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Context

• The 'Delhi Chalo' protest, in full swing since February 13, has seen farmers from Punjab, Haryana, and western Uttar Pradesh marching towards Delhi to assert their demands.
• The primary demand is for MSP,a safety net ensuring farmers a minimum income for their crops, lies at the heart of their agitation.

What is Minimum Support Price (MSP)?

• Minimum Support Price (MSP) is the lowest rate at which government procurement agencies buy crops from farmers. It shields farmers from market fluctuations, offering stability and income security.
• MSP is crucial for ensuring fair pricesfor farmers and is determined by the Commission for Agricultural Costs and Prices (CACP), considering factors like production costs, market trends, and demand-supply dynamics.
• Established in 1965, CACP operates under the Ministry of Agriculture and Farmers Welfare.
• After the CACP submits its recommendations, the Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister of India, makes the final decision on MSP levels.

How is MSP calculated?

• The Minimum Support Price(MSP) is calculated by considering both the explicit and implicit costs incurred by farmers.
• Explicit costs cover expenses like chemicals, fertilizers, seeds, and hired labor, while implicit costs include factors such as family labour and rent. These variables are represented by A2, FL, and C2.
• A2 refers to the expenses for inputs like chemicals, fertilizers, seeds, and hired labor for crop growth, production, and maintenance.
• A2 + FL includes both actual and implicit costs, such as family labor.
• C2 incorporates A2 + FL along with fixed capital assets and rent paid by farmers.
• Additionally, the Commission for Agricultural Costs and Prices (CACP) takes into account various other factors:
• Cost of cultivation per hectare and crop costs in different regions.
• Cost of production per quintal and regional differences.
• Market prices of relevant crops and their fluctuations.
• Other production and labour costs, along with associated changes.
• Prices of commodities bought or sold by farmers and any fluctuations.
• Information on product supply, including area, yield, production, imports, exports, and stocks with public agencies or industries.
• Demand information across regions, including total and per capita consumption, processing industry trends, and capacity.

Why are farmers protesting?

• Farmers have demandedMSP assurance across all crops, implementing Swaminathan Commission recommendations, debt relief, pensions for farmers, and withdrawing cases against past protestors.
• Advocacy for India's exit from WTO and free-trade agreements are also demands that have been put forth by the farmers. 

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