What is MSP full form, hidden secrets & latest news?

Ever thought about what would you eat if farmers across the globe went on strike? MSP, the burning topic in India has attracted attention across the globe. MSP full form is Minimum Support Price. The farmers in India landed on roads rebelling against Agricultural Bills passed by the Government which threatened the Minimum Support Price (MSP). MSP guarantees them a fixed price for their produce. When farmers resorted to strikes and revolts, everyone was uncertain about the root cause of the issue. MSP full form, the meaning of MSP was unknown to many. However, the internet did a good job in educating everyone about, MSP, MSP full form, Bills passed, and disagreement points of farmers with the Government against those bills.

Table of Contents

What is MSP Full form?

MSP full form is a Minimum Support price. It is the minimum price guaranteed to the farmers, at which the government will purchase their produced crops. The rationale behind this was to protect the farmers from the price fluctuations and ensure they get assured prices for their crops irrespective of the market price. In case the market price of the crops falls, the farmers will not incur losses on their produce. The fluctuation of supply due to seasonality, lack of price transparency in the market were responsible for fluctuations in the market price of the agricultural produce. The MSP is fixed even before the crop is sown, to encourage investment by the farmers to produce agricultural crops. Agriculture is the very foundation that satisfies the hunger of not only India but multiple countries across the globe. MSP is intended towards motivating farmers to continue cultivation while ensuring them financial stability in return.

Who decides on Minimum Support Price (MSP) & MSP Full Form?

The MSP is fixed by the Central Government on the recommendations of the Commission for Agricultural Costs and Prices (CACP). The CACP is a statutory body and submits separate reports recommending prices for Kharif and Rabi seasons. The Central Government after reviewing the report and considering the recommendations of the State Governments while keeping in view the overall demand and supply situation in the country takes the final decision. Below factors are considered before deciding on the MSP:

Cost of production including fertilizers
Seasonal fluctuations
Demand for agricultural produce
Supply of agricultural produce
A reasonable standard of living for Framers
Agricultural loan and rate of interest
Export commitments
Cost of transportation
Cost of marketing
Prices of agricultural produce abroad

MSP Full Form and Its Objectives

MSP full form is a Minimum Support Price. The prices of agricultural produce of farmers fluctuate a lot due to demand and supply conditions. Government intervention is required to protect farmers’ interests. Below are the objectives of setting MSP for agricultural produce:

To guarantee minimum selling price to farmers.
Prevent farmers from loss in case of a steep fall in market prices.
To safeguard the farmer’s interest.
To ensure the use of better technology for agricultural produce by the farmers.
Encourage the production of agricultural produce along with interrupted supply.
To ensure an adequate supply of essential food across the country.
Stabilize the agricultural market by producing enough to encourage exports.
Prevent inflation on agricultural produce.
Promote sustainable development and consistent GDP.

MSP Full Form and Minimum Support price for 2020-2021 for Crops

MSP full form is a Minimum Support price. Commission for Agricultural Costs and Prices (CACP) recommends MSP for 22 crops. Those 22 crops are Paddy, Jowar, Bajra, Maize, Ragi, Arhar, Moong, Urad, Groundnut-in-shell, Soyabean, Sunflower, Sesamum, Niger seed, Cotton, Wheat, Barley, Gram, Masur (lentil), Rapeseed or Mustard seed, Safflower, Jute and Copra. Whereas MSP derived for Toria based on MSP for Rapeseeds & Mustard and for De-husked Coconut on the Basis of MSP of Copra. MSP was a part of the Green Revolution.

Advantages of Minimum Support Price (MSP) & MSP Full Form

Improving the overall standard of life of people in rural areas.
Helps the farmers to pay back loans taken for cultivation.
Encourages farmers to produce all types of crops to avoid importing crops.
Encourages farmers to invest in the latest technology used in cultivation and other ingredients like fertilizers.

Issues or Challenges with Minimum Support Price (MSP) and MSP Full Form

Not all the farmers are aware of the Minimum Support Price (MSP) concept, due to which not every farmer is able to reap the benefits.
The ultimate objective of Minimum Support Price (MSP) was to generate income sources for small-scale farmers whereas, in reality, the MSP benefits accrue to large-scale farmers or those who are well established.
Lack of an appropriate medium of creating awareness about MSP leaves the benefits with few chosen ones.
Making Minimum Support price (MSP) payments through cheque makes it difficult for the farmers to encash it.
Almost 50% of the farmers get Minimum Support Price (MSP) payments within one month of the sale, whereas others get their payment after 1 month of sales. Delay in receiving MSP payments makes the life of farmers difficult.
Most of the farmers sell their produce through brokers who act as middlemen, thus when MSP payments are received, the broker charges a fixed percentage.

