Centre hikes Minimum Support Price (MSP) for six rabi crops

• The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, approved the increase in the Minimum Support Price (MSP) for all six mandated rabi crops for marketing season 2026-27 on October 1.

• Wheat is the main rabi (winter) crop, with sowing beginning from late October and harvesting from March onwards.

• The Centre announced a Rs 160 hike in the Minimum Support Price (MSP) for wheat to Rs 2,585 per quintal for the 2026-27 marketing year.

• The wheat MSP is Rs 2,425 per quintal for the 2025-26 marketing year (April-March).

• The wheat marketing year starts from April and much of the grain is procured by June.

• The Cabinet approved the MSP based on recommendations of the Commission for Agricultural Costs and Prices (CACP).

• The hike is in line with the Union Budget 2018-19 announcement of fixing MSP at a level of at least 1.5 times the all-India weighted average cost of production.

• In absolute terms, the highest increase has been announced for safflower at Rs 600 per quintal, followed by lentil (masur) at Rs 300 per quintal. 

• For rapeseed and mustard, the increase is Rs 250 per quintal; gram Rs 225 per quintal and barley Rs 170 per quintal.

• The increased MSP for rabi crops is aimed at ensuring remunerative prices for farmers and incentivising crop diversification.

What is MSP?

The Minimum Support Price (MSP) mechanism provides a price guarantee to farmers for their produce. This is implemented across the country as nearly 86 per cent farmers fall under the small and marginal category. It also helps in stabilising prices in the market and thus services the consumers as well.

Genesis of MSP

• India inherited an agrarian economy from the British with the agriculture and allied sector contributing to around three-fourths of the Gross Domestic Product (GDP) and providing employment to more than four-fifth of the population. 

• The food shortages faced during the mid-1960s pushed India to reform its agricultural policy and accordingly India adopted significant policy reforms focused on the goal of achieving food grain self-sufficiency.

• A series of institutional reforms were undertaken to boost agricultural production and to modernise farming practices. These included land reforms, structural changes in the agricultural administrative arrangements, agricultural extension schemes, initiation of price support policies including the introduction of the Minimum Support Price (MSP) for major agricultural produces, introduction of new technologies (popularly known as the green revolution), strengthening of agricultural research, etc. 

What is the significance of MSP?

• The prices of agricultural commodities are inherently unstable, primarily due to the variation in their supply, lack of market integration and information asymmetry. A very good harvest may result in a sharp fall in the price of that commodity during that year which in turn will have an adverse impact on the future supply as farmers withdraw from sowing that crop in the following years. This causes paucity of supply next year and hence, major price increase for consumers.

• To counter this, the MSP for major agricultural products is fixed by the government, each year. 

• MSP is a tool which gives guarantee to the farmers, prior to the sowing season, that a fair amount of price is fixed to their upcoming crop to encourage higher investment and production of agricultural commodities. 

• The MSP is in the nature of an assured market at a minimum guaranteed price offered by the government.

What is the process to fix MSP?

• The Commission for Agricultural Costs & Prices (CACP) is an attached office of the ministry of agriculture and farmers welfare. It was established in January 1965. 

• It is mandated to recommend MSPs to incentivise the cultivators to adopt modern technology, and raise productivity and overall grain production in line with the emerging demand patterns in the country. 

• MSP for major agricultural products are fixed by the government, each year, after taking into account the recommendations of the commission.

• CACP recommends MSPs of commodities, which comprise cereals, pulses, oilseeds and commercial crops.

• CACP submits its recommendations to the government in the form of price policy reports every year, separately for five groups of commodities namely kharif crops, rabi crops, sugarcane, raw jute and copra. 

• Before preparing aforesaid five pricing policy reports, the Commission draws a comprehensive questionnaire, and sends it to all the state governments and concerned national organisations and ministries to seek their views.

• Subsequently, separate meetings are also held with farmers from different states, state governments, national organisations like Food Corporation of India (FCI), NAFED, Cotton Corporation of India (CCI), Jute Corporation of India (JCI), trader’s organisations, processing organisations, and key central ministries. 

• The Commission also makes visits to states for on-the-spot assessment of the various constraints that farmers face in marketing their produce, or even raising the productivity levels of their crops. Based on all these inputs, the Commission then finalises its recommendations/reports, which are then submitted to the government.

• The Cabinet Committee on Economic Affairs (CCEA) takes a final decision on the level of MSPs and other recommendations made by the CACP.