Minimum Support Price (MSP): Crop List, Objectives & Challenges
Gajendra Singh Godara
Oct 18, 2025
20
mins read
Minimum Support Price (MSP) is a price floor offered by the government so that farmers get a fair pricing for their crops when market prices fall. Practically, when market prices fall below the MSP, government agencies buy the produce at MSP, thus guaranteeing farmers a price. It acts as a safety net for Indian farmers, guaranteeing a minimum price for their crops even when market rates fall.
Announced twice yearly before Kharif and Rabi sowing seasons. MSP currently covers 22 crops and plays a crucial role in ensuring food security and rural income stability.
Origin: Initially, the policy was introduced as one component of the first agricultural reforms (Green Revolution) in 1966-67. It was designed to serve as an incentive to farmers, particularly in Punjab and other high-yielding states, to embrace the new technology and crop varieties.
Thus achieving greater output and simultaneously safeguarding farmers’ interest against the possibility of a steep fall in market prices.
Purpose:The fundamental objectives of the Minimum Support Price Mechanism (MSP) is to protect farmers from distress sales and safeguard against arbitrary fluctuations in the market. The MSP is also aimed at maintaining the food security of the nation. The Minimum Support Price (MSP) also guarantees that the farmers do not sell below their cost of production. This is also aimed at encouraging the farmers to invest in expensive quality seeds and inputs.
Announcement Frequency: MSP announcements come twice yearly, before each sowing season. The MSPs are separated into Kharif (monsoon) and Rabi (winter) crops.
The Commission for Agricultural Costs and Prices (CACP) evaluates costs and market conditions to recommend the MSPs, which receive final approval from the Cabinet Committee on Economic Affairs (CCEA). The Food Corporation of India (FCI), the nodal agency, along with other State Agencies undertakes procurement of crops.
MSP applies to a fixed list of agricultural crops. Currently, 22 crops have MSPs: 14 Kharif crops, 6 Rabi crops, and 2 commercial crops. (Additionally, MSPs for toria and de-husked coconut are linked to related crops.) The categories and their crops are:
Crop Type | Crops Covered (MSP announced) |
Kharif (14) | Paddy, Jowar, Bajra, Ragi, Maize, Tur (Arhar), Moong, Urad, Groundnut, Sunflower Seed, Soyabean (Yellow), Sesamum, Nigerseed, Cotton |
Rabi (6) | Wheat, Barley, Gram (Chana), Lentil (Masur), Rapeseed & Mustard, Safflower |
Commercial (2) | Copra, Jute |
Table: Major crops with MSP guarantees. Source: Government notifications.
This list is revised periodically based on agricultural needs. For each crop, MSP encourages farmers to grow it by assuring a minimum selling price.
MSP serves several objectives in India’s agricultural economy:
Farmer Protection (Income Security): By guaranteeing a floor price, MSP safeguards farmers from distress sales during bumper harvests or market slumps. Farmers know they can sell to government agencies at the MSP, preventing them from incurring losses. For example, even if market prices dip, a wheat grower is assured ₹2,585/quintal for 2026-27 harvest.
Food Security: MSP operations ensure the government procures sufficient staples (rice, wheat, etc.) to build buffer stocks for the Public Distribution System (PDS) and strategic reserves. Stable MSP-led procurement thus supports the nation’s food security goals.
Encouraging Production: An assured MSP motivates farmers to grow important and staple cereals. Farmers are confident in placing advance purchases in quality agricultural inputs (improved seeds and modern technology) to increase their outputs. This contributes to the country’s crop supply stability.
Market Intervention: Minimum Support Price (MSP) continues to function as an effective intervention mechanism. When there is a private market failure or in circumstances of sharp price declines, government agencies purchasing produce at the MSP assists with the stabilization of the market and the price.
Economic Stability: MSP positively impacts the financial stability and livelihood of people in rural areas. Offering a guaranteed income, it fortifies the agrarian economy and indirectly bolsters the industrial food supply chain, including millers and processors, with dependable raw material provisions.
