What is Minimum Support Price (MSP)?

MSP is the rate at which the government buys crops from farmers, ensuring they receive a minimum profit of 1.5 times the cost of production, even if market prices fall below this level.

Why are MSP reforms necessary?

Reforms are needed to address challenges like droughts, economic crises, the impact of policies like GST and demonetisation, rising input costs, and the limited benefit to only a small percentage of farmers.

What are the benefits of MSP reforms?

MSP reforms provide income security, price stability, build farmer confidence, and encourage the growth of agriculture by allowing farmers to focus on improving techniques without worrying about market fluctuations.

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Decoding Farmer Welfare: MSP Reforms, And Way Forward

Q: How is MSP determined?

MSP is determined based on factors like cost of production, input-output price parity, demand and supply, inter-crop price parity, impact on cost of living, industrial costs, and international prices.

Q: Which crops are covered under MSP in India?

MSP covers cereals (like paddy, wheat, barley), pulses (like gram, moong, urad), oilseeds (like groundnut, mustard, soya bean), and other crops like raw cotton, raw jute, sugarcane, and tobacco.

Neha Gupta

Author

Updated: 28-01-2025 at 6:21 AM

Decoding Farmer Welfare: MSP Reforms, And Way Forward

Minimum Support Price comes as a boon for the farmers in such a position by granting them the benefits of both social and economic security. However, it is not a bed of roses and requires reforms to be entirely beneficial.

What Are MSP Reforms?

Minimum Support Price (MSP) refers to the rate at which the government buys crops from the farmers. The MSP is calculated by taking into account the cost of production incurred by the farmers and is at least 1.5 times higher than the cost incurred.

The MSP is decided twice every year for both Kharif and Rabi crops. The government buys all the crops of the farmers when the market price of such crops falls below the minimum support price. It is declared at the beginning of the sowing season by the government.

Different factors and reasons lead to the calculation of the Minimum Support Price every season. Furthermore, governmental actions, policy decisions, and economic decisions impact the cost of production incurred by the farmers.

Minimum Support Price reforms or MSP reforms are changes sought from and brought in by the government of India about the declaration of the price at which the government buys crops from the farmers. Reforms are necessary to accommodate the dynamic environment and address the raised concerns.

Read More: Weather-Based Crop Insurance Scheme- A Sigh of Relief For Farmers

History

The Minimum Support Price (MSP) system in India was established in 1966-67 during the Green Revolution. It was introduced to ensure that farmers don’t fall into the trap of exploitation and reap the benefits of fair practices. MSPs are simply fixed prices set for a particular crop at which farmers sell their produce to the government. The government then releases the food grains through the Public Distribution System.

Initially, MSPs were announced for only a certain number of crops but with time, many more crops were added as well.

Reasons For The Need for MSP Reforms

These reasons have not only pushed to bring in ‘reforms’ in the declaration of MSP but also called for a hike. Let us have a glance at major events of the recent past that have pushed and called for MSP reforms.

The drastic and devastating droughts that occurred in 2014 and 2015. India faced a 12% deficit in rainfall that led to huge losses for farmers.
Demonetisation and the initiation of Goods and Services Tax (GST), devastated the rural economy. Considering that it mainly functions in agriculture, it was adversely impacted.
The contraction of GDP and economic crisis in India during 2016-2017.
Increase in prices of petrol, diesel and kerosene.
The MSP is announced for a variety of 23 crops, however, it majorly benefits the rice and wheat harvesters.
The Shanta Committee Report of 2015 torched light on the fact that only 6% of the farmers receive the MSP.

Benefits Of MSP Reforms

The MSP was introduced in India in 1966 to address different concerns of the farmers concerning the sale of their harvest and to benefit them socially and economically. The benefits of introducing reforms in MSP are listed below:

Security of Income: A stable income source is generated by MSP and it aids the economic position of the farmers in events of market and price fluctuations.
Price Stability: The price stability mechanism generated by MSP benefits both consumers and farmers. It ensures that the rice ranges do not vary and fluctuate beyond a limit.
Faith: The grant of MSP affirms the faith of farmers in the governance system.
Growth of Agriculture: The farmers don't have to worry about the prices of crops due to the assurance given by MSP. This gives farmers ample time to focus on the improvement of agricultural techniques.

How Does MSP Differ From Issue Price?

Component	Minimum Support Price (MSP)	Issue Price
Definition	It is the price at which govt. buys crops from farmers.	It is the price at which govt. sells food grains to the public through PDS.
Objective	It helps farmers by ensuring that they get a fair return on their crops.	Provides essential food grains to the poor at subsidised rates.
Benefits	Farmers	People, especially from the vulnerable sections of society.
Established by	Indian government based on the recommendation of the Commission for Agricultural Costs and Prices (CACP)	The Indian government through schemes like the National Food Security Act (NFSA)
Covers	Selected crops like wheat, rice, pulses, etc.	Food grains like wheat, rice, etc. distributed through PDS.
Level of price	Usually higher than market prices to help farmers.	Lower than market prices to help people avail food grains.

How Is MSP Determined?

The MSP is determined by taking into account the following factors:

Cost of production
Input-Output price parity
Demand and supply
Inter Crop Price parity
Effect on industrial cost and infrastructure
Effect on cost of living
Effect on the general price level
International prices
Parity between prices paid and prices received by the farmers.
Effect on issue prices and implications for subsidy

MSP Crops List: Which Crops Are Covered Under MSP In India?

Find out the MSP crops list to know which crops are covered under MSP reforms in India.

Cereals: paddy, wheat, barley, jawar, bajra, maize and ragi
Pulses: gram, arhar/tur, moong, urad and lentil
Oilseeds: groundnut, rapeseed/mustard, toria, soya bean, sunflower seed, sesamum, safflower seed and niger seed
Raw Cotton, Raw Jute
Virginia flu-cured (VFC) Tobacco
Copra
De-husked coconut
Sugarcane

MSP Price List: MSP Of Crops In 2024-25

Crop	MSP (per quintal)
Rice	Rs. 2300
Bajra	Rs. 2625
Maize	Rs. 2225
Arhar	Rs. 7550
Moong	Rs. 8682
Urad	Rs. 7400
Groundnut	Rs. 6783
Soybean	Rs. 4892
Cotton	Rs. 7121
Nigerseed	Rs. 8717

Way Forward

The crops necessary for food security need to be given special importance. Improvement by way of digitization efforts is required to ensure that farmers have access to MSPs. Procurement mechanisms need to be changed and reformed to increase the percentage of farmers that are benefited by MSPs.

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