Minimum support price (India)
Instrument of agriculture price policy in India / From Wikipedia, the free encyclopedia
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The minimum support price (MSP) is an advisory price signal that is part of a larger set of agricultural policies in parts of India. This informal "support" price (as opposed to procurement or issue price[1]) is recommended by the government and aims to safeguard the farmer to a minimum profit for the harvest while at the same time increasing food security in the country.[2][3] MSP was initially an incentive for farmers to adopt technology with an aim of increasing the productivity of agricultural land in the 1960s, however in the 2000s it is seen as a market intervention and farmer income scheme.[4][5] The effectiveness of such a price policy has varied widely between states and commodities.[6][7] Awareness among farmers of the existence of an MSP is poor at 23%, while awareness of MSP procurement agencies is also poor with only about 20–25% of wheat and paddy produce being sold at MSP.[8][9]
The Indian government sets the price for about two dozen commodities twice a year.[10][11] MSP is fixed on the recommendations of the Commission for Agricultural Costs and Prices (CACP),[12][13] an apex advisory body for pricing policy under the Ministry of Agriculture.[14] CACP in turn recommends the pricing according to a diverse range of factors including national requirements, available resources, farmer wages, cost of living and product competitiveness.[15] However sometimes there are large differences between what the CACP recommends and the prices that the government recommends.[16] resulting in the price policy being used as a political tool.[17] Food Corporation of India (FCI) and the National Agricultural Co-operative Marketing Federation (NAFED) are involved in implementing the MSP at the state level.[16] While providing a support price to farmers, MSP also supports the public distribution system which provides subsided food.[8]