What is MSP and It's Objective

Based on the recommendations of the Commission for Agricultural Costs and Prices (CACP), the Department of Agriculture and Co-operation, Government of India, declares Minimum Support Price (MSP) for 22 crops before the sowing season. The idea behind MSP is to give guaranteed prices and assured market to the farmers and save them from the price fluctuations. It insulates farmers from the unwarranted fluctuation in prices caused by the variation in supply (largely influenced by the monsoon), lack of market integration, information asymmetry and other elements of market imperfection plaguing the agricultural markets. The guaranteed price and assured market are expected to encourage higher investment and in adoption of modern technologies in agricultural activities. Further, with globalization resulting in freer trade in agricultural commodities, it is very important to protect farmers from the unwarranted fluctuation in prices, provoked by the international level price variations.

Given the relevance of MSP scheme, the erstwhile Programme Evaluation Organization (PEO), now the Development Monitoring and Evaluation Office (DMEO), on a request from the Ministry of Agriculture, Government of India has conducted an Evaluation Study on the Efficacy of MSP. The study has been designed to explore the relevance of MSP and to ascertain if the intended benefits have reached the farmers after such a long period of implementation. The constraints faced in the implementation have also been analyzed and probable solutions have been explored and recommended.

Evaluation Objectives

1. To explore and analyze the effectiveness of price policy in India in the context of nationwide price support objectives set forth by government.

2. Impact of MSP on creating a predictable and equitable crop price regime.

3. To identify regional and intercrop variations in the implementation of MSP and reasons for the same.

4. To study and evaluate the impact of MSP on cropping patterns

5. To evaluate impact of MSP on long term agricultural competitiveness.

6. To evaluate impact of MSP on optimal land and water use and sustainability on a nationwide basis across crops.

7. To evaluate whether adoption of improved technology, appropriate investment, and rural infrastructure has been aided by operation of MSP.

8. To suggest policy measures related to MSP for the future.