Question 1

Which body recommends Minimum Support Price (MSP) for agricultural commodities in India?

Accepted Answer

Commission for Agricultural Costs and Prices. The Commission for Agricultural Costs and Prices (CACP) recommends MSP for agricultural commodities in India. CACP is an attached office of the Ministry of Agriculture and Farmers Welfare. It submits price policy reports for Kharif, Rabi, and commercial crops separately. The final announcement is made by the Cabinet Committee on Economic Affairs (CCEA).

Question 2

Which body gives the final announcement of MSP for agricultural crops in India?

Accepted Answer

Cabinet Committee on Economic Affairs. The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister, gives the final approval and announcement of MSP. CACP only recommends the prices; it is the CCEA that officially fixes them. This ensures MSP decisions have the highest executive sanction. The announcement is typically made before the sowing season begins.

Question 3

What does A2 cost formula include in MSP calculation?

Accepted Answer

Only actual paid-out expenses by the farmer. A2 refers to the actual paid-out expenses incurred by the farmer, including seeds, fertilizers, pesticides, hired labour, and irrigation charges. It does not include the value of family labour or owned resources. A2 is the narrowest cost concept used by CACP. Most farmers prefer C2+50% as recommended by the Swaminathan Commission.

Question 4

What does the A2+FL cost formula include?

Accepted Answer

Actual paid-out costs plus imputed value of family labour. A2+FL includes all actual paid-out costs (A2) plus the imputed value of unpaid family labour. This formula accounts for the contribution of family members who work on the farm without direct wages. The government has stated that MSP is fixed at 1.5 times A2+FL for most crops. Critics argue this still does not cover the full cost of cultivation.

Question 5

What does the C2 cost formula represent in agricultural cost calculation?

Accepted Answer

A2+FL plus imputed rent of owned land and interest on owned capital. C2 is the most comprehensive cost formula that includes A2+FL plus the imputed rent of owned land and interest on owned fixed capital. It represents the true economic cost of production. The Swaminathan Commission recommended fixing MSP at C2+50% to give farmers a fair return. The government currently announces MSP at 1.5 times A2+FL, not C2.

MSP, APMC & Procurement — Set 1