The Minimum Support Price (MSP) serves as a governmental tool in India, intervening in the market to safeguard agricultural producers from drastic drops in farm prices. Announced at the commencement of the sowing season for 22 specified crops, the primary objective of MSP is to motivate farmers to cultivate these crops, thereby ensuring an ample supply of food grains to meet the nation’s requirements.
Recommended by the Commission for Agricultural Costs and Prices (CACP), MSP determination involves a comprehensive analysis of factors such as production costs, inflation rates, and market demand. It is crucial to understand that MSP does not guarantee procurement prices for all crops. The government selectively procures a designated quantity of food grains to maintain buffer stocks and support welfare schemes.
The MSP system pursues several key objectives, including providing a safety net for farmers against price fluctuations, encouraging agricultural investments for enhanced production, and securing the nation’s food requirements. Despite these goals, the MSP system has faced criticism for its perceived inefficiencies. Detractors argue that it introduces market distortions and hinders farmers from diversifying their crop choices. Additionally, some contend that it inadequately supports the incomes of small and marginal farmers.
Recognizing these concerns, the government has embarked on reforms to refine the MSP system. In 2018, the introduction of the Pilot Scheme on Market Assurance Programme (PM-AASHA) aimed to offer farmers a fixed income beyond the MSP. However, as the scheme is still in its pilot phase, its success remains uncertain, and its impact on addressing the identified challenges is yet to be fully realized.