The CACP evaluates multiple factors while recommending MSPs, ensuring prices are fair yet economically justified:
Cost of Production: This is the primary determinant. It includes all paid-out costs (inputs like seeds, fertilizers, hired labor, fuel, machinery use, irrigation, etc.) plus the imputed cost of family labor. The MSP must cover these costs and provide a margin.
Margin Requirement: Government policy (since 2018) mandates MSP be at least 50% above the all-India weighted average cost of production. This minimum return (A2+FL + 50%) is a budgetary rule to ensure profitability.
Market Price Trends: Both domestic market prices and international prices are compared. If world prices fall below MSP levels, the MSP may be used to prop up domestic prices, or vice versa.
Demand and Supply: Current and projected demand-supply balance for each crop influences MSP. For example, surplus harvests might warrant lower MSP hikes, whereas shortages might justify higher MSPs to encourage more planting.
Inter-Crop Parity: Prices of different crops are set to maintain a balanced incentive structure. MSPs across crops are compared so that farmers don’t overwhelmingly shift to one crop purely for higher MSP, which could distort overall cropping patterns.
Terms of Trade: Changes in wages, inflation, and non-agricultural prices (terms of trade between agriculture and industry) are also considered. If input costs or labor wages rise sharply, MSPs may be raised to offset those additional costs.
In summary, to find MSP is calculated by adding all paid costs(A2) and family labor (FL), (A2+FL formula ) with a compulsory 50% margin.
The standard formula for MSP calculation is A2+FL:
A2 (Actual Cost): This covers all paid-out expenses by the farmer. Examples include costs of seeds, fertilizers, irrigation, hired human or machine labor, fuel/electricity for pump sets, rent for leased land, depreciation of equipment, interest on working capital, and any other operational expense.
FL (Family Labour): This is the imputed value of family (unpaid) labor. It recognizes the contribution of family members working on the farm without direct wages.
Minimum Margin: After computing A2+FL, the MSP is set so that the farmer gets at least a 50% margin over this cost. In practice, MSP = (A2+FL) * 1.5 (or more) as per the current policy.
For example, for wheat in 2026-27, A2+FL was ₹1,239/qtl; the MSP was set at ₹2,585/qtl (a 109% margin). This formula and margin requirement ensure MSPs are cost-reflective and profitable.
MSP plays a crucial role in India’s agricultural framework by providing financial stability and security to farmers:
Income Support: MSP guarantees farmers a minimum income, reducing vulnerability to price swings. In effect, it serves as an assured price floor that protects farm incomes.
Market Stability: By intervening to purchase crops when market prices fall, MSP smooths out price volatility. This prevents rapid price crashes at harvest time and ensures a more stable income flow to farmers.
Investment Encouragement: When farmers know they can sell at the MSP, they are more willing to invest in quality seeds and improved techniques. The assurance reduces risk, leading to higher productivity and better crop quality.
Food Security & Buffer Stocks: MSP-led procurement builds buffer stocks of essential foodgrains (like rice and wheat), which can be distributed through public programs (PDS) in lean years. This dual role of MSP – supporting farmers and stocking food – underpins national food security.
Rural Livelihoods: A strong MSP system uplifts rural economies by ensuring that agriculture remains a viable livelihood. It protects farmers from exploitative traders and the uncertainties of free markets.
While MSP is designed for farmer welfare, its implementation faces several challenges:
Uneven Coverage: In practice, MSP procurement is largely concentrated in a few crops and states. For instance, about 85% of rice and 74% of wheat procured at MSP come from Punjab and Haryana. Farmers in states with weak procurement infrastructure (like Bihar, West Bengal, Odisha) often cannot sell at MSP and must rely on private markets at lower prices.
Low Awareness: Many farmers are not fully aware of MSP details or how to access it. A NITI Aayog study found that around 62% of farmers learned about MSP only after the sowing season, missing the chance to plan accordingly. This lack of awareness, especially among small and marginal farmers, limits MSP’s effectiveness.
Access and Logistics: Eligible farmers may face long distances to procurement centers, high transportation costs, and insufficient storage facilities. These logistical hurdles reduce the net benefit of MSP or discourage farmers from participating.
