MINIMUM SUPPORT PRICE (MSP)

           Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.

          The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP). 

               MSP is price fixed by Government of India to protect the producer - farmers - against excessive fall in price during bumper production years. The minimum support prices are a guarantee price for their produce from the Government. 

               The major objectives are to support the farmers from distress sales and to procure food grains for public distribution. In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price.

Historical perspective of MSP

              The Price Support Policy of the Government is directed at providing insurance to agricultural producers against any sharp fall in farm prices. The minimum guaranteed prices are fixed to set a floor below which market prices cannot fall. Till the mid 1970s, Government announced two types of administered prices :

·       Minimum Support Prices (MSP)

·       Procurement Prices

              The MSPs served as the floor prices and were fixed by the Government in the nature of a long-term guarantee for investment decisions of producers, with the assurance that prices of their commodities would not be allowed to fall below the level fixed by the Government, even in the case of a bumper crop.

              Procurement prices were the prices of kharif and rabi cereals at which the grain was to be domestically procured by public agencies (like the FCI) for release through PDS. It was announced soon after harvest began. Normally procurement price was lower than the open market price and higher than the MSP.

              This policy of two official prices being announced continued with some variation upto 1973-74, in the case of paddy. In the case of wheat it was discontinued in 1969 and then revived in 1974-75 for one year only. Since there were too many demands for stepping up the MSP, in 1975-76, the present system was evolved in which only one set of prices was announced for paddy (and other kharif crops) and wheat being procured for buffer stock operations.

Determination of MSP

In formulating the recommendations in respect of the level of minimum support prices and other non-price measures, the Commission takes into account, apart from a comprehensive view of the entire structure of the economy of a particular commodity or group of commodities, the following factors:-

• Cost of production
• Changes in input prices
• Input-output price parity
• Trends in market prices
• Demand and supply
• Inter-crop price parity
• Effect on industrial cost structure
• Effect on cost of living
• Effect on general price level
• International price situation
• Parity between prices paid and prices received by the farmers.
• Effect on issue prices and implications for subsidy
• The Commission makes use of both micro-level data and aggregates at the level of district, state and the country. The information/data used by the Commission, inter-alia include the following :-
• Cost of cultivation per hectare and structure of costs in various regions of the country and changes there in;
• Cost of production per quintal in various regions of the country and changes therein;
• Prices of various inputs and changes therein;
• Market prices of products and changes therein;
• Prices of commodities sold by the farmers and of those purchased by them and changes therein;
• Supply related information - area, yield and production, imports, exports and domestic availability and stocks with the Government/public agencies or industry;
• Demand related information - total and per capita consumption, trends and capacity of the processing industry;
• Prices in the international market and changes therein, demand and supply situation in the world market;
• Prices of the derivatives of the farm products such as sugar, jaggery, jute goods, edible/non-edible oils and cotton yarn and changes therein;
• Cost of processing of agricultural products and changes therein;
• Cost of marketing - storage, transportation, processing, marketing services, taxes/fees and margins retained by market functionaries; and
• Macro-economic variables such as general level of prices, consumer price indices and those reflecting monetary and fiscal factors.

Pricing policy for sugarcane

              The pricing of sugarcane is governed by the statutory provisions of the Sugarcane (Control) Order, 1966 issued under the Essential Commodities Act (ECA), 1955. Prior to 2009-10 sugar season, the Central Government was fixing the Statutory Minimum Price (SMP) of sugarcane and farmers were entitled to share profits of a sugar mill on 50:50 basis. As this sharing of profits remained virtually unimplemented, the Sugarcane (Control) Order, 1966 was amended in October, 2009 and the concept of SMP was replaced by the Fair and Remunerative Price (FRP) of sugarcane. A new clause ‘reasonable margins for growers of sugarcane on account of risk and profits’ was inserted as an additional factor for working out FRP and this was made effective from the 2009-10 sugar season. Accordingly, the CACP is required to pay due regard to the statutory factors listed in the Control Order, which are

• the cost of production of sugarcane;
• the return to the grower from alternative crops and the general trend of prices of agricultural commodities;
• the availability of sugar to the consumers at a fair price;
• the price of sugar;
• the recovery rate of sugar from sugarcane;
• the realization made from sale of by-products viz. molasses, bagasse and press mud or their imputed value (inserted in December, 2008) and;
• reasonable margins for growers of sugarcane on account of risk and profits (inserted in October, 2009).
• States also announce a price called the State Advisory Price (SAP), which is usually higher than the SMP.

