Centre and the MSP Laws

Why in news?

Following an inconclusive meeting with the Union government, farmers from Punjab, Haryana, and Uttar Pradesh launched their ‘Chalo Delhi’ in connection to the demand for a legal guarantee of Minimum Support Price (MSP).


GS-02 GS-03 (Economy, Government policies and interventions)

About MSP:

  • The Minimum Support Price (MSP) serves as a form of government intervention in the market to safeguard agricultural producers from significant declines in farm prices.
  • Announced by the Government of India at the outset of the sowing season for specific crops, these prices are determined based on recommendations from the Commission for Agricultural Costs and Prices (CACP).
  • The MSP is established by the government to shield farmers from sharp price drops during periods of abundant production. It provides farmers with a guaranteed price for their produce, ensuring protection from market fluctuations.
  • When market prices for a commodity plummet below the announced minimum, government agencies step in to purchase the entire quantity offered by farmers at the designated minimum price.

Crops under MSP:

The government sets Minimum Support Prices (MSPs) for 22 designated crops and establishes Fair and Remunerative Prices (FRP) for sugarcane. These include 14 crops for the kharif season, 6 for the rabi season, and two additional commercial crops. The list encompasses:

  • Cereals (7): Paddy, wheat, barley, jowar, bajra, maize, and ragi
  • Pulses (5): Gram, arhar/tur, moong, urad, and lentil
  • Oilseeds (8): Groundnut, rapeseed/mustard, toria, soyabean, sunflower seed, sesamum, safflower seed, and nigerseed
  • Raw Cotton
  • Raw Jute
  • Copra
  • De-husked Coconut
  • Sugarcane (FRP)
  • Virginia flu-cured (VFC) Tobacco

Why legalize MSP:

  • Farmer Welfare: Legalizing MSP ensures that farmers receive a fair and guaranteed price for their produce, protecting them from price fluctuations and market uncertainties. This stability in income can improve their standard of living, reduce poverty, and enhance overall welfare in rural areas. Additionally, average debt burden of a farmer in India according to NABARD is over Rs 1 lakh. Hence, it will help reduce their debt burden.
  • Food Security: MSP encourages farmers to produce essential crops, ensuring a steady supply of food grains in the market. This is crucial for maintaining food security, especially in countries where agriculture plays a significant role in the economy and where a large portion of the population depends on agriculture for their livelihood.
  • Rural Development: By providing a minimum price guarantee, MSP can stimulate investment in agriculture, leading to improved infrastructure, technology adoption, and agricultural practices. This, in turn, can boost rural development, create employment opportunities, and reduce migration from rural to urban areas.
  • Stabilizing Prices: Legalizing MSP can help stabilize prices in the market by providing a benchmark for fair pricing. It prevents price crashes during bumper harvests, which can otherwise lead to distress sales by farmers and subsequent market disruptions. Stable prices benefit both producers and consumers by ensuring a reliable supply of agricultural products at reasonable prices.