MSP should be scrapped

MSP- What, Why and How ?

MSP- Minimum Support Price set by the Govt. is the price at which govt
procures food grains from farmers.
• Irregularity in Price and Revenue of farm produce. Hence, MSP was
introduced by the govt to cover the cost of production incurred by the
farmers.

• Procurement system is not uniform causing imbalance in production of

crops like between wheat and certain lesser utilized crops. They become
more expensive.

• Waste (increasing govt expense , subsidy budget gets disturbed 2015)

• Weak positive corelation between cost of production and MSP as

different states have varying cost of production depending upon
resources available.
• Future expectations change causing a change in the supply curve but demand almost same (because in-
elastic)
• Snowball effect
Consequences of MSP

• Price capping (price floor) cause

imbalance between demand and
supply

• Waste (increasing govt expense ,

subsidy budget gets disturbed
2015)

• Kills competition in market and

hence (monopoly or oligopoly exists)

• Lack of awareness of farmers

MSP should not be scrapped
What and why?
Minimum Support Price for essential crops set up by the GoI to purchase directly from the farmers.
This safeguards the farmer to a minimum profit for their harvest. 23 crops are covered over 80% of
India’s total agricultural produce.

Why it should not be scrapped?

• Assured Income covers the cost of production of farmers even if the market
prices of their produce dip, more so for small & marginal farmers (85% of total
farmers in India with only 33% of the total landholdings while their production
makes upto 41% of the total.

• Increase in farmers income- investment in technology and modern farming

MSP- A Necessary Tool

The min support price acts as a tool for the govt to control sharp rise or fall in crop prices.

Helps govt control the growth of crops that are low in production (by offering more price
support for them)

Unavailability of cold storage facilities to the farmers makes them vulnerable to sell their
produce immediately and this can be exploited by private firms

It also helps marginal farmers living below poverty line to have a positive net profit by selling
their produce at MSP and buying them at subsidized price through PDS
Globalization can badly hit the Indian farmers who are relatively less technologically advanced, less land
holdings, poorer availability to facilities etc.

Credits to MSP, farmers are able to cover their expenses for now but in absence of MSP, they are
prone to get exploited by the instruments of free market economy.

Source- The Hindu Source- The Hindu