Crops covered

26 commodities are currently covered. They are as follows.

• 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
• Copra
• De-husked coconut
• Raw cotton
• Raw jute
• Sugarcane (Fair and remunerative price)
• Virginia flu cured (VFC) tobacco

MSP for Kharif Crops for 2018-19 Season

                 Giving a major boost for the farmers’ income, the Cabinet Committee on Economic Affairs chaired by Prime Minister Shri Narendra Modi has approved the increase in the Minimum Support Prices (MSPs) for all kharif crops for 2018-19 Season.

                 The decision of the CCEA is a historic one as it redeems the promise of the pre-determined principle of fixing the MSPs at a level of at least 150 percent of the cost of production announced by the Union Budget for 2018-19.  The Commission for Agricultural Costs and Prices (CACP) has recommended MSPs for all kharif crops broadly in line with the announced principle.

                The Minimum Support Prices (MSPs) for all kharif crops of 2018-19 season have been increased as follows:

(Rs/quintal)

Commodity	Variety	MSP for  2017-18 Season	MSP approved for 2018-19 Season	Increase		Return* over  cost in  percent
				Absolute Absolute	%
Paddy	Common	1550	1750	200	12.90	50.09
	Grade A	1590	1770	180	11.32	51.80
Jowar	Hybrid	1700	2430	730	42.94	50.09
	Maldandi Maldandi	1725	2450	725	42.03	51.33
Bajra	-	1425	1950	525	36.84	96.97
Ragi	-	1900	2897	997	52.47	50.01
Maize	-	1425	1700	275	19.30	50.31
Arhar(Tur)	-	5450	5675	225	4.13	65.36
Moong	-	5575	6975	1400	25.11	50.00
Urad	-	5400	5600	200	3.70	62.89
Groundnut	-	4450	4890	440	9.89	50.00
Sunflower Seed	-	4100	5388	1288	31.42	50.01
Soyabean	-	3050	3399	349	11.44	50.01
Sesamum	-	5300	6249	949	17.91	50.01
Nigerseed	-	4050	5877	1827	45.11	50.01
Cotton	Medium Staple	4020	5150	1130	28.11	50.01
	Long Staple	4320	5450	1130	26.16	58.75

* Includes all paid out costs such as those incurred on account of hired human labour, bullock labour/machine labour, rent paid for leased in land, expenses incurred on use of material inputs like seeds, fertilizers, manures, irrigation charges, Depreciation on implements and farm miscellaneous expenses, and imputed value of family labour.

Details:

              The Budget for 2018-19 had indicated that a paradigm shift in the agricultural policies is needed to achieve the objective of doubling farmers' income by 2022 through greater emphasis on generating higher incomes of farmers. The increase in the MSPs of Nigerseed at Rs.1827 per quintal, moong by Rs.1400 per quintal, sunflower seed by Rs.1288 per quintal and cotton by Rs.l 130 per quintal is unprecedented.

              Amongst cereals and nutri cereals, in terms of absolute increase, MSP of paddy (common) has been raised by Rs 200 per quintal, jowar (hybrid) by Rs 730 per quintal and ragi by Rs 997 per quintal. The highest percentage increase in MSP over the previous year is for ragi (52.47 %) followed by jowar hybrid (42.94%). For pulses, apart from Moong, MSP of arhar (tur) has been raised by Rs 225 per quintal yielding a return over cost by 65.36 per cent and urad by Rs 200 per quintal with a return over cost by 62.89 per cent in order to maintain inter-crop-price parity. Similarly, the MSP of Bajra has been raised by Rs.525 per quintal yielding a return of 96.97 per cent over cost.

