why it is important for the government to fix a minimum support price for a labour
Answers
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 price during bumper production years. The minimum support prices are a guarantee price for their produce from the Government. The major objectives are to support the farmers from distress sales and to procure food grains for public distribution. 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.
IT AFFECT FARMERS :-
The agriculture sector and farmers are passing through a difficult phase. The sector suffered a blow from back-to-back droughts during 2014-15 and 2015-16 followed by low and depressed farm level prices during 2016-17 and kharif 2017, mainly due to global price trends. This has intensified the demand for ensuring MSP (minimum support price) and raising MSP.
The forthcoming budget needs to take a call to launch effective measures to address the agrarian distress, with emphasis on measures that deliver immediate results. This includes price as well as non-price factors.
Non-price factors like technology, market reforms, infrastructure and institutions are quite important to raise growth and farmers' income, but they take time to deliver results and thus are important for medium and long term, whereas better prices result in immediate effect on farmers' income and also on productivity and growth. In the light of this the forthcoming budget should accord top priority to measures that translate into remunerative prices for farm produce with immediate effect. MSP is one such instrument.
The government notifies MSP for 23 commodities and FRP (fair and remunerative price) for sugarcane. These crops cover about 84% of total area under cultivation in all the seasons of ayear. About 5% area is under fodder crops which are not amenable for MSP-type intervention. Thus, the present list of MSP crops covers close to 90% of the cultivated area. The system of MSP, if implemented fully, will leave only a very small segment of producers without price benefit.