Minimum Support Price (MSP): Evolution, Mechanism & Factors

Minimum Support Price (MSP) – Static Notes

1. Concept of MSP

  • Definition: MSP is the minimum price guaranteed by the government at which it will purchase crops from farmers, irrespective of the market price.
  • Objective: To ensure remunerative prices for farmers, encourage crop production, and provide price stability.
  • Announcement: MSPs are announced before the sowing season for both Kharif and Rabi crops.
  • Decision-making Body: Commission for Agricultural Costs and Prices (CACP) recommends MSPs.
  • Approval: Final decision taken by the Cabinet Committee on Economic Affairs (CCEA).

2. Historical Background

  • Applied After: The concept of MSP was applied after the Green Revolution (late 1960s) to encourage adoption of HYV seeds and assured returns.
  • First Crop Covered: Wheat was the first crop to have MSP in 1966–67.
  • Haryana’s Distinction: Haryana is the first state in India to procure all crops from farmers at MSP.

3. Factors Considered by CACP in Determining MSP

  1. Demand and supply situation.
  2. Cost of production (Comprehensive cost, including family labour, inputs, rent, etc.).
  3. Price trends – domestic and international.
  4. Inter-crop price parity (balanced pricing among crops to avoid skewed sowing).
  5. Terms of trade between agriculture and non-agriculture sectors.
  6. Margin: At least 50% margin over cost of production (as per Swaminathan Commission recommendation accepted in 2018).
  7. Implications for consumers (inflationary impact).

4. Procurement & Implementation

  • Main Cereals: Procured by Food Corporation of India (FCI) and State agencies.
  • Other Crops:
    • Pulses, oilseeds, copra → procured under PM-AASHA scheme by NAFED/NCCF.
    • Cotton → procured by Cotton Corporation of India (CCI).
    • Jute → procured by Jute Corporation of India (JCI).

5. Significance of MSP

  • Provides income security to farmers.
  • Encourages crop diversification (if implemented well).
  • Shields farmers from market volatility.
  • Ensures food security through procurement.

6. Criticism & Challenges (Static Understanding)

  • Beneficial mainly to farmers in states with robust procurement (Punjab, Haryana, parts of MP, Chhattisgarh).
  • Distorted cropping pattern – overproduction of wheat & paddy.
  • Fiscal burden on government.
  • Limited awareness among farmers for crops other than wheat & rice.

    I. Kharif Crops (as per MSP list 2020–21 & 2024–25)
    1. Paddy (Common)
    2. Jowar
    3. Bajra
    4. Ragi
    5. Maize
    6. Tur (Arhar)
    7. Moong
    8. Urad
    9. Groundnut
    10. Sunflower
    11. Soyabean (Yellow)
    12. Sesamum
    13. Nigerseed
    14. Cotton (Medium Staple)

  • II. Rabi Crops (as per MSP list 2021–22 & 2025–26)

    1. Wheat
    2. Barley
    3. Gram (Chana)
    4. Masur (Lentil)
    5. Rapeseed & Mustard
    6. Safflower

  • III. Commercial Crops (Other Seasons)

    Copra (Milling) – as per MSP list 2021 & 2025

    1. Copra (Milling)

  • Jute – as per MSP list 2021–22 & 2025–26

    1. Jute



      ✅ Total crops under MSP (as per the data given) = 22