              Promoting cultivation of pulses can help India overcome nutrition insecurity, improve soil fertility by nitrogen fixation and provide income support to farmers. Thus, increased MSPs for pulses will give a price signal to farmers to increase acreage. Further enhanced MSPs would boost production of oilseeds and encourage investment in its productivity and help reduce India's import bill. Increase in MSPs of nutri-cereals will improve nutritional security and allow farmers to get higher prices.

              Food Corporation of India (FCI) and other designated State Agencies would continue to provide price support to the farmers in the case of cereals including nutri-cereals. National Agricultural Cooperative Marketing Federation of India Limited (NAFED), FCI, Small Farmers Agri -Business Consortium (SFAC) and other designated Central Agencies would continue to undertake procurement of pulses and oilseeds. Cotton Corporation of India (CCI) will be the central nodal agency for undertaking price support operations for Cotton.

Minimum Support Price for 2017-18

              Sowing season in India of crops varies from state to state and the harvesting of the crop also depends on variety. Thus a harvested crop sown in kharif 2016-17 may reach in the market even before October. MSP of Kharif Crops for 2017-18 Season applicable is applicable from 1 September 2017.

Commodity	Variety	MSP for 2016-17    (Rsper quintal)	MSP for  2017-18 (Rsper quintal)	Increase over previous year (Rsper quintal)
KHARIF CROPS
Paddy	Common	1470	1550	80
	Grade 'A'	1510	1590	80
Jowar	Hybrid	1625	1700	75
	Maldandi	1650	1725	75
Bajra		1330	1425	95
Maize		1365	1425	60
Ragi		1725	1900	175
Arhar (Tur)		5050 (includes Rs.425/- Bonus)	5450 (includes Rs.200- Bonus)	400
Moong		5225 (includes Rs.425/- Bonus)	5575 (includes Rs.200/- Bonus)	350
Urad		5000 (includes Rs.425/- Bonus)	5400 (includes Rs.200- Bonus)	400
Cotton	Medium Staple *	3860	4020	160
	Long Staple **	4160	4320	160
Groundnut in shell		4220 (includes Rs.100/- Bonus)	4450 (includes Rs.200/- Bonus)	230
Sunflower seed		3950 (includes Rs.100/- Bonus)	4100 (includes Rs.100/- Bonus)	150
Soyabeen	Yellow and Black	2775 (includes Rs.100/- Bonus)	3050 (includes Rs.200/- Bonus)	275
Sesamum	-	5000 (includes Rs.100/- Bonus)	5300 (includes Rs.100/- Bonus)	300
Nigerseed	-	3825 (includes Rs.100/- Bonus)	4050 (includes Rs.100/- Bonus)	225
RABI CROPS (To be marketed in 2018-19)
Wheat		1625	1735	110
Barley		1325	1410	85
Gram		4000 ((includes bonus of Rs.200 per quintal)	4400 (includes bonus of Rs. 150 per quintal)	400
Masur (Lentil)		3950 (includes bonus of Rs.150 per quintal)	4250 (includes bonus of Rs.100 per quintal)	300
Rapeseed/Mustard		3700 (includes bonus of Rs.100 per quintal)	4000 (includes bonus of Rs.100 per quintal)	300
Safflower		3700 (includes bonus of Rs.100 per quintal)	4100 (includes bonus of Rs.100 per quintal)	400
Toria		3560	3900	340
OTHER CROPS
Copra (2018 crop season)	Milling		7511	-
	Ball		6785	-
De-husked coconut			2030	-
Raw Jute  (for 2018-19  season)			3700	-
Sugarcane $		230	-	-
* Staple length (mm) of 24.5 -25.5 and Micronaire value of 4.3 -5.1
** Staple length (mm) of 29.5 -30.5 and Micronaire value of 3.5 -4.3
$ Fair and remunerative price

The Fair and Remunerative Price payable by sugar mills for 2017-18 sugar season has been fixed at Rs.255/- per quintal. This will be linked to a basic recovery rate of 9.5 percent, subject to a premium of Rs.2.68 per quintal for every 0.1 percentage point increase in recovery above that level.