What is Minimum Support Price, or MSP?

MSPs are the prices at which the government procures certain crops from farmers to insure them against any sharp fall in prices. It is an integral component of Agriculture Price Policy and it strives to ensure support price to farmers and affordable prices to the consumer. 

Based on the recommendations of the Commission for Agricultural Costs and Prices (CACP), the government declares MSP after considering the views of state governments and Central Ministries/Departments concerned for agricultural crops such as cereal, pulses, oilseeds and commercial crops every year at the beginning of both the crop seasons. 

The factors considered by CACP for fixing MSP include cost of production, domestic and international prices, demand-supply conditions, inter-crop price parity and the terms of trade between agricultural and non-agricultural sectors.

MSP ensures a profit of at least 50% over the cost of production for the farmers. Moreover, if the farmers get favourable terms to sell their produce or better price than MSP, they are free to sell to non-government parties.

The concept first began in 1966 with the Green Revolution. Though it is not legally mandated to do so, the government currently announces MSP for 25 major agricultural commodities each year including 14 crops of the kharif season and 7 crops of the rabi season. 

Apart from this, MSP is announced for Copra, de-husked coconut and jute along with a Fair Remunerative Prices (FRP) is announced for Sugarcane.

FRP is the minimum price that sugar mills have to pay sugarcane growers. Currently, the government mainly buys rice and wheat at the guaranteed prices.  

The procured wheat and paddy is utilized in distribution under Targeted Public Distribution System (TPDS) and other welfare schemes under National Food Security Act (NFSA). Around 2.1 crore farmers have benefited from government procurement at MSP in 2020-21 compared to 2.04 crore farmers in the previous year. 

The Centre has procured a record 879 lakh tonnes of paddy in the 2020-21 marketing season for nearly Rs 1.66 trillion. The MSP for paddy has gone from Rs 1,360 per quintal in 2014-15 to Rs 1940 per quintal in 2021-22, a 43 per cent increase.

Wheat procurement had also hit an all-time high of almost 390 lakh tonnes with MSP value of Rs 75,000 crore. The MSP for wheat has gone up from Rs 1,450 per quintal in 2014-15 to Rs 2,015 per quintal in 2021-22, a 39 per cent increase. The government says it is committed to continue MSP operations to ensure remunerative prices to the farmers.

According to most experts, legalising MSP will be a bad move, if taken. Executive director of Centre for Sustainable Agriculture, GV Ramanjaneyulu, recently said that a guaranteed MSP will kill Indian agriculture. He said that if the government provides a legal guarantee to MSP, it will lead to wrong cropping patterns tilted towards high yielding crops.