MSP-Minimum Support Price is the price that the government sets on agricultural product price to purchase directly from the farmers.
MSP rate on the agricultural product acts as a safeguard the farmer to a minimum profit for the harvest, incase the open market has lesser price than the cost incurred.
- The government fixes Minimum Support Prices (MSPs) for 22 mandated agricultural crops on the basis of the recommendations of the Commission for Agricultural Costs & Prices (CACP), after considering the views of State Governments and Central Ministries/Departments concerned and other relevant factors. MSP is determined for the country as a whole and not region or state-specific.
- While recommending MSP, CACP considers various factors viz.
- cost of production,
- overall demand-supply situations of various crops in domestic and world markets,
- domestic and international prices,
- inter-crop price parity,
- terms of trade between agriculture and non-agriculture sector,
- likely effect of price policy on rest of economy and
- a minimum of 50 percent as the margin over cost of production.