• The government has increased the minimum support price (MSP) of raw jute by Rs 250 to Rs 4,750 per quintal for the 2022-23 season. It assures a minimum of 50 per cent as margin of profit.

• The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, approved the MSP for raw jute for the 2022-23 season.

• The approval is based on recommendations of the Commission for Agricultural Costs and Prices.

• Jute Corporation of India (JCI) will continue as central government nodal agency to undertake price support operations and the losses incurred, if any, in such operations, will be fully reimbursed by the Centre.

• The announced MSP of raw jute for the 2022-23 season is in line with the principle of fixing the MSP at a level of at least 1.5 times all India weighted average cost of production as announced by the government in the Budget 2018-19.

What is MSP?

The Minimum Support Price (MSP) mechanism provides a price guarantee to farmers for their produce. This is implemented across the country as nearly 86 per cent farmers fall under the small and marginal category. It also helps in stabilising prices in the market and thus services the consumers as well.

Genesis of MSP

• India inherited an agrarian economy from the British with the agriculture and allied sector contributing to around three-fourths of the Gross Domestic Product (GDP) and providing employment to more than four-fifth of the population. 

• The food shortages faced during the mid-1960s pushed India to reform its agricultural policy and accordingly India adopted significant policy reforms focused on the goal of achieving food grain self-sufficiency.

• Series of institutional reforms were undertaken to boost agricultural production and to modernise farming practices. These included land reforms, structural changes in the agricultural administrative arrangements, agricultural extension schemes, initiation of price support policies including the introduction of the minimum support price (MSP) for major agricultural produces, introduction of new technologies (popularly known as the green revolution), strengthening of agricultural research, etc. 

What is the significance of MSP?

• The prices of agricultural commodities are inherently unstable, primarily due to the variation in their supply, lack of market integration and information asymmetry. A very good harvest may result in a sharp fall in the price of that commodity during that year which in turn will have an adverse impact on the future supply as farmers withdraw from sowing that crop in the following years. This then causes paucity of supply next year and hence, major price increase for consumers.

• To counter this, the MSP for major agricultural products is fixed by the government, each year. 

• MSP is a tool which gives guarantee to the farmers, prior to the sowing season, that a fair amount of price is fixed to their upcoming crop to encourage higher investment and production of agricultural commodities. 

• The MSP is in the nature of an assured market at a minimum guaranteed price offered by the government.

What is the process to fix MSP?

• The Commission for Agricultural Costs & Prices (CACP) is an attached office of the ministry of agriculture and farmers welfare. It was established in January 1965. 

• It is mandated to recommend MSPs to incentivise the cultivators to adopt modern technology, and raise productivity and overall grain production in line with the emerging demand patterns in the country. 

• MSP for major agricultural products are fixed by the government, each year, after taking into account the recommendations of the commission.

• CACP recommends MSPs of 23 commodities, which comprise 7 cereals (paddy, wheat, maize, sorghum, pearl millet, barley and ragi), 5 pulses (gram, tur, moong, urad, lentil), 7 oilseeds (groundnut, rapeseed-mustard, soyabean, sesamum, sunflower, safflower, niger seed), and 4 commercial crops (copra, sugarcane, cotton and raw jute).

• CACP submits its recommendations to the government in the form of price policy reports every year, separately for five groups of commodities namely kharif crops, rabi crops, sugarcane, raw jute and copra. 

• Before preparing aforesaid five pricing policy reports, the commission draws a comprehensive questionnaire, and sends it to all the state governments and concerned national organisations and ministries to seek their views.

• Subsequently, separate meetings are also held with farmers from different states, state governments, national organisations like Food Corporation of India (FCI), NAFED, Cotton Corporation of India (CCI), Jute Corporation of India (JCI), trader’s organisations, processing organisations, and key central ministries. 

• The commission also makes visits to states for on-the-spot assessment of the various constraints that farmers face in marketing their produce, or even raising the productivity levels of their crops. Based on all these inputs, the commission then finalises its recommendations/reports, which are then submitted to the government.

• The Cabinet Committee on Economic Affairs (CCEA) takes a final decision on the level of MSPs and other recommendations made by the CACP.

Jute industry in India

• India is the largest producer of jute, also called the golden fibre, in the world. The production of jute including mesta is around 13.5 lakh tonnes covering an area of nearly 7.32 lakh hectare. 

• The jute industry is one of the major industries in the eastern region, particularly in West Bengal. It is estimated that the jute industry provides direct employment to 3.7 lakh workers in organised mills and in diversified units including tertiary sector and allied activities and supports the livelihood of several lakh farm families. In addition, there are a large number of persons engaged in the trade of jute.

• Jute meets the standards for ‘safe’ packaging in view of being a natural, renewable, biodegradable and eco-friendly product. 

• The government provides support to the jute growers through MSP operations by the Jute Corporation of India.

• The Jute Corporation of India (JCI) was established in 1971. It is the official agency of the ministry of textiles responsible for implementing the MSP policy for jute producers and serves as a stabilising agency in the raw jute market. JCI also undertakes commercial operations, procuring jute at prices above the MSP on commercial consideration to generate profits. 

• The schemes for promotion of the jute sector are primarily implemented by the National Jute Board, which is a statutory body created for the development and promotion of the sector.

• Jute-ICARE has been launched for increasing the income of jute farmers by at least 50 per cent by using certified seeds, modern agronomic practices in jute cultivation and also by using microbial consortium to upgrade the quality of jute. The programme has shown enormous promise so far. 

• The promotion of Jute Geo-Textiles and Agro-Textiles have been taken up with the state governments, particularly those in the northeast region and also with departments such as ministry of road transport and ministry of water resources. 

• A software platform ‘JUTE-SMART’ (Jute Sacking Supply Management and Requisition Tool) has been set up for procurement of jute sacking from November 1, 2016.

Manorama Yearbook app is now available on Google Play Store and iOS App Store