A political ploy: on the hike in MSP’s(Hindu summary-7th July 2018)

www.iasinsights.in ; www.iasgyaan.com posts Hindu  summary about Hike in MSP’s and political action behind it.

A political ploy: on the hike in MSP’s

The Hindu

Context:

  • Rise in MSP’s by the union government.
  • Rather than hike in MSP’s there is a need of agriculture reforms.

What is MSP?

  • Minimum Support Price is the price at which government purchases crops from the farmers, whatever may be the price for the crops.
  • It is an important part of India’s agricultural price policy.
  • It helps to incentivize the framers and thus ensures adequate food grains production in the country.
  • It gives sufficient remuneration to the farmers, provides food grains supply to buffer stocks and supports the food security programme through PDS and other programmes.
  • It is announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).

Procurement price:

  • The price at which GoI procures crops despite announcing MSP.
  • Usually procurement price > MSP.
  • It is announced after harvesting.

Facts to be known:

Commodity

 

Variety

 

MSP for 2017-18Season

 

MSP approvedfor 2018-19Season

 

Increase

 

Return*over cost in percent

 

Absolute

 

 

 

Absolute

 

Percentage

 

Paddy

 

Common

 

1550

 

1750

 

200

 

12.90

 

50.09

 

Grade A

Grade A

 

1590

 

1770

 

180

 

11.32

 

51.80

 

Jowar

 

Hybrid

 

1700

 

2430

 

730

 

42.94

 

50.09

 

Maldandi

Maldandi

 

1725

 

2450

 

725

 

42.03

 

51.33

 

Bajra

 

 

1425

 

1950

 

525

 

36.84

 

96.97

 

Ragi

 

 

1900

 

2897

 

997

 

52.47

 

50.01

 

Maize

 

 

1425

 

1700

 

275

 

19.30

 

50.31

 

Arhar(Tur)

 

 

5450

 

5675

 

225

 

4.13

 

65.36

 

Moong

 

 

5575

 

6975

 

1400

 

25.11

 

50.00

 

Urad

 

 

5400

 

5600

 

200

 

3.70

 

62.89

 

Groundnut

 

 

4450

 

4890

 

440

 

9.89

 

50.00

 

Sunflower Seed

 

 

4100

 

5388

 

1288

 

31.42

 

50.01

 

Soyabean

 

 

3050

 

3399

 

349

 

11.44

 

50.01

 

Sesamum

 

 

5300

 

6249

 

949

 

17.91

 

50.01

 

Nigerseed

 

 

4050

 

5877

 

1827

 

45.11

 

50.01

 

Cotton

 

Medium Staple

 

4020

 

5150

 

1130

 

28.11

 

50.01

 

Long Staple

 

4320

 

5450

 

1130

 

26.16

 

58.75

 

 

  • The highest percentage increase in MSP over the previous year is for ragi (52.47 %) followed by Jowar hybrid (42.94%).

What is the issue?

  • Hike on consumer price inflation is expected to vary between 0.5% and 1% by the end of 2018-19.
  • The Centre’s fiscal arithmetic may not be too adversely affected if its outlay on procurement is around ₹15,000 crore, about 0.1% of GDP
  • Because of this hike, farmers will prefer those crops which have high MSP leading to over supply of those crops and short supply of other crops which are having least hike.

How MSP helps the public and farmers?

Step 1: GoI procures the crops usually Rice and Wheat by paying MSP or procurement price

Step 2: These are shifted to FCI godowns

Step 3: From FCI respective state civil supplies dept will purchase the grains

Step 4: These purchased grain are distributed to the people at affordable prices through PDS

What to be done?

Raising MSP’s though a good initiative, we cant depend on that only as it has long standing affects on prices and fiscal burden. Instead it is advisable to use new techniques and methodologies to increase the production.

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