economics minimum supportive price AEC

1. MINIMUM
SUPPORTIVE PRICE
AEC301-AGRICULTURAL MARKETING TRADE
AND PRICE(2+1)

2. THEMINIMUMSUPPORTPRICE(MSP)ISANAGRICULTURALPRODUCTPRICESETBYTHE
GOVERNMENTOFINDIATOPURCHASEDIRECTLYFROMTHEFARMER.
THISRATEISTOSAFEGUARDTHEFARMERTOAMINIMUMPROFITFORTHEHARVEST,IFTHE
OPENMARKETHASLESSERPRICETHANTHECOSTINCURRED.
THEMINIMUMSUPPORTPRICESAREANNOUNCEDBYTHEGOVERNMENTOFINDIAATTHE
BEGINNINGOFTHESOWINGSEASONFORCERTAINCROPSONTHEBASISOFTHE
RECOMMENDATIONSOFTHECOMMISSIONFORAGRICULTURALCOSTSANDPRICES(CACP)
MINIMUM SUPPORT PRICE

3. OBJECTIVE
The main objective of Minimum Support Price (MSP) is to avoid losses of farmers by helping them regulate
a minimum level of price at which a commodity can be purchased by the agents who purchase from
farmers or which the government offers to buy.
The minimum support prices are a guarantee price for their produce from the Government.
Assure remunerative and relatively stable price environment for the farmers by inducing them to increase
production and thereby augment the availability of food grains.
Improve economic access of food to people.
To ensure remunerative prices to the growers for by encouraging higher investment and production.
It also aims to bring a balanced realization of sufficient food production and consumption needs at the
same ensuring adequate and affordable food grains to all the people.

4. The Commission of Agricultural Costs and Prices (CACP) while recommending prices takes into account
important factors, such as:
I. Cost of production
II. Changes in input prices
III. Input/output Price Parity
IV. Trends in market prices
V. Inter-crop Price Parity
VI. Demand and supply situation
VII. Effect on Industrial Cost Structure
VIII. Effect on general price level
IX. Effect on cost of living
X. International market price situation
XI. Parity between prices paid and prices received by farmers (Terms of Trade)

8. Reference
https://en.wikipedia.org/wiki/Minimum_support_price_(India)#cite_ref-CACP_2-1
https://farmer.gov.in/mspstatements.aspx