What precisely is MSP?
The minimum support price is the price the government pays farmers for their wheat (MSP). MSPs have been created for 23 crops farmed in both the Kharif and Rabi seasons.
What methodology was used in its calculation:
The rate at which the government purchases crops from farmers is known as the MSP, which is calculated at least one and a half times the producers’ cost of production.
According to the Union Budget for 2018–19, MSP would be kept at 1.5 times the cost of production.
Two times a year, the MSP is determined using recommendations made by the Commission for Agricultural Costs and Prices (CACP), a statutory organisation that submits separate reports for the kharif and rabi seasons.
Which production costs are included while determining MSPs:
When recommending MSP, the CACP considers both “A2+FL” and “C2” expenditures.
All of the money farmers spend on things like seeds, pesticides, fertilisers, hired labour, gasoline, and irrigation is included in category A2 expenditures.
A2+FL considers actual out-of-pocket expenses as well as the worth of unpaid family labour.
In addition to A2+FL, the C2 expenses also comprise the rent and interest forfeited on owned land and fixed capital assets.
MSP’s drawbacks include:
The main issue with the MSP is a lack of government procurement equipment for all crops, with the exception of wheat and rice, which the Food Corporation of India actively purchases under the PDS.
Farmers who live in places where the government buys all of their grain profit the most, while those who live in areas where government grain purchases are less common are frequently impacted.
Additionally, the MSP-based procurement system relies on commission agents, intermediaries, and APMC representatives, all of whom are difficult for smaller farmers to get a hold of.
