What is MSP
- Minimum Support Price is the assured price announced by the Government of India at which it procures crops from farmers, irrespective of market price fluctuations.
- Objective: Protect farmers from distress sales when market prices fall sharply.
Legal & Institutional Framework
- Not a statutory right; MSP is an administrative decision.
- Announced by: Government of India before the sowing season.
- Based on recommendations of: Commission for Agricultural Costs and Prices (CACP).
- Final decision taken by: Cabinet Committee on Economic Affairs (CCEA).
- Procurement agencies:
- Food Corporation of India (FCI) – cereals
- NAFED – pulses, oilseeds
- Cotton Corporation of India (CCI) – cotton
Crops Covered under MSP
- MSP is announced for 23 crops:
- 7 cereals: Rice, Wheat, Maize, Jowar, Bajra, Ragi, Barley
- 5 pulses: Tur, Urad, Moong, Gram, Lentil
- 7 oilseeds: Groundnut, Mustard, Soybean, Sunflower, Sesamum, Nigerseed, Safflower
- 4 commercial crops: Cotton, Jute, Sugarcane*, Copra
- (*Sugarcane has FRP instead of MSP)
Cost Concepts Used by CACP
- A2: Paid-out costs (seeds, fertilisers, labour, etc.)
- A2 + FL: A2 plus imputed value of family labour
- C2: A2 + FL + imputed rent on land + interest on capital
Current Policy:
- MSP is fixed at at least 50% above A2 + FL cost, as recommended by MS Swaminathan Committee.
Objectives of MSP
- Ensure income security to farmers.
- Encourage production of essential crops.
- Stabilise food prices and ensure food security.
- Maintain buffer stocks under Public Distribution System (PDS).
Benefits
- Protects farmers from price volatility.
- Supports foodgrain procurement for NFSA.
- Provides price signals before sowing.
- Enhances rural income stability.
Limitations / Issues
- Skewed procurement: Mainly benefits wheat and rice farmers.
- Regional imbalance: Punjab, Haryana, western UP dominate procurement.
- Market distortion: Discourages crop diversification.
- Fiscal burden: High storage and subsidy costs.
- Environmental impact: Overuse of water and fertilisers.
Recent Reforms & Alternatives
- Price Deficiency Payment (PDP): Compensation if market price < MSP.
- PM-AASHA Scheme: Support for oilseeds and pulses.
- e-NAM: Improves price discovery via digital markets.
- Direct Income Support: PM-KISAN as complementary support.
IAS-2026 - OPTIONAL / GEOGRAPHY / PUBLIC ADMINISTRATION / SOCIOLOGY / ANTHROPOLOGY / ORIENTATION ON 03 & 04-10-2025 
