It is price guarantee offered by the government
Without 100% Guarantee to buy all Crops no meaning of MSP. (For entire quantity only)
Maximum Support Price
It is the price guarantee offered by the Government to the farmer it is calculated by CACP (Commission of Agriculture Cost & Prices) and announced before the sowing season by the Cabinet committee of Economic Affairs.
Although the Government announces MSP for a number of Crops, MSP Link Guaranteed procurement take place only for Rice wheat and Sugarcane (Sugarcane is procured by Sugar Mills under fair and remunerative prices).
Factors for calculation of MSP:-
For some of the other Crops Government has come up with PM ASHA Scheme. It has following components :-
Applicable for pulses, oil seeds and COPRA. Here, the state Govt. with proactively procured Crops from the farmers, if the market price falls below MSP. Losses up to a certain amount will be reimbursed by the Centre Govt. Payment is to be made within 3 Days of procurement and Procurement will be limited to 25 % of the toral produce in the state.
Here, the farmer will sell the crops at the market, at market prices, the difference between MPS and Model Price will be directly given to the farmer. It is applicable for oil Seeds.
State Government will invite private companies which will procure the crops from the farmer at MSP a service charge of 15 % of MSP alongwith certain indirect benefits which the Govt. may decide will be given to the companies. It is to be at pilot basis, in few district of the states. It is apply for oil seeds
For some commodities like horticulture items government does not announce the MSP but procurement is done under market, Market Intervention Price, It is done if prices fall or/and production increased compare to previous year. The Procurement is done at Market Intervention Price.
The grains are given to states by Centre at Central issue price. The stated bears the Cost of Transportation and distribution.
Under this system directly procure the grains of the farmer at MSP and different between MSP and Central issue price is given to the State by Centre. In case the state government announce over MSP the amount paid would be limited to grains sold under the PDS System.
How MSP Calculated:
CACP takes into account factors like cultivation, demand & supply Situation, inter-crop parity, stock held from previous year, price in domestic and international market for MSP Calculation. MS Swaminathan Commission had recommended that MSP should at least 150% of cost of Cultivation. Although the government in 2018, claimed that it has implemented the recommendation of commission, The farmers were still unhappy as profits were calculated at A2+FL while the commission recommened the MSP to be at least 150% of C2.
As the MSP capacity of Govt. is skewed towards rice and wheat, mono-culture has emerged as a problem. Cultivation of water intensive crops in arid and semi-arid regions has led to water crisis in the country.
As a measure, the government has given a sharp hike on the MSP of Bajra Green Gram (Moong), Jowar etc. Millets are considered as nutri-cereals which can tolerate drought like condition and are more resistant towards climate change. Moreover millets and pulses provide certain nutrients which rice and wheat cannot provide.
The policy makers also suggested that social and economic facts should also be considered while calculating the MSP. It would help in changing at cropping pattern in the country.
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