What is minimum support price?

The Government of India announces the Minimum Support Prices (MSPs) for different crops in order to provide farmers fair prices for their produce. It encourages the agricultural sector as the MSP is the lowest price at which the government itself will buy the crop from the farmers ensuring a certain amount of profit for the farmers. The MSPs are announced twice a year during the rabi and kharif seasons. It protects the interest of the farmers as it prevents speculations regarding agricultural output cost and allows the farmers to make the right decisions with respect to their productions. It also allows the government to run the Public Distribution System in an efficient manner as they are able to stockpile food grains at MSP and redistribute the same to the general public at effective prices. This protects consumer welfare and reduces the price of food grains in the market.