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What's the article about?
- It discusses the benefits and drawbacks of the recently increased Minimum Support Price (MSP) for wheat and other crops.
Relevance: GS3:
- Issues related to Direct and Indirect Farm Subsidies and Minimum Support Prices;
- Issues of Buffer Stocks and Food Security;
- Prelims
What's the crux of the article?
- The GoI hiked the MSP for wheat such that it is neither too much nor too little. Three reasons are given for this:
- The public wheat stocks are slightly lower than last year, but still sufficient to meet this year's needs. To close this gap in the FCI’s warehouses, farmers needed to be compensated adequately.
- International wheat prices have increased.
- The fall of the rupee has widened the gap between domestic & global prices.
What is MSP:
- MSP is the method of price support for the farmers.
- MSP for a crop is the price at which the government is supposed to procure that crop from farmers if the market price falls below it.
- MSP is announced by the GoI before the sowing on the recommendations of the Commission for Agricultural Costs and Prices (CACP).
- As of now, CACP recommends MSPs of 23 commodities, which comprise
- 7 cereals (paddy, wheat, maize, sorghum, pearl millet, barley and ragi),
- 5 pulses (gram, tur, moong, urad, lentil),
- 7 oilseeds (groundnut, rapeseed-mustard, soyabean, seasmum, sunflower, safflower, nigerseed), and
- 4 commercial crops (copra, sugarcane, cotton and raw jute).
Potential of MSP:
- MSP can be used as a signaling tool for farmers to grow crops based on both market dynamics, resource use efficiency & environmental sustainability.
- The MSP-based procurement regime has done the opposite — promoting water-intensive crops (specifically rice, sugarcane and wheat) prone to surplus production.
Way Forward:
- The MSP, if managed properly, can be used by the government as a powerful tool in ensuring both sustainable production and price stability.