Procurement Delays and Gaps: Sometimes, government agencies (like the Cotton Corporation of India or Sugar and Oilseed Marketing Boards) delay procurement operations. Such delays can undermine MSP’s purpose.
Digital and Technical Barriers: Although platforms like e-NAM (National Agriculture Market) aim to streamline procurement, technological issues and registration bottlenecks have sometimes hampered smooth transactions.
State Disparities: Due to these issues, only a small percentage of farmers actually benefit from MSP procurements. (A 2015 report estimated that only about 6% of farmers directly benefit from MSP.) This disparity across regions and communities remains a key concern.
These challenges imply that simply announcing MSP hikes is not enough – effective delivery mechanisms are crucial. Experts stress the need to expand procurement centers, leverage digital platforms, and ensure timely payments so that MSP genuinely reaches farmers.
In the latest agricultural season (2025–26), the government has made several significant MSP reforms:
Steep MSP Hikes: For Rabi 2026-27 season, MSPs for all mandated crops were substantially raised. For example, wheat MSP was increased to ₹2,585/qtl, ensuring a 109% margin over cost. Other Rabi crops (barley, gram, etc.) saw similar boosts.
Procurement Targets: The government has set ambitious procurement goals. Notably, it aims to procure 100% of the production of certain pulses (tur/arhar, urad, masoor) by 2028–29 to achieve self-sufficiency. (Already, 2.46 million tonnes of arhar had been procured by March 2025.)
Record Payouts and Coverage: Official data show that MSP disbursements and procurement volumes have surged. In 2024-25, MSP payouts reached ₹3.33 lakh crore and total procurement was about 117.5 million tonnes (LMT), up from ₹1.06 lakh crore and 76.14 LMT in 2014-15. These trends reflect broader farmer coverage.
Digital Reforms: New initiatives aim to make procurement faster and more transparent. For instance, the Cotton Corporation launched the Kapas Kisan mobile app for cotton MSP operations. This app allows farmers to self-register, book slots, and get real-time quality/payment updates, reducing delays and paperwork.
Overall, the 2025–26 measures emphasize higher MSPs and more procurement to ensure farmers earn remunerative prices. The government’s strategy explicitly links MSP to “national self-reliance” in key crops, focusing on pulses, oilseeds, and millets to diversify away from rice/wheat.
MSP affects broader economic and policy dimensions:
Economic Impact:
Large MSP procurements entail huge fiscal outlays and can impact inflation. The jump in MSP spending (from ~₹1 lakh crore to ₹3+ lakh crore) has implications for government budgets.
By building buffer stocks, MSP can help contain food price inflation, but very high stocks may later flood the market (as seen historically with wheat).
Cropping Patterns & Environment:
MSPs have historically favoured certain crops, leading to monoculture in regions like Punjab-Haryana. This has put environmental strain. For example, the MSP panel noted that paddy, sugarcane, cotton, and wheat (all MSP crops) are water intensive, exacerbating the depletion of groundwater. Arguably, MSP should promote diversification to millets and pulses to reduce ecological strain.
Legal Aspects:
MSP is currently a policy guarantee, not a legal entitlement. There is no statutory right for a farmer to demand MSP. (MSP has “no legal sanction” by itself.).
In recent years, there have been demands to make MSP legally binding, but this remains unresolved. The lack of legal force means MSP rates and procurement are essentially at the government’s discretion.
Subsidies and WTO:
MSP procurement subsidies count as domestic support under WTO rules (“amber box”). India has argued that many MSP purchases are for food security and invoked the WTO’s Peace Clause (agreed at Bali 2013) to exceed subsidy limits without challenge.
By classifying MSP-related procurement as part of public stock programs, India shielded itself from WTO disputes. Nevertheless, MSP and input subsidies often far exceed India’s WTO ceilings, drawing concern from trade partners.
India’s MSP policy also interacts with global trade rules:
Trade-Distorting Support: Under the WTO’s Agreement on Agriculture, price supports like MSP are considered “trade-distorting” domestic subsidies (amber box). India’s MSP and input subsidies for major crops exceed its agreed WTO limits, technically breaching the cap.
