Are you aware of MSP and its full form? The actual full form of MSP is “Minimum Support Price“
What is MSP? What is the use of MSP in agriculture?
MSP: Minimum Support Price is the price fixed by the government to protect the producers- farmers against the excessive price falls during production years. MSP is a way of protecting the farmers from the uncertainties of the market as well as of the natural kind in India.
MSP is known as the ‘safety net’ for the farmers as it is the core of the agricultural revolution that has seen India transform from a food-deficient to a food-surplus nation. In order to stave off the effects of financial fluctuations in India, over the years MSP has helped the farmers with the same.
The MSP has become a major talking point after the farmer’s protests reached the National Capital.
What is the MSP’s objective in Agriculture?
- To support the farmer from the distress sales
- To procure food grains for public distribution.
During the period of Independence, in terms of cereal production, India was staring at a major deficit. After struggling for the first decade, India then decided to go for extensive agriculture reforms. Centre introduced the Minimum Support Price for the first time in the year 1966-67.
Wheat was the first commodity to be set up for MSP at the rate of Rs. 54 per quintal.
See this YouTube video for recent updates about MSP:
History Of MSP
The Minimum Support Price is a benchmark set up below which market prices cannot fall. The government of India announced two types of administered prices till the mid-1970s:
- Minimum Support Prices (MSP)
- Procurement Prices
MSPs served as the benchmark prices, fixed by the government in the nature of long term guarantee for investment decisions of producers- giving the assurance the prices of their commodities won’t be allowed to fall down below the fixed level set up by the Government, even in the case of bumper crops.
In general, the procurement prices for the crops were lower than the open market price and higher than the MSP. This policy of prices announced continued with some variation up till 1973-74 for the commodity of paddy.
However, in the case of wheat, the same was discontinued in 1969 and then revived in 1974-75 for one year only.
With demands rising for MSP, in 1975-76 the present pricing system evolved in which only one set of prices was announced for paddy and other Kharif crops and wheat being procured for buffer stock operations.
Need Of MSP
As with Green Revolution, Indian policymakers realized that farmers needed incentives in order to grow food crops. Or else farmers won’t opt for crops such as wheat and paddy as they are labor-intensive and don’t fetch lucrative prices.
Thus to boost the productions and incentivize the production, the MSPs were introduced in the 1960s.
In our nation, India, there are two major cropping seasons namely known as ‘Rabi’ and ‘Kharrif’.
- The government announces the MSP at the start of each cropping season.
- The major points made by the Commission for Agriculture Costs and Prices are been exhaustively studied by the government and then the MSP is been decided.
- The recommendations are been based on some pre-fixed formulae that include the actual cost incurred, implicit family labour as well as the rent paid by the farmers.
- However, these variables in technical terms are known as A2, FL and C2. The government calculates the MSP generally by adding those terms.
The fact remains that MSP doesn’t have any legal stature even while the Centre has been providing the MSP to the wheat and paddy farmers since the mid- 60s to take over the food crisis.
- In a year, in the country if the crop grows in large amounts, the MSP guarantees the farmer, he must get the minimum support price i.e. MSP no matter what the price of that crop is in the market.
- When a farmer sells his crop in Government Mandi, then the entire money he earns due to selling his crop reaches his bank account directly because of MSP without any intervention from middlemen or corruption.
- One of the biggest pros for farmers due to MSP is that it guarantees the farmers that they will get a fair price for that crop.
- Many things related to agriculture and keeping farmers inconsideration, decisions are taken.
Issues are faced while preparing MSP, some of them faced on regular basis are:
- Due to the large area quantity of our nation, it has different soil qualities for different states.
- The climate also varies which becomes an issue while preparing the MSP.
- Some other issues faced are variations in price, water facilities, diversity of labour while preparing MSP.
Calculation Of MSP
MSP can be calculated as
A2: covers all the paid-out costs directly incurred by the farmers in cash and in-kind on inputs.
A2 +FL: A2 plus an imputed value of unpaid family labour
C2: The most comprehensive cost that factors in rentals and interest for owned land and fixed capital assets, on top of A2+ FL. At present, MSP is placed at 1.5 times the cost of production based on the A2+FL cost and not C2 costs.
See MSP prices that are available for all farmers now.
Factors Taken Into Consideration For MSP
The MSP of a crop is fixed by the Commission for Agriculture Costs and Prices based on:
- Cost of production
- Market price trends
- Price fluctuations
- Different costs
- Agriculture wage rate
- International market price
- Effect on industrial cost structure
- Effect on the cost of living
- Inter-crop price parity
- Parity between prices paid and prices received by farmers
- Effect on issue prices and implications for subsidy
Commodities Under MSP
The Indian Government sets prices for 22 commodities twice a year under MSP Mechanism
- Pearl millet
- Nigar seed
- Commercial Crops
- Raw jute
MSPs of toria and de-husked coconut are fixed based on the MSPs of rapeseed/ mustard and copra respectively.
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FAQ: MSP Full Form & Meaning
What does MSP mean?
The meaning of MSP is Minimum Support Price. It is a price given by the government to the farmers. MSP helps to protect the farmers from uncertainties of the market.
Is MSP good for farmers?
MSP is like a security for the farmers. MSP helps farmers to get the correct amount of their crops and recover from the losses.
Who introduced MSP in India?
MSP was introduced by the government and by the Commission for Agricultural Costs and Prices.
Who pays for MSP in India?
There is a fixed price for MSP, which is paid by some of the big businesses, and food organizations in India.
Summary: What is MSP Full Form
MSP meaning Minimum Support Price is thus the price at which Government procures crops from the farmers and becomes a necessity for the farmers.
MSP was introduced by the Government and by the Commission for Agricultural Costs and Prices in India. In this article, we have mentioned different facts and points related to MSP and also mentioned how MSP is affecting us or framers.
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