Published on: June 14, 2023

Minimum Support Price

Minimum Support Price

Why in news? The government announced the MSP for 17 ‘kharif’ crops, like paddy, pulses (moong, arhar, urad), oilseeds like groundnut and soyabean and cotton, for the marketing season of 2023-24.


How does the MSP work?

  • It is a part of the government’s agricultural price policy, it is the price at which the government offers to procure farmers’ produce during the season.
  • It works as a tool to stabilise production and to control consumer prices.
  • Food Corporation of India (FCI) and the National Agricultural Co-operative Marketing Federation (NAFED) are involved in implementing the MSP at the state level

Who announces MSP?

  • Commission for Agricultural Costs & Prices (CACP) recommends MSPs for 22 mandated crops and fair and remunerative price (FRP) for sugarcane.
  • It will be finally approved at a meeting of the Cabinet Committee on Economic Affairs (CCEA)

What are the cost involved in announcing MSP?

  • There are three types of cost involved in production cost
  • A2’: Costs incurred directly in cash and kind on seeds, fertilisers, pesticides, hired labour, leased-in land, fuel, irrigation by the farmer, etc.
  • ‘A2+FL’: Includes A2 plus an imputed value of unpaid family labour.
  • ‘C2’: Comprehensive cost that factors in rentals and interest forgone on owned land and fixed capital assets, on top of A2+FL.

Why are farmers worried?

  • The government’s notion of ensuring 1.5 times the cost of production on crops does not provide remunerative price.

What is C2+50 Formula of MSP?

  • The National Commission for Farmers, constituted under the chairmanship of agricultural scientist MS Swaminathan, in its report had recommended that farmers should be given Minimum Support Price (MSP) under the C2+50 percent formula.
  • C2+50%: The total cost of the crop (C2) and the profit thereon is 50 percent.
  • This method includes, in addition to the factors used to calculate A2, the economic value of the efforts of family members working on the farm, and the value of other expenses, including rent and other assets.

After these are calculated, the