What is Minimum Support Price, or MSP?

After the Centre made a U-turn on agriculture laws, farmers hailed the government's decision to look into their demand to legalize Minimum Support Price or MSP. But what exactly is MSP? 

Let's understand

Minimum Support Price or MSP was introduced first by the Center in 1966-67. This was after India faced a major deficit in cereal production at the time of Independence. The less production was not able to meet the population's high demand. Consequently, in the wake of battling for more than 10 years, the public authority of India at long last chose to go for broad agrarian changes. As an initial move towards this rural transformation, the Minimum Support Price or MSP was presented.

The Minimum Support Price or MSP is a wellbeing net for the ranchers as it runs after shielding them from the vulnerabilities of the market and of the regular kind. The presentation of the Minimum Support Price or MSP was a progressive advance for the rural business of India, which changed the country from a food deficiency to a food overflow country. From that point forward, MSP has shown to be of extraordinary assistance to the ranchers to remain protected from monetary variances.

When heading towards the Green revolution, it was realized that the Indian farmers needed more incentives for the production of food crops. This was necessary, especially to grow crops like Wheat and Paddy that needed a lot of labor. Thusly, with an end goal to give higher impetuses to the ranchers, which would likewise help creation, the Center chose to present the Minimum Support Price or MSP. The very first harvest to get an MSP chosen was wheat, which sorted an MSP out at 54 for each quintal.

Today, there are 23 yields that get the MSP. These harvests incorporate Bajra, Wheat, Maize, Paddy, Barley, Ragi, and Jowar, beats like tur, chana, urad, moong, and masoor, oilseeds like safflower, mustard, niger seed, soya bean, groundnut, sesame, and sunflower. Other than these, business crops like cotton, copra, crude jute, and sugarcane are additionally furnished with a Minimum Support Price or MSP.

• How is the MSP determined?

As you must already know, India's two major cropping seasons are the Rabi and Kharif cropping seasons. The Central Government of India fixes and announces the Minimum Support Price or MSP for the crops at the start of these Rabi and Kharif cropping seasons. This decision is made after the government carefully and extensively studies the major points made by the Commission for Agricultural Costs and Prices.

When farmers grow crops, they incur some implicit as well as explicit costs. The implicit or unpaid costs include the family labour and the rent paid by the farmers. All these costs are considered while calculating and fixing the Minimum Support Price or MSP. When talking in more calculative and technical terms, you can consider the variables A2, FL, and C2. The Commission considers these variables for Agricultural Costs and Prices or CACP in the following manner:

1. A2 This includes all the expenses incurred by the farmers for buying the chemicals, fertilizers, seeds, and hired labour for the growth, production, and maintenance of the food crops.

2. A2 + FL This covers the actual costs incurred along with the implicit costs in the form of family labour.

3. C2 This includes A2 + FL along with the fixed capital assets and the rent paid by the farmers.

Along with the above factors, some other important things considered by the Commission of Agricultural Costs and Prices or CACP in deciding the Minimum Support Price or MSP are as follows:

• Cost of cultivation per hectare and the costs of the crop in other regions of the country to compare the two and take note of the differences.
• Cost of production per quintal and costs of the same in other regions, again to compare and check the differences.
• Market prices of all the concerned crops and any changes within them.
• Other production costs and labor costs and any changes within them as well.
• The prices of any commodities sold or purchased by the farmers and any changes in these prices.
• Information regarding the supply of the produce. This includes area, yield, production, imports, exports, domestic supply, availability of the product and any stocks present with the public agencies, government or industries.
• Information regarding the demand across the region. This includes the total and per capita consumption, trends and capacity of the processing industry.
• Information regarding the demand and supply within the global market and the prices of the produce in the international market or any changes in them.
• The prices of the farm product derivatives like jute goods, jaggery, sugar, cotton yarn. Edible or non-edible oils and many more.
• The costs and changes in the costs of processing of the agricultural products.
• Costs and charges in the costs of marketing, storage, transportation, taxes or fees, marketing services, etc.
• Information about the macro-economic variables like the consumer price indices and general level of prices.

All the above factors assume a significant part and are thought about prior to ascertaining and fixing the Minimum Support Price or MSP during the Kharif just as Rabi editing seasons.

With everything taken into account, the idea of Minimum Support Price or MSP has worked for the ranchers and gone about as their security net for quite a long while at this point. For this reason, this idea is generally upheld by Indian ranchers the whole way across the country.