Peace Clause: To protect its MSP regime, India invoked the Bali Peace Clause (2013). This WTO provision allowed developing countries to temporarily exceed subsidy limits for public stockholding programs (including MSP procurements for food security) without facing legal challenge. India notified WTO that its rice MSP exceeded ceilings, but by claiming it as a food security measure under the Peace Clause, it was exempt from the dispute.
Global Implications: Some trading partners have raised concerns. Excessive MSP-backed exports (e.g., large rice and wheat stocks) can affect world prices. In 2020, India cited food security to justify price support for rice, prompting WTO notifications but no formal action due to the Peace Clause.
Several committees have shaped India's Minimum Support Price (MSP) framework over the decades.
The journey began in 1965 with the Agricultural Prices Commission (APC), later renamed the Commission for Agricultural Costs and Prices (CACP). Today, CACP recommends MSPs for 22 crops—including wheat, rice, pulses, oilseeds, and cotton based on production costs and market dynamics.
In 2004, the National Commission on Farmers (NCF), chaired by renowned scientist M.S. Swaminathan, was formed to address agrarian distress. The NCF made a landmark recommendation: MSP should guarantee farmers at least 50% profit over their production costs, a demand still echoed in farm protests.
Later, the 2014 Shanta Kumar Committee reviewed the Food Corporation of India (FCI) and proposed shifting from price-based procurement to direct income support for farmers.
1. Diversify MSP Coverage
The MSP must gradually include more crops under MSP beyond rice and wheat.
It should also promote remote coarse cereals, pulses, and oilseeds. Further connecting with local agro climatic conditions and market demand.
In order to reduce the over reliance on water intensive crops. The MSPs must encourage crops specific to the regions.
2. Targeted MSP Policy
They must prioritize MSP for crops that ensure food security and rural incomes.
To ensure the efficient use of resources, the blanket MSP coverage across all crops must be avoided.
The support must be focused where farmers face high price volatility or structural disadvantages.
3. Strengthen Procurement Systems
Modernize procurement infrastructure and digitalize payment mechanisms.
Expand procurement centres and ensure transparency to limit middlemen.
Encourage Farmer Producer Organizations (FPOs) and cooperatives in procurement activities
Prelims
Q. Consider the following statements: (2020)
In the case of all cereals, pulses, and oil seeds, the procurement at Minimum Support price (MSP) is unlimited in any State/UT of India.
In the case of cereals and pulses, the MSP is fixed in any State/UT at a level to which the market price will never rise.
Which of the statements given above is/are correct?
1 only
2 only
Both 1 and 2
Neither 1 nor 2
Answer: (d)
Q. Consider the following statements: (2023)
The Government of India provides Minimum Support Price for niger (Guizotia abyssinica) seeds.
Niger is cultivated as a Kharif crop.
Some tribal people in India use niger seed oil for cooking.
How many of the above statements are correct?
Only one
Only two
All three
None
Answer: (c)
Mains
Q. What are the direct and indirect subsidies provided to the farm sector in India? Discuss the issues raised by the World Trade Organization (WTO) in relation to agricultural subsidies. (2023)
Q. What do you mean by Minimum Support Price (MSP)? How will MSP rescue the farmers from the low income trap? (2019)
Q. In what way could replacement or price subsidy with Direct Benefit Transfer (DBT) change the scenario of subsidies in India? Discuss. (2016)
Minimum Support Price remains a cornerstone of India’s farm policy, supporting millions of farmers and bolstering food security.MSP ensures that farmers earn a minimum income and are protected from volatile markets. In recent years, steep MSP hikes and expanded procurement efforts demonstrate the government’s commitment to farmer welfare.
However due to unequal implementation and access mean many farmers still miss out on MSP benefits. Experts emphasize that execution is key. By expanding procurement infrastructure, leveraging digital platforms (e.g. e-NAM), and ensuring timely payments.If implemented well, MSP can continue to be a powerful tool for rural stability. If not, its full potential to uplift farmers and ensure equitable growth may not be realized.
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