The price declared by the Government every year before the sowing season to provide incentive to the farmers is called

The correct answer is Minimum support price.

Key Points

• The price declared by the Government every year before the sowing season to provide incentive to the farmers is called the Minimum Support Price (MSP).
• The Minimum Support Price (MSP) is a form of market intervention by the Government of India to ensure price stability for agricultural producers.
• It acts as a safety net for farmers, protecting them against sharp declines in farm prices.
• The MSP is announced by the Government of India at the beginning of the sowing seasons for both Rabi (winter-sown) and Kharif (monsoon-sown) crops.
• The Commission for Agricultural Costs and Prices (CACP), an attached office of the Ministry of Agriculture and Farmers Welfare, recommends these prices to the government.   
• While recommending the MSP, the CACP takes into account various factors.
• These factors include the cost of production, changes in input prices, market price trends, demand and supply, inter-crop price parity, and the effect on consumers.
• The primary objective of the MSP is to ensure remunerative prices to farmers for their produce.
• This incentivizes farmers to adopt modern technology and invest in increasing the productivity of their land.
• By guaranteeing a minimum price, the government aims to encourage higher investment and production in the agricultural sector.
• The MSP also plays a crucial role in ensuring food security for the country by promoting the production of essential crops.
• When market prices fall below the declared MSP due to a bumper harvest or other reasons, government agencies like the Food Corporation of India (FCI) procure the entire quantity offered by farmers at the MSP.
• This ensures that farmers receive a guaranteed price for their produce, preventing distress sales.
• The MSP covers a range of crops, including cereals, pulses, oilseeds, and commercial crops.
• The implementation of the MSP scheme varies across different states and commodities.
• While it has been beneficial in providing income security to many farmers, it has also faced criticism regarding its effectiveness and reach.
• Some concerns include the fact that not all farmers benefit equally due to limitations in procurement infrastructure and the concentration of procurement in certain regions.
• There are also debates about the level at which MSP is fixed and its impact on market dynamics and government finances.
• Despite these criticisms, the Minimum Support Price remains a significant policy tool in India's agricultural sector, aimed at protecting farmers' interests and ensuring food security.
• The annual declaration of MSP before the sowing season is a crucial step in this direction, providing farmers with price signals and encouraging them to plan their cropping patterns accordingly.
• The government's commitment to the MSP reflects the importance of the agricultural sector to the Indian economy and the livelihoods of millions of farmers.