Difference between subsidised rate and support price
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Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices. The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP). MSP is price fixed by Government of India to protect the producer - farmers - against excessive fall in priceduring bumper production years. The minimum support prices are aguarantee price for their produce from the Government that this will be the minimum price at which their product will fetch.If the market price is above,MSP,the farmer can obviously sell it at the marketprices.In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price.
The major objectives are to support the farmers from distress sales and to procure food grains for public distribution.
As of 2015-16,Minimum support prices are currently announced for 25 commodities,which includes food grains like Wheat ,paddy etc and non food crops like raw cotton,raw jute etc.
Then there is this concept ofPROCUREMENT PRICE,which is the price at which government procures food grains for buffer stocking and PDS purposes through FCI.
Consider the situation where,in the wake of an imminent food shortage that may occur, the traders are willing to procure food grains in advance,driving up the market price.When the market prices are much higher than the MSP,the farmer will obviously be willing to sell it in the market.
But the government,still, needs to procure food grains on its own to meet its distribution commitments in PDS at subsidised rates(issue price) and to create the buffer stock,necessary to intervene from supply side incase there is food deficiency and high food inflation.Therefore the government so as to fulfill these commitments,declares a Procurement price which is > or = to the MSP.
The major difference between MSP and PP is that while PP is for food grains only,MSP is for 25 crops which includes both food grains and non food grains.
The major objectives are to support the farmers from distress sales and to procure food grains for public distribution.
As of 2015-16,Minimum support prices are currently announced for 25 commodities,which includes food grains like Wheat ,paddy etc and non food crops like raw cotton,raw jute etc.
Then there is this concept ofPROCUREMENT PRICE,which is the price at which government procures food grains for buffer stocking and PDS purposes through FCI.
Consider the situation where,in the wake of an imminent food shortage that may occur, the traders are willing to procure food grains in advance,driving up the market price.When the market prices are much higher than the MSP,the farmer will obviously be willing to sell it in the market.
But the government,still, needs to procure food grains on its own to meet its distribution commitments in PDS at subsidised rates(issue price) and to create the buffer stock,necessary to intervene from supply side incase there is food deficiency and high food inflation.Therefore the government so as to fulfill these commitments,declares a Procurement price which is > or = to the MSP.
The major difference between MSP and PP is that while PP is for food grains only,MSP is for 25 crops which includes both food grains and non food grains.
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