UPSC Mains Daily Questions » Daily Answer Writing Challenge-4th August

Daily Answer Writing Challenge-4th August

Q1. What do you mean by the Minimum Support Price (MSP)? How can MSP help farmers  escape the low-income trap? (150 Words, 10 Marks) 

Answer: 

Minimum support price (MSP) is a “minimum price” for any crop that the government considers as  remunerative for farmers and hence deserving of “support”. It is also the price that government  agencies pay whenever they procure a particular crop. 

The main goals are to buy food grains for public distribution and to support farmers who have  to sell their crops at a loss. To protect the interests of the farmers, it is the price at which the  government purchases crops for the farmers. It plays a significant role in India’s agricultural  price strategy. It supports the PDS programme for food security and provides farmers with  adequate compensation. 

MSP assists farmers in escaping the poverty trap: 

  • Fixed Remunerations: Farmers are financially protected from the whims of market price  volatility. 
  •  Diversification of crops: The MSP issued by the Government of India for the first time in 1966- 67 for wheat has now been expanded to about 24 crops. This will encourage farmers to plant  a variety of crops in order to maximise their profits. 
  • Prevents Distress-Sale: Farmers rarely have spare savings to purchase inputs for the following  agricultural season. Small and marginal farmers often face difficulties in obtaining credit (loans).  ⚪ As a result, farmers are compelled to sell produce at rock-bottom prices and cannot  

purchase high-quality seeds, fertilisers, pesticides, and tractor-rent for the following  cropping season, further reducing their income from the next cycle. MSP stops this from  happening. 

  • Helps informed decision making: The government announces MSPs for 23 crops, including  cereals, pulses, oilseeds, and certain cash crops, prior to the sowing season.  ⚪ This advanced knowledge enables the farmer to make an informed decision about which  

crop to seed in order to maximise economic value within the constraints of his farm’s size,  climate, and irrigation capabilities. 

  • Benchmark for private buyers: MSP gives a price signal to the market that if merchants do not  offer prices higher than MSP, the farmer may not sell his produce to them.  ⚪ As a result, it serves as an anchor or benchmark for the agro-commodity market. While this  

does not guarantee that market prices will be higher than MSP, it does assure that market  prices will not be significantly lower than MSP. 

However, Well intended MSP policy is causing a few setbacks like it is leading to crop monocropping  of Wheat and Rice. Green Revolution areas are getting more benefits, further, it limits government  capacity for public investment in agriculture. 

In this background, more work remains to be done regarding MSPs for various crops. In addition  to increasing the quantum and diversifying MSPs, the procurement of food grains must be  streamlined in order to support agricultural investment and assure food security in the country.