MSP – Advantages and Diasadvantages

MSP – Advantages and Diasadvantages

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The MSP, or Minimum Support Price, is the government-determined price at which the national government buys crops from farmers. The MSP was implemented in India between 1966 and 1997 to give farmers with a guarantee of price and to protect their profit. The GOI has announced an MSP (Minimum Support Price) of Rs. 2.37 Lac Crores for farmers farming wheat and paddy in the Union Budget 2022-23.

Why is MSP necessary? - The GOI declares the Minimum Support Price (MSP) before each seeding season in accordance with the recommendations of the Commission on Agricultural Costs and Prices (CACP). Farmers value the minimum support price because it preserves their profit. For example, if the cost of crops is lower on the free market, the farmer has the option of selling his products to the government at MSP. The MSP of each crop varies according to its nature, and MSP does not apply to all crops. The MSP favours equally the government and the farmers since the government receives an abundance of grains.

Advantages of MSP

• MSP supports the government in controlling the volatility of agricultural price as well as sustaining prices as low as reasonable.

• MSP serves as financial stability for farmers, allowing them to repay agricultural debts and recoup crop cultivation costs.

• MSP assists the government in purchasing extra amounts of excellent grains from farmers, ensuring that there is no food scarcity in the country.

• MSP also assists financial institutions and banks, and MSP enables farmers to repay their debts. This aids in preventing loan waivers, resulting in no obligations on the banks and guaranteeing the smooth operation of the economy.

Disadvantages of MSP

•Why MSP does not appear to be very useful to small-scale farmers since they sell their products in the free market and typically borrow money from private lenders, so they do not gain from government initiatives.

• It is frequently noticed that farmers obtain a better price for their crops when they sell them straight to the FPI (Food Processing Industries), however when the government offers MSP for 23 crops, it only procures one-third of them.

•The MSP inhibits competition in the agriculture industry and limits farmers' prospects. Aside from that, it puts stress on the government's finances.

The agricultural sector is India's most thriving industry, accounting for more than 40% of the overall employment in the country. As a result, this sector is vital to the Indian economy, and the government should take aggressive efforts to guarantee that farm subsidies benefit every farmer in the country.