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The Indian government uses the Minimum Support Price (MSP) as a market safeguarding agricultural producers from a major reduction in farm prices. The Government of India announces minimum support prices of particular crops at the start of the sowing season, based on the Commission for Agricultural Costs and Prices (CACP) recommendations. MSP is just a price set by the Indian government to shield farmers from price drops amid bountiful output years. The minimum support prices seem to be a government-guaranteed price for their produce. The main goals are to assist farmers in avoiding crisis sales and to obtain food grains through public distribution.
What are Kharif Crops?
Kharif crops, also called monsoon crops, have been planted during the rainy season and monsoon (June to October). Their crops are harvested just at the end of the monsoon season while they are planted their seeds at the start of the monsoon season. Kharif crops are highly reliant on seasonal rainfall. The quantity and duration of rains are now the two most essential parameters determining Kharif crop output. In India, paddy, maize, jawar, bajra, cotton, sugarcane, peanuts, pulses, and other Kharif crops are farmed. The sowing season varies depending on the advent of monsoon in various regions of India; for example, in southern states, including Kerala and Tamil Nadu, seeds are normally sown toward the end of May, whereas in northern regions, including Punjab and Haryana, seeds are sown around June.
MSP’s Historical Perspective
The government’s Price Support Policy aims to protect agricultural farmers from a severe drop in farm prices. Minimum guaranteed prices were designed to prevent market prices from falling below a certain level. The government declared 2 kinds of administered prices until the mid-1970s:
Procurement Prices
Minimum Support Prices
The MSPs are set by the government as a long-term safeguard for producers’ financial decisions, ensuring that prices of their commodities will not fall underneath the level set by the government though in the event of a bumper harvest. The purchasing prices for Kharif or rabi cereals have been the prices where the grain is now to be acquired domestically by public bodies (such as the FCI) for release through to the PDS. It was revealed soon after the harvest started. Usually, procurement costs were lower than open market costs or higher than MSP costs. In the case of paddy, this policy of announcing two official prices persisted with certain variations until 1973-74.
In the case of wheat, it was phased out in 1969 and then reintroduced for a single year in 1974-75. Because there were too many requests for raising the MSP, the current system was created in 1975-76, with only one set of prices issued for paddy (and other Kharif crops) and wheat purchased for buffer stock supplies.
Latest Minimum Support Prices- Kharif (2021-22)
Crop sowing seasons vary from state to state in India, while crop harvest is also dependent on variation. As a result, a Kharif-planted crop might be harvested and sold before October. The MSP of Kharif Crops for 2021-22 is effective on September 1, 2021. Rabi Marketing Season (RMS) 2022-23 is the minimum support price, including all mandatory Rabi crops. The rise in MSP for Kharif Crops for the marketing season 2021-22 seems to be in keeping with the Union Budget 2018-19 statement of establishing MSPs at a level of approximately 1.5 times the All-India weighted average Cost of Production (CoP), intending to provide farmers overall substantially equitable remuneration.
The highest predicted yields to farmers above their cost of production were expected in the case of Bajra (85%), followed by urad (65%), and tur (45%). (62%). Return to farmers above their cost of production is expected to be approximately 50% for the remaining crops.
Conclusion
The increase in MSP of Kharif crops for the marketing season 2021-22 is also in line with Union Budget 2018-19 stating that MSPs should be set at around 1.5 times the All-India weighted Cost (CoP) to give farmers an overall essentially balanced remuneration. The highest predicted profits to farmers over their cost of production are estimated in the case of Bajra (85%), followed by urad (65%), then turn (45%). (62%). Returns to farmers above their production cost are expected to be at least 50% for the remaining crops.