Opportunity areas to make Minimum Support Price (MSP) Effective

Create awareness about Minimum Support Price (MSP), make sure everyone is aware of MSP benefits to allow equal accessibility of benefits.
Prompt MSP payments are required, within a week of sales. The farmer’s livelihood depends on this, thus regular and consistent MSP payments will encourage the farmers to produce in abundance.
MSPs are usually announced after the sowing season begins. Announcing MSPs in advance, much before the sowing season starts will help the farmers to plan the cultivation in a better and more cost-effective way.
Farmers should be provided with the required infrastructure, ingredients, equipment, and facilities to support the cultivation and avail MSP benefits.
The Procurement centers from which the Purchase and sale take place for the agricultural produce should be within the village, so that farmers may save on the transportation and freight costs.

Current Changes in Minimum Support Price (MSP) for 2022-2023

The Cabinet Committee on Economic Affairs (CCEA) has approved the increase in the Minimum Support Prices (MSP) for Rabi crops for Rabi Marketing Season (RMS) 2022-23. This has been done with an objective to ensure fair, competitive, and stable income is generated by the way of MSP payments. Under the Pradhan Mantri Annadata Aay SanraksHan, Abhiyan announced by the government in 2018, it will help in providing a remunerative return to farmers for their produce.

Farm Bill Protest and Minimum Support Price (MSP) Controversies

On September 27^th. 2020, three Farm Bills were passed by the Government in the Parliament. After that is history. At first, the contents of all these three Bills were not understood in depth by the people, but once they were interpreted, the people revolted against them. As per them this would threaten the Minimum Support Price (MSP) and would be exploitative in nature. There began the struggle between the farmers who took to the streets and became vocal about their disagreement with the Government and demanded to revoke all these three Bills else they would continue the revolt. They started living on roads, in spite of the fact that covid-19 was at its peak. Let us understand what were these Bills and how would their implementation impact the farmer’s livelihood.

The Three Farm Bills introduced were as below:

1. Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill

This Bill gives freedom to the farmers to sell their produce outside the Agricultural Produce Market Committee (APMC) regulated markets. The APMCs are government-controlled marketing yards or mandis. These APMCs were earlier formed to protect the farmer’s interest by fixing a floor price to sell their agricultural produce but in modern times, it no longer serves this purpose. Infact it is turning exploitative in various ways. Below were the elements of the above Bill:

Trade of Agricultural produce – The farmers are allowed to trade their produce anywhere, previously they were restricted to trade only in APMCs government-regulated markets called mandis.
Inter and Intrastate supply – The farmers may engage in inter-state (trading from one state to another) or intrastate (within the same state).
Digitalizing trade – the framers have the freedom to sell their produce through online mediums like the internet. This would open the doors to more accessibility and distribution.
No Fees Charged – the State Governments will not be able to charge any cess, market fees even if they trade outside the trading area.

2. Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill

This Bill allows the farmer and the proposed buyer to decide on the procurement price or Minimum Support Price (MSP) before the cultivation or production takes place. This was done to widen the buyer base as mandis had a limited number of buyers. Below were the elements of the above Bill:

Agreement – There would be a farming agreement between the farmer and buyer of the agricultural produce.
Time Period – The agreement mentioned will be for a specified period of time ranging from one crop season to a maximum of 5 years. If the production involves more than 5 years, then the time period may be mutually decided by the farmer and the buyer.
Pricing – As per the agreement, the price at which the buyer would purchase the agricultural produce will be decided much before and will be explicitly mentioned in the agreement.
Disputes – Disputes raised will be managed through three authorities which are Conciliation Board, Sub-Divisional Magistrate, and Appellate Authority.

3. Essential Commodities (Amendment) Bill

This allows interstate and intrastate distribution of the agricultural produce of the farmers. State governments are not allowed to levy any market fees, or cess on these considering them as necessities.

When these bills were passed by the Government, they never thought that rumors would turn the table for them. These Bills were projected as the end of the Minimum Support Price (MSP). The Government was unable to explain the long-term benefits of all these Bills, instead, the fear of Minimum Support Price (MSP) withdrawal had taken a toll on the farmer’s mindset. Below were the elements of the above Bill:

Controls of the Central Government – Production, supply, and distribution of necessity or essential products are regulated by the Central Government, to prevent hoarding, inflating the prices, disrupting distribution, making it available to all the sections of society at fair prices.
Deregulation of essential commodities – The Government will have full control over the supply of essential commodities including agricultural produce, especially during times of natural calamities like floods, earthquakes, storms, or war. This would ensure adequate supply to all the consumers.
Limit on agricultural produce – As per the Government, the limit on produce will not be effective unless the price of the product has risen to 100%, whereas there is a 50% rise in the retail prices of nonperishable products. The increase will be calculated over the price prevailing immediately preceding twelve months, or the average retail price of the last five years, whichever is lower.

Why did Farmer protest against these three Farm Bills?

