What is MSP, How is it decided?

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There is a discussion between the ongoing agitation against the new laws related to agriculture in the country -MSP i.e Minimum Support Price.

After all, what does MSP mean? Why are farmers afraid of ending the MSP system? How is MSP fixed? Why are the problems of farmers unable to be resolved even after repeated issue of MSP? Let us try to find answers of such important questions.


What does MSP stand for?

MSP is the price of agricultural products declared by the government, like if the MSP of an agricultural product is Rs 1000 per quintal, then it is believed that the farmer should get such price for that agricultural product.


How does Government decide the MSP?


The Central Government conducts the MSP of major agricultural products keeping in mind the recommendations of the CACP ( Commission for Agriculture Costs and Prices). According to the information given on the CACP website, it is the attached office of the Ministry of Agriculture and Farmers welfare, Government of India. It came in to existence in January 1965.

Currently, the CACP recommends an MSP of 23 commodities, including :-

  • 7 Cereals are - Dhan, Wheat, Maize, Jowar, Millet, Barley and Ragi.
  • 5 Commodities Pulses - Gram, Arhar, Moong, Urad, Masoor.
  • 7 Oilseeds - Groundnut, Mustard, Soyabean, Sunflower, Safflower, Ramtil and Sesame
  • There are 4 Commercial Crops - Copra, Sugarcane, Cotton and Raw Jute.
Every year, the CACP makes its recommendations to the government in the form of price policy reports for different 5 groups of commodities - Kharif Crops, Rabi Crops, Sugarcane, Raw Jute and Copra. Before preparing the price Policy report, the CACP prepares a comprehensive questionnaire and sends it to all state governments, concerned national organizations and ministries to seek their opinion.  

CACP prepares its report on the basis of all inputs, going through several processes, and then the report is sent to the central government. Then the central government takes the feedback of the state governments and their respective ministries. After this, the Cabinet Committee on Economic Affairs of the Central Government takes the final decision on the recommendations of the CACP regarding the MSP.


Is there any Legal Obligation to Implement MSP?

No, there is no legal obligation to implement MSP in India. There is a legal aspect to the MSP of just one crop and that crop is sugarcane. Actually, the price of sugarcane is fixed according to Sugarcane (Control) Order 1996, which was issued under the Essential Commodities Act. This order provides for setting a fair and remunerative price (FRP) for Sugarcane every year. According to FRP, sugar mills are responsible for payment.



Why do farmers fear the end of the MSP system?



Farmers fear that the new law will gradually eliminate agricultural Market (APMC), which could lead to a crisis on the MSP. ,Many agricultural experts believe that traders in agricultural mandis have to pay market fees, but when they buy outside, they will not have to pay fees/tax. In such a situation, traders will go out of the market for their demand and once the market is over, it will be difficult to meet the MSP.




Location: Delhi, India

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