agricultural Costs and Prices (CACP).
•  The CACP takes into account demand and supply, the cost of production and price trends in the market among other things when fixing MSPs.
• The price is announced at the beginning of the sowing season.

Why is MSP important?

• Though prices of agro commodities may soar while in short supply, during years of bumper production, prices of the very same commodities plummet.
• MSPs ensure that farmers get a minimum price for their produce in adverse markets.
• MSPs have also been used as a tool by the Government to incentivize farmers to grow crops that are in short supply.

Challenges Associated with MSP:

• Policy issue: Farmers across the country have been facing problems of selling their produce at the minimum support price.
• Procedural delay: Problems like delay in the setting up of procurement centers, exploitation by commission agents defeat the purpose of MSP.
• Involvement of Middlemen: Taking advantage of the complexities in the supply chain, middlemen appear to be causing disparities in the price.