STATUTORY MINIMUM PRICE (SMR)
1. Context
The Finance Ministry has notified the rules enabling cooperative sugar mills to claim past cane price payments made to farmers, in excess of the government’s statutory minimum price (SMP), as “business expenditure”. The move is expected to provide mills a relief of almost Rs 10,000 crore, against pending tax demands and litigation in respect of payments made before 2015-16 financial year
2. What is the Statutory minimum Price (SMP)
- The statutory minimum price (SMP) is announced by the central government based on the cost of cultivation estimated by the Commission for Agricultural Costs and Prices (CACP)
- This is the basic price which the sugar mills must pay sugarcane growers
- However, citing differences in cost of production, productivity levels and also as a result of pressure from farmers groups, some states (Uttar Pradesh, Punjab, Haryana, Tamil Nadu and Uttarakhand) used to declare state-specific sugarcane prices called State Advised Prices (SAP), usually higher than the SMP
- These states also argued that SMP was merely the minimum price which could be enhanced to protect farmers interests
- Even though the name suggest that SAPs are advisory prices, litigation in courts has established that the mills in these states mandatorily pay SAP to farmers in these states.
- Unlike the MSP for wheat or paddy announced by the Centre, where the government procures a commodity from farmers directly in case market prices go below the MSP, the government never procures sugarcane from farmers directly
3. Minimum Support Price (MSP)
Minimum Support Price (MSP) is a price support mechanism implemented by the government of India to protect farmers from fluctuations in agricultural produce prices and ensure remunerative prices for their crops.
MSP is an important agricultural policy that aims to provide stability to farmers' income and safeguard their interests during times of market volatility.
The MSP is announced by the government each year, and is based on the recommendations of the Commission for Agricultural Costs and Prices (CACP)
As of 2023, there are 22 crops under the Minimum Support Price (MSP) in India. These crops are:
- Kharif crops:
- Paddy
- Jowar
- Bajra
- Maize
- Ragi
- Tur (Arhar)
- Moong
- Urad
- Cotton (Medium Staple)
- Cotton (Long Staple)
- Groundnut
- Sunflower Seed
- Soyabean (Black)
- Soyabean (Yellow)
- Rabi crops:
- Wheat
- Barley
- Gram
- Lentil
- Rapeseed/Mustard
- Sesame
- Nigerseed
- Commercial crops:
- Sugarcane
- Copra
4. Commission for Agricultural Costs and Prices (CACP)
- The Commission for Agricultural Costs and Prices (CACP) is an advisory body of the Government of India that advises the government on agricultural pricing policy.
- The CACP was established in 1965 as the Agricultural Prices Commission and was renamed the Commission for Agricultural Costs and Prices in 1985
- The CACP is responsible for recommending the Minimum Support Prices (MSPs) for agricultural crops.
- The MSPs are prices that the government guarantees to buy agricultural crops from farmers, even if the market prices are lower.
- The MSPs are intended to protect farmers from distress sales and to ensure that they receive a fair price for their produce
4. Fair and Remunerative Prices (FRP)
- Fair and Remunerative Price (FRP) is a minimum price set by the government for sugarcane, which is to be purchased by sugar mills from farmers.
- The FRP is fixed by the Cabinet Committee on Economic Affairs (CCEA) on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP)
- The FRP is calculated based on the cost of production of sugarcane, which includes the cost of land, water, fertilizers, pesticides, and labor. The FRP is also adjusted for inflation
- In recent years, the government has increased the FRP for sugarcane, in response to the demands of sugarcane farmers. The government has also announced a number of other measures to support sugarcane farmers, such as providing them with subsidized fertilizers and crop insurance
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For Prelims: MSP, FRP, SMP
For Mains: 1.MSP has traditionally focused on major crops, but several other agricultural commodities lack price support mechanisms. Assess the feasibility and implications of extending MSP to non-major crops to promote diversification and sustainable agricultural practices
2.Discuss the role of the Commission for Agricultural Costs and Prices (CACP) in determining the Minimum Support Price (MSP) for various crops. Critically evaluate the methodology employed by CACP and suggest measures to make MSP more inclusive, especially for small and marginalized farmers
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Previous Year Questions
1. Consider the following Statements (UPSC CSE 2020)
1. In the case of all cereals, pulses and oil-seeds, the procurement at Minimum Support Price (MSP) is unlimited in any State/UT of India
2.In the case of cereals and pulses, the MSP is fixed in any State/UT at level to which the market price wiull never rise
Which of the statements given above is/ are correct?
A. 1 Only
B. 2 Only
C. Both 1 and 2
D. Neither 1 nor 2
Answer -D
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Source: indianexpress
