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MSP & FRP-Safety net for the farmers

  • IAS NEXT, Lucknow
  • 30, Sep 2021
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MSP and FRP ( Minimum support price vs Fair and Remunerative Price (FRP) of sugarcane

A ‘safety net’ for the farmers, the MSP is the core of the agricultural revolution that saw India transforming from a food-deficient to a food-surplus nation. Over the years, the MSP has helped the farmers in India to stave off the effects of financial fluctuations. The MSP has become a major talking point after the farmers’ protests reached the national Capital.

The MSP-Minimum support price is the rate at which the government purchases crops from farmers, and is based on a calculation as recommended by Government

How the govt decides on the MSP?

In India, there are two major cropping seasons, namely ‘Rabi’ and ‘Kharif’

The government announces the MSP at the start of each cropping season.

The MSP is decided after the government exhaustively studies the major points made by the Commission for Agricultural Costs and Prices.

These recommendations are based on some pre-fixed formulae. This includes the actual cost incurred, implicit family labor as well as the sort of fixed assets or rent paid by the farmers.

In technical terms, these variables are called A2, FL and C2. The MSP is calculated by the government by often adding all these.

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

Crops under MSP:

The Commission for Agricultural Costs & Prices (CACP) recommends MSPs for 22 mandated crops and fair and remunerative price (FRP) for sugarcane.

CACP is an attached office of the Ministry of Agriculture and Farmers Welfare.

The mandated crops include 14 crops of the kharif season, 6 rabi crops and 2 other commercial crops.

In addition, the MSPs of toria and de-husked coconut are fixed on the basis of the MSPs of rapeseed/mustard and copra, respectively.

The concept of MSP was first mooted in 1966-67, during green revolution, to incentivize the Punjab farmers to use the dwarf ‘miracle’ wheat varieties.

Pricing policy for sugarcane/ Fair and Remunerative Price (FRP) of sugarcane.

Sugarcane prices are determined by the Centre as well as States.

The pricing of sugarcane is governed by the statutory provisions of the Sugarcane (Control) Order, 1966 issued under the Essential Commodities Act (ECA), 1955.

Prior to 2009-10 sugar season, the Central Government was fixing the Statutory Minimum Price (SMP) of sugarcane and farmers were entitled to share profits of a sugar mill on 50:50 basis.

As this sharing of profits remained virtually unimplemented, the Sugarcane (Control) Order, 1966 was amended in 2009 and the concept of SMP was replaced by the Fair and Remunerative Price (FRP) of sugarcane.

The Centre announces Fair and Remunerative Prices which are determined on the recommendation of the Commission for Agricultural Costs and Prices (CACP) and are announced by the Cabinet Committee on Economic Affairs, which is chaired by Prime Minister.

The State Advised Prices (SAP) are announced by key sugarcane producing states which are generally higher than FRP.