WHAT IS MSP AND FRP?

 

MSP

• MSP is the rate at which government purchases the crops from farmers, and  is based on a calculation of at least one and a half times the cost production incurred by the farmers.
• MSP is a minimum support price for any crop that the government considers as remunerative for farmers and hence deserving of support.
• The Commission for Agricultural Costs and Prices (CACP) recommends MSP for 22 mandated crops.
• The mandated crops include 14 crops of the kharif season , 6 rabi crops and 2 other commercial crops.

FACTORS DECIDING MSP

• Cost of cultivation.
• Demand situation of commodity.
• Market price trends(domestic and global).
• Implication for consumers (inflation).
• Soil and Water use.
• Trade between agriculture and non agriculture sectors

THREE KINDS OF PRODUCTION

• A2: Covers all paid out costs directly incurred by the farmer in cash and kind on seeds, fertilizers, pesticides, hired labour, leased in land, fuel, irrigation, etc
• A2+FL: Includes A2 plus an imputed value of unpaid family labour.
• C2: It is more comprehensive cost that factors in rentals and interest forgone on owned land and fixed capital assets, on top of A2+FL.
• CACP considers both A2+FL  while recommending MSP.
• The Cabinet Committee on Economic Affairs of the union government takes a final decision on the level of MSPs and other recommendations made by CACP.

FRP

FRP is the price declared by the government, which mills are legally bound to pay to farmers for the cane produced by them.

Mills have the option of signing an agreement with farmers, which would allow them to pay the FRP in installments.

Delays in payment can attract an interest up to 15% per annum, and the sugar commissioner can recover unpaid FRP as dues in revenue recovery by attaching property of the mills.

The payment of FRP across the country is governed by the sugarcane control order 1966 issued under essential commodities act 1955 which mandates payment with in 14 days of the delivery of cane 

FRP is also determined on the recommendation of CACP

FRP is based on Rangarajan Committee report on reorganizing sugarcane industry.

FACTORS DECIDING FRP

• Cost of production of sugar cane.
• Availability of sugar to consumers at fair price.
• Price at which sugar produced from sugarcane is sold by producers.
• Recovery of sugar from cane
• The realization made from the sale of by products

NEED FOR MSP AND FRP

• Environmental disasters like drought , flood etc.
• Declining commodity price.
• Effects of demonetisation and GST which crippled rural economy.
• Higher input prices

ISSUES

• Limited extend
• Ineffective implementation.
• Acts like a procurement price.
• Makes agriculture wheat and paddy dominated.
• Middle men

WAY FORWARD

• Proper governmental action when prices fall
• Make MSP as an incentive price for other crops also which have nutritional seurity
• More focus on animal husbandry
• Involve State Support eg: Bhavantar Bhugtan Yojana initiate by Madhya Pradesh (a deficiency payment system.)