It is price guarantee offered by the government

Without 100% Guarantee to buy all Crops no meaning of MSP. (For entire quantity only)

• Suggested by:-          Commission of Agriculture Cost & Prices.
• Implemented by:-    Cabinet Committee of Economics
• Bonus in MSP:–         Announced during the time of procurement. (Discretion on part of Government)

• Reason why farmer sells the crops APMC not to Government  

• Due to Credit already taken (Middleman issue)
  • Lack of Knowledge to farmers.
  • MSP is only declared for limited crops.
  • Government procurement is very late. Due to :-
    • Lack of infrastructure of storage to hold on Crop
    • Government hold the payment and pay amount after 15 Days.

• Ashok Devi Committee
  • Recommendations
  • Advantages     
    • Price support Scheme:-
    • Payment within 3 Days
    • Apply to pulses, Oilseeds, COPRA

• Price Deficiency Payment: Deficit payment direct to Bank account.
• Model Price:–   Average Price of any commodity of x (like Haryana) state+ 2 nearest states (UP & Punjab). (By this traders cannot manipulate the market price).
• Private Procurement and Stocking Scheme:–

Maximum Support Price

It is the price guarantee offered by the Government to the farmer it is calculated by CACP (Commission of Agriculture Cost & Prices) and announced before the sowing season by the Cabinet committee of Economic Affairs.

Although the Government announces MSP for a number of Crops, MSP Link Guaranteed procurement take place only for Rice wheat and Sugarcane (Sugarcane is procured by Sugar Mills under fair and remunerative prices).

Factors for calculation of MSP:-

• Prime Guarantee to farmer that they have not a loss

For some of the other Crops Government has come up with PM ASHA Scheme. It has following components :-

• Price Support Scheme

Applicable for pulses, oil seeds and COPRA. Here, the state Govt. with proactively procured Crops from the farmers, if the market price falls below MSP. Losses up to a certain amount will be reimbursed by the Centre Govt. Payment is to be made within 3 Days of procurement and Procurement will be limited to 25 % of the toral produce in the state. 

• Price Deficiency Payment Scheme

Here, the farmer will sell the crops at the market, at market prices, the difference between MPS and Model Price will be directly given to the farmer. It is applicable for oil Seeds.

• Private Procurement and Stocking Scheme

State Government will invite private companies which will procure the crops from the farmer at MSP a service charge of 15 % of MSP alongwith certain indirect benefits which the Govt. may decide will be given to the companies. It is to be at pilot basis, in few district of the states. It is apply for oil seeds

Perishable Goods

• Market Intervention Price.

For some commodities like horticulture items government does not announce the MSP but procurement is done under market, Market Intervention Price, It is done if prices fall or/and production increased compare to previous year. The Procurement is done at Market Intervention Price.

• Decentralized Procurement

The grains are given to states by Centre at Central issue price. The stated bears the Cost of Transportation and distribution.

Under this system directly procure the grains of the farmer at MSP and different between MSP and Central issue price is given to the State by Centre. In case the state government announce over MSP the amount paid would be limited to grains sold under the PDS System.

How MSP Calculated:

CACP takes into account factors like cultivation, demand & supply Situation, inter-crop parity, stock held from previous year, price in domestic and international market for MSP Calculation. MS Swaminathan Commission had recommended that MSP should at least 150% of cost of Cultivation. Although the government in 2018, claimed that it has implemented the recommendation of commission, The farmers were still unhappy as profits were calculated at A2+FL while the commission recommened the MSP to be at least 150% of C2.

As the MSP capacity of Govt. is skewed towards rice and wheat, mono-culture has emerged as a problem. Cultivation of water intensive crops in arid and semi-arid regions has led to water crisis in the country.

As a measure, the government has given a sharp hike on the MSP of Bajra Green Gram (Moong), Jowar etc. Millets are considered as nutri-cereals which can tolerate drought like condition and are more resistant towards climate change. Moreover millets and pulses provide certain nutrients which rice and wheat cannot provide.

The policy makers also suggested that social and economic facts should also be considered while calculating the MSP. It would help in changing at cropping pattern in the country.