Consider the following statements regarding Minimum Support Price 1 MSP is a ldquo minimum price rdq...........

Indian Economy (CDS) Agriculture

Consider the following statements regarding Minimum Support Price:

1. MSP is a “minimum price” for any crop that the government considers as remunerative for farmers and hence deserving of “support”.

2. CACP considers both A2+FL and C2 costs while recommending MSP.

3. CACP gives the fi nal decision on the level of MSPs which the government has to abide with.

Which of the statements given above is/are correct?

1only

2 and3 only

1 and 2 only

1, 2 and 3

Minimum Support Price :

The MSP is the rate at which the government purchases crops from farmers, and is based on a calculation of at least one-and-a-half times the cost of production incurred by the farmers.
MSP is a “minimum price” for any crop that the government considers as remunerative for farmers and hence deserving of “support”
The Commission for Agricultural Costs & Prices (CACP) recommends MSPs for 22 crops and fair and remunerative price (FRP) for sugarcane. CACP is an attached offi ce of the Ministry of Agriculture and Farmers Welfare.
While recommending price policy of various commodities under its mandate, the Commission keeps in mind the various Terms of Reference (ToR) given to CACP in 2009. Accordingly, it analyzes 1) demand and supply;2) cost of production;3) price trends in the market, both domestic and international;4) inter-crop price parity;5) terms of trade between agriculture and nonagriculture;6) a minimum of 50 percent as the margin over cost of production; and 7) likely implications of MSP on consumers of that product.
CACP considers both A2+FL and C2 costs while recommending MSP.
Three Kinds of Production Cost: The CACP projects three kinds of production cost for every crop, both at state and all-India average levels. ‘A2’:Covers all paid-out costs directly incurred by the farmer in cash and kind on seeds, fertilisers, pesticides, hired labour, leased-in land, fuel, irrigation, etc