Farmers have always followed a particular system of selling their produce to Government administered procurement centers at Minimum Support Price (MSP). These Bills aimed at avoiding Agricultural Produce Market Committee (APMC) regulated markets. This created misunderstandings since there will not be any Government-regulated markets to sell their produce. This would mean that they would be forced to sell their products to large private corporates. This opened room to various possibilities like the corporates might exploit the farmers by purchasing their produce at minimal cost while selling it at exorbitant prices to the consumers. Below were the reasons for the protest:

Fear of demolishing all the Agricultural Produce Market Committee (APMC) regulated markets.
The Bills does not mandate any Minimum Support price (MSP), instead, it leads to the assumption of withdrawal of MSP.
If there will be no Government intervention, then the large corporates might exploit the farmers by setting floor prices at a bare minimum which may be unfair and not at all remunerative in nature.
There are no guidelines or laws governing the MSP set, it’s not mentioned anywhere in the Bills passed.
There are trust issues between the farmers and the Government, the former believes that in the absence of Minimum Support Price (MSP), the large corporates will acquire a monopoly, in the long run, thus they will no longer have any bargaining power or any say in anything.

Bihar’s case of repealing Agricultural Produce Market Committee (APMC)

Bihar repealed APMC in 2006. However, the land, market structure, type of transactions, type of farmers, and volume of transactions in the Government regulated Agricultural Produce Market Committee (APMC) differs from State to State. The volumes of transactions conducted in Bihar’s mandis were very less. The objective of repealing the APMC Act was to invite private corporates to invest in the infrastructures, facilities, equipment and develop agricultural markets in the rural areas. Rural development will follow as a by-product. However, though the exports boosted, the farmer’s income levels improved, but private markets did not become dominant enough to overpower the farmer’s bargaining power. The agricultural produce in terms of quality and quantity improved. The improvement levels were not great, but at a consistent rate.

Comparing Bihar’s case with other states like Punjab, Haryana where the volume of transactions in APMC is huge, the land, market structure and types of crops grown also differs will not give you predictive results.

History of Minimum Support Price (MSP)

MSP (Minimum Support Price) came into existence in the 1960s when India was struggling to take the road to development. Food shortages, price fluctuations, inadequate infrastructure haunted the country. Green revolution attracted the attention of all, and India bestowed with rich resources, had the possibility to become a leader in crop production. Exporting crops could add to India’s forex reserves while gaining a global presence. Let us know the main reasons why MSP came into existence in India?

Promote food production, as food shortage was India’s burning concern then, as it was a heavily populated country with the primitive development stage.
Exporting crops or agricultural produce would help India to increase its Global presence, develop good relations with countries across the Globe and boost its revenue.
Ensure rural development, by ensuring income by the way of MSP, and improving the overall standard of living of the farmers.
Provide monetary incentives to the farmers to use better technologies, infrastructure, and ingredients to increase agricultural production.
Promote cultivation of better quality agricultural produce. This would improve the nutritional value of overall produce; hence higher prices could be charged for quality produce.
Prevent farmers from price fluctuations, especially during bumper produce, when supply exceeds demand, and prices sharply decline, leading to huge losses to the farmer. MSP acts as a hedging mechanism, where the risk of loss arising out of unforeseen future is transferred to the Government.
The middlemen between the farmers and the end-users or consumers were considered to be more powerful than the farmers, with higher bargaining power. Thus, cracking better deals for farmers.

Was Minimum Support Price (MSP) successful in its objective?

Minimum Support Price (MSP) given was higher for Wheat and Rice initially, because of which there was overproduction of these crops as compared to other crops.
Pulses production which was in huge demand abroad were ignored since MSP incentive for Wheat and rice were higher.
There was no diversification of crops due to which the nutritional value took a back seat.
Subsidies provided by the Government to boost the cultivation of agricultural produce never trickled down to all the farmers, they were sided away by few.
Rural programs and schemes launched by the Government were not successful enough to make the lives of farmers debt-free, as a large number of farmers still continue to commit suicide under the burden of debt taken for cultivation.
Bank accounts opened for the farmers to receive cash for cultivation purposes, were all fraudulently swallowed by the corrupted officials, as uneducated farmers are ignorant and innocent without knowing their rights.
Financial inclusion was far away from the reach of rural people.
Due to inadequate monetary means, the farmers were forced to use inorganic fertilizers and chemicals to boost production, but eventually, this led to year on year decrease in their agricultural produce.
Urbanization acted as a catalyst to turn agricultural lands into commercial complexes, thus diverting all the resources.

Thus, the Minimum Support Price (MSP) was not immune to issues, defects, and hollow promises of changing government.

FunFact

The government repealed all the 3 agricultural bills and put an end to 15 months of protest by farmers on the road.

Let us know your thoughts about the Farmer’s protest on these three Bills?