Minimum Support Price (MSP)

Minimum Support Price (MSP) is the minimum price set by the government for certain agricultural products, at which the products would directly be bought from the farmers if the open market prices are less than the cost incurred. This is an important topic for the UPSC exam.

MSP Latest News

On Sept 9, 2021, the Central Government hiked the MSP for Rabi crops including wheat, mustard, safflower and masoor (lentil) dal, Rapeseed and Chana or gram. To know more about the significance of this move and also the protests surrounding this MSP hike, please read CNA dated Sep 9, 2021, where this is explained in detail.

MSP is a form of government intervention to insure the farmers against a steep decline in the prices of their goods and to help them prevent losses. The government of India sets the MSP twice a year for 24 commodities. This is done by the government to protect the farmers against a fall in prices in a year of bumper production. When the market price falls below the declared MSP, the government would purchase the entire quantity from the farmers at MSP.

The chief objectives of setting up MSP are:

1. Support farmers from distress sales
2. To procure food grains for public distribution

CACP – Commission for Agricultural Costs and Prices

The Commission for Agricultural Costs and Prices (CACP) decides the minimum support price taking into account the following factors:

1. The entire structure of the economy of a particular commodity or group of commodities
2. Cost of production
3. Changes in input prices
4. Input-output price parity
5. Trends in market prices
6. Demand and supply
7. Inter-crop price parity
8. Effect on industrial cost structure
9. Effect on the cost of living
10. Effect on the general price level
11. International price situation
12. Parity between prices paid and prices received by the farmers
13. Effect on issue prices and implications for subsidy

Crops covered under MSP

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