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What is minimum support price? UPSC NOTE

 


  • 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.

  • MSP is a “minimum price” for any crop that the government considers as remunerative for farmers and hence deserving of “support”.

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

  • 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.

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What is minimum support price?

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

  • ‘A2’: 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.

  • ‘A2+FL’: Includes A2 plus an imputed value of unpaid family labour.

  • ‘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.

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What is minimum support price?

  • CACP considers both A2+FL and C2 costs while recommending MSP.

  • CACP reckons only A2+FL cost for return.

  • However, C2 costs are used by CACP primarily as benchmark reference costs (opportunity costs) to see if the MSPs recommended by them at least cover these costs in some of the major producing States.

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Recently in news

  • The 2023-24 MSPs for 17 kharif crops and variants were approved.

  • The Centre has set the minimum support price (MSP) for paddy sown in the kharif or monsoon season at ₹2,183 per quintal, an increase of ₹143 a quintal from last year’s figure.

  • Apart from paddy, new MSPs have been set for major pulses - moong, tur or arhar.

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What is minimum support price? UPSC NOTE
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