Context: The Union Cabinet has approved significant hikes in the Minimum Support Prices (MSPs) for six rabi crops for the 2026–27 marketing season, aimed at ensuring remunerative prices to farmers and promoting crop diversification.
What is MSP?
- MSP is the minimum guaranteed price at which the government procures crops from farmers, protecting them from distress sales.
- It currently covers 23 crops: 7 cereals, 5 pulses, 7 oilseeds, and 4 commercial crops.
- The policy serves as a tool for ensuring food security, farmer welfare, and market stability.
Key Highlights of the Hike
- Crops Covered: Wheat, barley, jowar, gram, lentil, and safflower.
- Wheat: MSP increased by ₹160 per quintal to ₹2,585/quintal (6.6% rise), offering the highest gain over cost of production (109%).
- Safflower: Witnessed the highest absolute and percentage increase (₹600 per quintal), reflecting government emphasis on oilseed cultivation and crop diversification.
- The hikes align with the government’s aim to double farmers’ income and reduce dependence on imported edible oils.
How MSP is Determined
- Commission for Agricultural Costs and Prices (CACP):
- A statutory body set up in 1965 under the Ministry of Agriculture.
- Recommends MSPs twice a year (for kharif and rabi crops).
- Recommendations are not binding; final approval rests with the Cabinet Committee on Economic Affairs (CCEA).
- Factors Considered:
- Cost of cultivation (A2, A2+FL, C2).
- Demand-supply situation.
- Price trends and inter-crop parity.
- Terms of trade for farmers.
- Global prices and food security concerns.
- Cost Concepts:
- A2: Actual paid-out costs (seeds, fertilizers, etc.).
- A2+FL: A2 + imputed family labour.
- C2: Comprehensive cost (A2+FL + rental value of land + interest on capital).
- MSPs are generally fixed at A2+FL + 50% margin, ensuring fair returns.
Significance
- Enhances farmers’ income security and incentivizes crop production.
- Encourages oilseed production, reducing edible oil import bills.
- Balances inflation control with farmer welfare.
- Strengthens food security by ensuring procurement at fair prices.
Challenges Ahead
- Procurement is still concentrated in wheat and rice, limiting benefits for other crops.
- Rising MSPs can strain the fiscal burden.
- Market reforms and diversification efforts need to complement MSP to achieve sustainable outcomes.
Conclusion
The recent MSP hike reflects the government’s continued focus on farmer welfare, crop diversification, and self-reliance in agriculture. However, structural reforms in procurement, storage, and marketing remain crucial to ensure that the benefits of MSP reach all farmers equitably.