Model Answer

Introduction

Minimum Support Price (MSP) is a crucial market intervention by the Government of India aimed at protecting agricultural producers from significant price drops during periods of high production. Its primary objectives are to prevent distress sales among farmers and to ensure the procurement of food grains for public distribution.

Understanding Minimum Support Price (MSP)

The Government of India, based on recommendations from the Commission for Agricultural Costs and Prices (CACP), announces MSP for various crops before each sowing season. Under the Agricultural Produce Market Committee (APMC) Acts, farmers can sell their produce at designated APMC mandis. However, they may not always receive fair prices due to market fluctuations or manipulation by agents. MSP guarantees that farmers can sell their produce to government agencies at the announced minimum price, providing a safety net against market volatility.

How MSP Helps Farmers Escape the Low-Income Trap

1. Prevention of Distress Sales: MSP ensures that farmers receive a minimum price for their crops, preventing them from selling at throwaway prices during financial emergencies.
2. Increased Agricultural Output: With the assurance of a fair price, farmers are encouraged to produce more, leading to enhanced agricultural productivity.
3. Reduced Dependence on Moneylenders: The guaranteed income from MSP reduces farmers’ reliance on high-interest loans from moneylenders, helping them avoid debt traps.
4. Informed Decision-Making: MSP is announced before the sowing season for 23 crops, allowing farmers to make informed choices about which crops to plant based on potential profitability.
5. Benchmark for Private Buyers: MSP serves as a price signal to the market, ensuring that farmers are less likely to sell their produce for less than the minimum price set by the government.

Despite these benefits, challenges remain, such as uneven implementation across states and the perception of MSP as a political tool rather than a genuine support mechanism. Additionally, the focus on a few crops has led to monoculture practices, which can be detrimental to agricultural diversity and sustainability.

Conclusion

While MSP has made significant strides in supporting farmers, its objectives have not been fully realized. Reforming the MSP system is essential to ensure that it effectively addresses the needs of all farmers and promotes sustainable agricultural practices.