Roadmap for Answer Writing 1. Introduction Context Setting: Briefly introduce the concept of MSP as a government policy tool designed to ensure fair prices for farmers’ crops. Significance of MSP: Mention that MSP aims to protect farmers from price fluctuations and market volatility, ...
Model Answer Minimum Support Prices (MSPs) are set twice a year based on the recommendations of the Commission for Agricultural Costs and Prices (CACP) and are approved by the Cabinet Committee on Economic Affairs. The CACP considers the following costs when recommending MSPs: A2 Costs: These coverRead more
Model Answer
Minimum Support Prices (MSPs) are set twice a year based on the recommendations of the Commission for Agricultural Costs and Prices (CACP) and are approved by the Cabinet Committee on Economic Affairs. The CACP considers the following costs when recommending MSPs:
- A2 Costs: These cover all direct expenses such as seeds, fertilizers, labor, and fuel.
- A2+FL Costs: This includes A2 plus the imputed value of unpaid family labor.
- C2 Costs: A more comprehensive cost, which includes A2+FL along with the cost of renting land or the interest foregone on owned land and capital assets.
CACP uses both A2+FL and C2 costs while recommending MSPs, although primarily A2+FL is considered when determining the minimum price for farmers. C2 costs are used to benchmark MSP recommendations to ensure that at least these costs are covered in major producing states.
Challenges with the MSP Regime
- Limited Reach: Less than 6% of agricultural households benefit directly from MSPs. In 2019-20, three states—Punjab, Haryana, and Madhya Pradesh—accounted for 85% of wheat procurement, limiting the MSP’s effectiveness nationwide (Source: Government Reports).
- Distortion of Cropping Patterns: The MSP system favors crops like rice and wheat, which has led to the neglect of crops such as millets, oilseeds, and vegetables. This is particularly detrimental for rainfed farmers who grow these crops, and it has increased India’s dependence on food imports (Source: Agriculture Surveys).
- Procurement Challenges: The centralized procurement and storage system add significant overhead costs and result in high grain wastage due to inadequate storage facilities (Source: CAG Reports).
- Ecological Impact: The MSP regime encourages the excessive use of chemical inputs and monocultures, which harms soil health, reduces groundwater levels, and leads to ecological problems like salinity (Source: Environmental Studies).
- Fiscal Burden: The food subsidy bill, which accounted for nearly 30% of the central government’s net tax revenue in 2020-21, puts a significant strain on government finances (Source: Budget Reports).
To address these issues, India needs to diversify its procurement system, adopt better area planning, and consider legalizing MSPs to make it more inclusive and sustainable.
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Model Answer Introduction The Minimum Support Price (MSP) is a policy tool introduced in India to ensure farmers receive a fair price for their crops, irrespective of market fluctuations. Announced by the government before each sowing season, MSP serves as a price floor to prevent distress sales andRead more
Model Answer
Introduction
The Minimum Support Price (MSP) is a policy tool introduced in India to ensure farmers receive a fair price for their crops, irrespective of market fluctuations. Announced by the government before each sowing season, MSP serves as a price floor to prevent distress sales and support farmers’ income. However, the current status of MSP and the ongoing debate about its legal backing raise questions about its effectiveness and reach.
Current Status of MSP in India
Role of MSP in Securing Farmers’ Income
Challenges with MSP
Does Legal Backing for MSP Guarantee Financial Sustainability
While legal backing for MSP is a popular demand, it alone may not guarantee financial sustainability for all farmers. There are several reasons why:
Way Forward
- Diversification of Procurement: Expanding MSP to other crops and regions, along with setting up procurement centers in less developed areas, can enhance its effectiveness.
- Strengthening Market Infrastructure: Alongside legal backing for MSP, there should be a focus on improving market infrastructure, warehousing, and transportation to ensure farmers can access the benefits of MSP.
- Agri-reforms: MSP needs to be complemented by reforms in agricultural marketing, including the promotion of Farmer Producer Organizations (FPOs) and the introduction of digital trading platforms like e-NAM.
- Income Support Schemes: Combining MSP with direct income support schemes like PM-KISAN and crop insurance can provide a more comprehensive safety net for farmers
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