Explained: What is MSP and why are farmers protesting against the new farm laws | Economy News


New Delhi: Farmer unions are vehemently agitating over the new farm laws which they fear will dismantle the minimum support price (MSP) system and corporatise farming.

Thousands of farmers stayed put at various Delhi border points for the seventh consecutive day on Tuesday (December 2). In the above context let us understand what MSP is and how it impacts the farmers.

What is MSP (Minimum Support Price)?

Minimum Support Price (MSP) as the name suggests is the price that the government sets on agricultural product price to purchase directly from the farmers. MSP rate on the agricultural product acts as a safeguard the farmer to a minimum profit for the harvest, incase the open market has lesser price than the cost incurred.

How is Minimum Support Prices fixed?

The government fixes Minimum Support Prices (MSPs) for 22 mandated agricultural crops on the basis of the recommendations of the Commission for Agricultural Costs & Prices (CACP), after considering the views of State Governments and Central Ministries/Departments concerned and other relevant factors. MSP is determined for the country as a whole and not region or state-specific.

What factors are considered before recommending MSP?

While recommending MSP, CACP considers various factors viz. cost of production, overall demand-supply situations of various crops in domestic and world markets, domestic and international prices, inter-crop price parity, terms of trade between agriculture and non-agriculture sector, likely effect of price policy on rest of economy and a minimum of 50 percent as the margin over cost of production.

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The 22 mandated  crops, for which MSP is being announced by the government for the last three years, include 14 Kharif crops viz. paddy (Common and Grade ‘A’), jowar (Hybrid and Maldandi varieties), bajra, maize, ragi, arhar, moong, urad, groundnut, soyabean, sunflower, sesamum, nigerseed, cotton (medium staple and long staple variety) and 6 Rabi crops viz. wheat, barley, gram, masur (lentil), rapeseed & mustard, safflower and two commercial crops viz. jute and copra (milling and ball copra). In addition, MSP for toria and de-husked coconut are also fixed on the basis of MSPs of rapeseed & mustard and copra respectively.

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