What is MSP?

What is MSP?

MSP is the rate at which the government buys grains from farmers. Currently, it fixes MSPs for 23 crops grown in both Kharif and Rabi seasons. 

How is it calculated?

The MSP is based on a calculation of at least one-and-a-half times the cost of production incurred by the farmers. 

• The MSP is fixed twice a year on the recommendations of the Commission for Agricultural Costs and Prices (CACP), which is a statutory body and submits separate reports recommending prices for kharif and rabi seasons. 

Challenges with MSP

1. The major problem with the MSP is lack of government machinery for procurement for all crops except wheat and rice, which the Food Corporation of India actively procures under the PDS.
2. As state governments procure the last mile grain, the farmers of states where the grain is procured completely by the government benefit more while those in states that procure less are often affected.
3. The MSP-based procurement system is also dependent on middlemen, commission agents and APMC officials, which smaller farmers find difficult to get access to.

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