Ø After Independence, India was
struggling to produce enough agricultural output for the growing population.
Ø To increase agricultural output, in
the 1960s India saw the green revolution.
What is
Green Revolution?
Ø Green Revolution refers to
exponential increase in agricultural output especially in production of food
grains including wheat and rice facilitated by use of high yielding variety
(HYV) seeds, fertilizers and pesticides.
Food
Corporation of India
Ø During that period in the 1960s, the
government set up the Food Corporation of India (FCI).
Ø The primary objective of Food
Corporation of India (FCI) is to procure the food grains from farmers, to
maintain buffer stock keeping in view the food security for the country's
population and distribute the same via public distribution system to the end
consumers.
What is
Minimum Support Price?
Ø The function of procurement of food
grains by FCI is where Minimum Support Price came into picture.
Ø For smooth functioning of the above
framework of procurement and distribution, it was important to remove the
element of uncertainty for farmers in order for them to have visibility about
the prices they will get for their output.
Ø Due to bumper production of food
grains during a year, often the prices would fall so sharply in the market,
that farmers would not even be able to recover their cost of producing the
output.
Commission
for Agricultural Costs and Prices (CACP)
Ø Thus in 1965, the Government of
India set up the Commission for Agricultural Costs and Prices (CACP) as the
Agricultural Prices Commission.
Ø The primary objective of the
Commission for Agricultural Costs and Prices (CACP) frame pricing policies and
recommend the Minimum Support Price.
Ø Minimum Support Price is the
guaranteed minimum price recommended by CACP at which the FCI will acquire the
output produced by the farmer.
Ø While calculating MSP, the CACP
takes into consideration all the costs incurred by farmers to produce the
harvest thus ensuring stable income for them from their harvest.
Ø So if prices of the produce falls
sharply in the market, the FCI will buy the same from farmers at the MSP.
Thus through
MSP, Government of India achieves two objectives
1) To ensure
minimum profit for the farmers for their harvest by avoiding distress sale of
produce by them
2) To
procure and maintain buffer stock for food security and further distribute the
same through a public distribution system.
There is
much more to discuss, but let's keep it for later.
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