Determinants of MSP
While recommending price policy of various commodities under its mandate, the Commission keeps in mind the various Terms of Reference (ToR) given to CACP in 2009. Accordingly, it analyzes
1) demand and supply;
2) cost of production;
3) price trends in the market, both domestic and international;
4) inter-crop price parity;
5) terms of trade between agriculture and non-agriculture;
6) a minimum of 50 percent as the margin over cost of production; and
7) likely implications of MSP on consumers of that product.
It may be noted that cost of production is an important factor that goes as an input in determination of MSP, but it is certainly not the only factor that determines MSP.
