what is the Issues with the Hike of Minimum Support Price (MSP)

what is the Issues of the Hike of Minimum Support Price (MSP)

About:MSP 

a. The MSP is the rate at which the government purchases

crops from farmers, and is based on a calculation of at

least one-and-a-half times the cost of production incurred

by the farmers.

b. MSP is a “minimum price” for any crop that the government

considers as remunerative for farmers and hence deserving

of “support”.

Current news on MSP

the Hike of Minimum Support Price (MSP)

 

Crops under MSP:

a. The Commission for Agricultural Costs & Prices (CACP) recommends MSPs

for 22 mandated crops and fair and remunerative price (FRP) for sugarcane.

i. CACP is an attached office of the Ministry of Agriculture and Farmers

Welfare.

b. The mandated crops include 14 crops of the kharif season, 6 rabi crops and 2

other commercial crops.

c. In addition, the MSPs of toria and de-husked coconut are fixed on the basis of the

MSPs of rapeseed/mustard and copra, respectively.

Three Kinds of Production Cost:

The CACP projects three kinds of production cost for every crop, both at state and all-India average levels.

a. ‘A2’:

i. Covers all paid-out costs directly incurred by the farmer in cash and kind on seeds, fertilisers, pesticides, hired

labour, leased-in land, fuel, irrigation, etc.

b. ‘A2+FL’

i. Includes A2 plus an imputed value of unpaid family labour.

c. ‘C2’It is a more comprehensive cost that factors in rentals and interest forgone on owned land and fixed capital assets,

on top of A2+FL.

a. The Cabinet Committee on Economic Affairs (CCEA) of the Union government takes a final decision on the level of

MSPs and other recommendations made by CACP.

the Hike of Minimum Support Price (MSP)

Issues with Hike:

a. This increase seems modest keeping in mind the cultivation costs - particularly

on account of diesel used for powering tractors, irrigation pumps and harvester

combines - have gone up.

b. Some increases, especially for maize, did not even keep pace with inflation.

c. Further, absence of assured procurement means farmers have no incentive to

cultivate them.

d. The announcement comes at a time when farm unions have been demanding

legislation to guarantee MSP for all farmers for all crops, and a repeal of three

contentious farm reform laws.

Issues with MSP:

a. The major problem with the MSP is lack of government machinery for

procurement for all crops except wheat and rice, which the Food Corporation of

India actively procures under the PDS.

b. As state governments procure the last mile grain, the farmers of states where

the grain is procured completely by the government benefit more while those in

states that procure less are often affected.

c. The MSP-based procurement system is also dependent on middlemen,

commission agents and APMC officials, which smaller farmers find difficult to

get access to.

Solution:

a. The CACP, in its price policy report for the 2018-19 kharif marketing season,

had suggested enactment of a legislation conferring on farmers ‘The Right to

Sell at MSP’. This, it felt, was necessary “to instil confidence among farmers for

procurement of their produce”.

b. The government should be promoting crop and animal agriculture that also leads

to consumption of foods rich in proteins, vitamins, minerals and dietary fibre —

as opposed to just calories and sugar — by the people.

i. The right way to do it is by freezing the MSPs of paddy and wheat, besides

capping their procurement at, say, 10-15 quintal per acre per farmer.