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Tags Current Affairs

Legal guarantee for MSP

Date: 30 November 2021 Tags: Agriculture

Issue

Farm unions are increasing pressure on the government to give a legal guarantee for the minimum support prices (MSP) of crops.

 

Background

Since the announcement to withdraw three farm laws, the farms unions have refused to withdraw protests unless MSP is legalized.

 

Details

  • The Cabinet Committee on Agriculture Produce (CCAP) announces MSP for 23 crops every year before the sowing season.

  • The MSP seeks to provide a minimum 50% return on all cultivation costs, which however is on paper.

  • The prices received by farmer for crops after the harvest season is well below the MSP. They cannot demand these prices as MSP does not have a legal backing.

 

MSP crops

  • Cereals: Paddy, wheat, maize, bajra, jowar, ragi and barley

  • Pulses: Chana, tur/arhar, moong, urad and masur

  • Commercial crops: Sugarcane, cotton, copra and raw jute

  • Oil seeds: Rapeseed-mustard, groundnut, soyabean, sunflower, sesamum, safflower and nigerseed

 

Implementing the demand

  • The first method can be through forcing private traders to provide MSP. Such mechanism already exists for sugarcane mills.

  • The second method is government providing MSP through its agencies such as National Agricultural Cooperative Marketing Federation of India (Nafed), Cotton Corporation of India (CCI) and Food Corporation of India (FCI).

  • The third method of implementation is through the price deficiency payments. Government does not force buying at MSP. It allows farmers to sell at prevailing market prices and only pays the difference amount.

 

Other demands

  • Several farm unions have demanded that prices should be calculated according to varied input rates across 15 agro-climatic zones.

  • There is also a demand that MSP is extended to fruits and vegetable farmers.

 

Government’s position

  • Government has announced setting up of a committee to make MSP more transparent and promote change in crop pattern.

  • The government says that price levels cannot be sustained through legal status without proper demand and supply.

  • In sugar sector, government mandated MSP for sugarcane has forced sugar mills to accumulate thousands of crore in arrears.  This is because of low sugar prices, high supply and low liquidity.

  • In Maharashtra, a law that made it punishable for traders for buying produce below MSP resulted in buyers withdrawing when prices fell below MSP.

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