Minimum Support Price (MSP) in Indian agriculture is a government-set price at which it purchases certain crops from farmers, ensuring them a minimum income regardless of market fluctuations. This mechanism aims to protect farmers from distress sales and ensure food security by incentivizing agricultural production.

Different methods for computing MSP include:

1. Cost of Production: MSP is often based on the comprehensive cost of production, which includes three types of costs:
A2 Cost: Covers cash and kind expenses incurred by farmers.
– A2+FL Cost: Includes A2 costs plus the imputed value of family labor.
– C2 Cost: This encompasses A2+FL costs along with the rental value of owned land and interest on fixed capital.

2. Recommendations from the Agricultural Price Commission: The Commission recommends MSP based on various factors, including production costs, market trends, and demand-supply dynamics.

3. Market Analysis: MSP is influenced by the analysis of current market conditions and trends for particular crops. If there is a high demand, MSP may be adjusted upwards.

4. Government Policies: The government periodically reviews MSPs in light of its agricultural policies and socio-economic conditions, ensuring that the prices remain relevant and beneficial for farmers.

By using these methods, the government aims to ensure fair remuneration to farmers, stabilize agricultural income, and promote overall agricultural development in the country.