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MSP (Minimum Support Price)

The Minimum Support Price (MSP) is the government-announced floor price at which designated agricultural commodities are procured by central or state agencies if market prices fall below that level. MSP is recommended by the Commission for Agricultural Costs & Prices (CACP) in the Department of Agriculture & Farmers Welfare and approved by the Cabinet Committee on Economic Affairs (CCEA).

Overview

MSPs are announced before the sowing season for each crop year, signalling expected returns to farmers and serving as the trigger price for procurement operations by agencies such as the Food Corporation of India for paddy and wheat and the Cotton Corporation of India (see Cci Cotton Procurement) for kapas.

Eligibility

Procurement operations are open to any farmer offering produce of fair average quality conforming to specified moisture, foreign matter and grade norms at a notified procurement centre during the official window. MSP applies only to mandated crops; horticultural commodities such as tomato, coconut and tamarind fall outside the basket.

Benefit and structure

CACP currently recommends MSP for 22 mandated crops and a Fair and Remunerative Price (FRP) for sugarcane, giving an effective coverage of 23 crops:

  • 7 cereals: paddy, wheat, maize, jowar, bajra, barley, ragi
  • 5 pulses: tur, moong, urad, chana, masur
  • 7 oilseeds: groundnut, soybean, sunflower, sesamum, safflower, rapeseed-mustard, niger
  • 2 commercial crops: cotton and jute
  • Sugarcane (covered by FRP)

The Centre has committed to setting MSP at a minimum of 1.5 times the A2+FL cost of production estimated by CACP.

Implementation

CCEA approves the price after CACP recommendations, and procurement is operationalised at APMC mandis (see Apmc Mandi) and dedicated centres such as those run by the Telangana State Civil Supplies Corporation (see Ikp Paddy Procurement). State governments may layer additional bonuses over MSP, as Telangana has done for fine paddy (see Telangana Fine Paddy Bonus).

See also Cci Cotton Procurement, Ikp Paddy Procurement, Telangana Fine Paddy Bonus, Apmc Mandi and Tomato Price Cycle.

References

  1. Minimum Support Prices: From Safety Net to Self-Sufficiency. Press Information Bureau.
  2. Commission for Agricultural Costs and Prices. cacp.dacnet.nic.in.