MSP related discussions

Question 1

What is MSP?

Answer 1

The MSP (minimum support price) assures the farmers of a fixed price for their crops.

Question 2

How was the MSP fixed earlier?

Answer 2

The Commission for Agricultural Costs & Prices (CACP) in the Ministry of Agriculture would recommend MSPs for 23 crops.

1. The CACP considered various factors while recommending the MSP for a commodity, including cost of cultivation.
2. It also took into account the supply and demand situation for the commodity; market price trends (domestic and global) and parity vis-à-vis other crops; and implications for consumers (inflation), environment (soil and water use) and terms of trade between agriculture and non-agriculture sectors.

[EARLIER CACP USED TO CONSIDER MARKET FACTORS(AVAILABILITY,IMPACT ON OTHERS,CULTIVATION COST)]

Question 3

What changed with the Union Budget for 2018-19?

Answer 3

The Budget for 2018-19 announced that MSPs would henceforth be fixed at 1½ times of the production costs for crops as a “pre-determined principle”.

Simply put, the CACP’s job now was only to estimate production costs for a season and recommend the MSPs by applying the 1.5-times formula.

[MSP= 1.5 TIMES PRODUCTION COST]

Question 4

Which production costs were taken in fixing the MSPs?

Answer 4

The CACP’s ‘Price Policy for Kharif Crops: The Marketing Season 2018-19’ report stated that its MSP recommendation was based on 1.5 times the A2+FL costs.

‘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.

‘FL= unpaid family labour.

It does not take into account C2 costs.
‘C2’ = rentals and interest forgone on owned land and fixed capital assets, on top of A2+FL.

[CULTIVATION COST = A2(ALL COST IN CASH & KIND EXCEPT FAMILY LABOUR) + FL (FAMILY LABOUR)

Question 5

Difference between Kharif and Rabi crops.

Answer 5

Rabi crops are grown in the winter season.
Ex:wheat, barley, oats, gram, mustard, linseed.

Kharif crops are grown in the monsoon season.
Ex:rice, maize, millet, ragi, pulses, soybean, groundnut.

[RABI : WINTER & KHARIF : MONSOON]
[TRICK -> SMALL SEASON WITH SMALL TIME I.E. RABI IN WINTER]