Note4Students
From UPSC perspective, the following things are important :
Prelims level: Minimum Support Prices (MSP)
Mains level: Not Much
Central Idea
- The Cabinet Committee on Economic Affairs (CCEA) has increased the Minimum Support Prices (MSP) for all Rabi crops for the financial year 2024-25.
Understanding MSP
- Policy Framework: MSP is a government policy designed to safeguard farmers’ income. Unlike subsidized grains in the Public Distribution System (PDS), it isn’t an entitlement but a part of administrative decision-making.
- MSP Commodities: The Centre currently fixes MSPs for 23 agricultural commodities, guided by recommendations from the Commission for Agricultural Costs and Prices (CACP).
- No Legal Backing: There is currently NO statutory backing for these prices, nor any law mandating their enforcement.
Fixing MSPs
- Factors Considered: CACP considers multiple factors when recommending MSP for a commodity, notably the cost of cultivation.
- Key Determinants: These determinants encompass supply and demand dynamics, domestic and global market prices, parity with other crops, implications for consumers and the environment, and terms of trade between agriculture and non-agriculture sectors.
- 5 Times Formula: The 2018-19 Budget introduced a “pre-determined principle” where MSPs should be set at 1.5 times the production cost, simplifying CACP’s role to estimating production costs and applying the formula.
Production Cost Calculation
- Three Cost Categories: CACP calculates three production cost categories for each crop, at both state and all-India average levels.
- A2: Encompasses all paid-out costs directly incurred by the farmer, such as seeds, fertilizers, labor, land lease, fuel, and irrigation.
- A2+FL: Includes A2 and imputes a value for unpaid family labor.
- C2: A comprehensive cost accounting for rentals and forgone interest on owned land and capital assets in addition to A2+FL.
Back2Basics:
| Rabi Crops | Kharif Crops | Zaid Crops | |
| Growing Season | Winter (sown in Oct-Dec) | Monsoon (sown in Jun-Jul) | Summer (sown in Feb-Apr) |
| Harvest Season | Spring (harvested in Mar-Apr) | Autumn (harvested in Oct-Nov) | Early Autumn (harvested in May-Jun) |
| Examples | Wheat, barley, peas, gram | Rice, maize, cotton, soybean | Cucumber, watermelon, muskmelon |
| Water Requirement | Relies mainly on rainfall | Relies on monsoon rains | Requires irrigation and supplemental water |
| Temperature | Grows in cooler temperatures | Grows in warmer temperatures | Grows in hot temperatures |
| Crop Rotation | Often used in crop rotation | Less commonly used in crop rotation | Usually not part of crop rotation |
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