Cabinet Approves Hike in MSP for 14 Kharif Crops

The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister, has approved the Minimum Support Prices (MSP) for 14 Kharif crops for the 2025–26 marketing season. This step aligns with the government's commitment to offer remunerative prices and promote crop diversification under the vision of doubling farmers’ income.

Minimum Support Price (MSP)

• MSP is not a statutory or constitutional right; it is an administrative mechanism.
• No legal obligation exists on the government to procure all crops at MSP, except for crops under Public Distribution System (PDS) and welfare schemes.
• MSP policy operates under the broader umbrella of government efforts to ensure price support and food security under the Directive Principles of State Policy (Article 38, 39(b)).

Nodal Institutions Involved

• Commission for Agricultural Costs and Prices (CACP): Recommends MSPs. It is an attached office of the Ministry of Agriculture and Farmers Welfare.
• Cabinet Committee on Economic Affairs (CCEA): Final authority to approve MSPs.
• Food Corporation of India (FCI) and state agencies: Key procurement bodies implementing MSP procurement for rice and wheat.

Coverage of Crops Under MSP

• 22 Mandated Crops:
  • 14 Kharif Crops: Paddy, maize, bajra, jowar, ragi, tur, urad, moong, groundnut, soyabean, sunflower, cotton, sesamum, nigerseed.
  • 6 Rabi Crops: Wheat, barley, gram, lentil, mustard, safflower.
  • 2 Commercial Crops: Copra and raw jute.
• Sugarcane: FRP (Fair and Remunerative Price), not MSP, is declared for sugarcane.

Cost Concepts Used by CACP

• A2: Actual paid-out costs incurred by farmers.
• A2+FL: A2 plus imputed value of family labour.
• C2: A2+FL + rent and interest on owned land and capital assets (used as a reference cost).
• MSP returns are primarily calculated over A2+FL, though C2 acts as a benchmark for ensuring viability.

Objectives and Significance

• It ensures price stability and remunerative returns for farmers.
• It acts as a risk-mitigation tool against market fluctuations.
• It aids in fulfilling the goals of food security and self-sufficiency.
• It promotes crop diversification and encourages cultivation of pulses and oilseeds.
• It serves as a buffer against rural distress, particularly during inflationary or deflationary phases.

Major Concerns and Challenges

• Limited Coverage and Implementation
  • Only rice and wheat benefit from extensive procurement.
  • For other crops, MSP exists only on paper; procurement infrastructure is weak or absent.
• Low Awareness and Access:
  • Majority of small and marginal farmers are unaware of MSP or lack access to procurement centres.
  • Shanta Kumar Committee (2015): Only 6% of farmers benefit directly from MSP.
• Regional and Crop Imbalance
  • Punjab-Haryana-centric procurement leads to monoculture of rice and wheat.
  • This exacerbates groundwater depletion, overuse of fertilisers, and environmental degradation.
• Role of Intermediaries
  • Farmers depend on APMC middlemen and commission agents, who often exploit them by offering lower prices or extracting commissions.
• Fiscally Unsustainable
  • Massive government expenditure for procurement, storage, and distribution under the PDS.
  • Leads to food grain stocks exceeding buffer norms, causing storage losses and food wastage.

Reform Proposals and Way Forward

• Rationalise MSP Mechanism
  • Link MSP only to food security crops and expand to underrepresented regions and crops (like pulses, oilseeds, millets).
• Diversify Crop Basket
  • Provide incentives and procurement support for coarse grains and climate-resilient crops to promote nutritional and ecological sustainability.
• Strengthen Procurement Infrastructure
  • Enhance the reach of procurement centres in eastern and central India.
  • Ensure real-time payment systems and direct benefit transfers to farmers.
• Reduce Dependence on Middlemen
  • Encourage Farmer Producer Organisations (FPOs), cooperatives, and direct market linkages.
• Legal Guarantee for MSP (Debated)
  • While some stakeholders demand a legal guarantee for MSP, others argue it would distort the market and fiscal health unless backed by reforms.