Minimum Support Price (MSP) Mechanism

The Minimum Support Price, or MSP, is a price the government promises to pay farmers for certain crops, no matter how low the market price falls. It acts like a safety net: if the market price of a crop drops below the MSP, the government (through its agencies) can buy the crop from farmers at the MSP instead, so farmers do not have to sell at a loss.

Why does it exist?

Farm prices can swing sharply within a season because of weather, and a bumper harvest can even push prices down further, hurting the very farmers who produced more. MSP exists to give farmers a guaranteed minimum income for their effort and investment, and to encourage them to keep growing crops that the country needs, such as food grains and oilseeds, even when market prices are unpredictable.

Where did it come from?

MSP began in the mid-1960s alongside the Green Revolution, when the government needed a policy to encourage farmers to adopt new high-yield wheat and rice varieties and to build up public food stocks. The body that recommends MSP was set up in 1965 as the Agricultural Prices Commission. It was renamed the Commission for Agricultural Costs and Prices (CACP) in 1985. Over the decades, MSP was extended to more crops, including oilseeds like soybean, groundnut and mustard, and pulses.

How does it work?

Each season, the Commission for Agricultural Costs and Prices (CACP), an expert body under the Ministry of Agriculture, studies the cost of growing each crop (seeds, labour, fertiliser, etc.) and recommends an MSP for 22 mandated crops. The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister, then approves the final MSP for each crop before the sowing season starts, so farmers know the assured price in advance.

If the market price in the mandis (wholesale markets) falls below the MSP, government agencies such as the Food Corporation of India (FCI) for grains, or NAFED (National Agricultural Cooperative Marketing Federation) for oilseeds and pulses, step in to buy directly from farmers at the MSP.

The key parts and facts

MSP is announced twice a year: before the Kharif season (crops sown in the monsoon, like paddy, soybean, groundnut) and before the Rabi season (crops sown in winter, like wheat, mustard). The CACP's recommendation is meant to give farmers a return of at least 50% over their production cost. Since the Union Budget 2018-19, the government fixes MSP at least 1.5 times the all-India weighted average cost of production, measured as A2+FL cost.

The Swaminathan Commission (National Commission on Farmers) in the mid-2000s also asked for cost plus 50%, but it used the wider C2 cost, so farmer groups say today's MSP is lower than what the Commission wanted. However, MSP by itself is not a legal right: unless the government or its agency actually buys the crop at MSP, a farmer forced to sell to a private trader at a lower price has no automatic legal claim to the MSP amount.

Which crops get an MSP?

The 22 mandated crops are:

• 14 Kharif crops, such as paddy, jowar, bajra, maize, tur (arhar), moong, urad, groundnut, soybean and cotton.
• 6 Rabi crops: wheat, barley, gram, lentil (masur), rapeseed-mustard and safflower.
• 2 commercial crops: jute and copra (dried coconut).

Sugarcane does not get an MSP. It gets a Fair and Remunerative Price (FRP) instead. As an example of the numbers, the MSPs for the rabi marketing season 2027-28 (approved in September 2026) are, in ₹ per quintal: wheat 2,610; barley 2,286; gram 5,958; lentil 7,390; rapeseed-mustard 6,613; safflower 7,215. The government's stated margin over A2+FL cost ranged from 50% for safflower to 106% for wheat.

India's position and Indian examples

MSP has been most effective for wheat and rice, mainly in states like Punjab and Haryana, where government procurement infrastructure is strong. For oilseeds like soybean, procurement at MSP happens far less often and in smaller quantities, so market price, which is affected by global prices and import duty, matters much more to soybean farmers than the announced MSP does.

The Shanta Kumar Committee (2015) estimated that only about 6% of farm households sell their crop to the government at MSP. So most farmers never get the MSP directly.

State bonus over MSP

Some states pay farmers an extra bonus on top of the MSP, for example for wheat or paddy. The Centre discourages this. A bonus pulls in more grain than the central pool needs, and that raises the Centre's food subsidy bill. So, under its procurement agreements with states, the Centre may limit how much grain it takes into the central pool from a state that pays a bonus. This limit is usually what that state needs for its ration shops and welfare schemes.

Commonly confused concepts

• MSP vs market price: MSP is the floor price the government promises; the market price is whatever a crop actually sells for on a given day in the mandi, which can be higher or lower than MSP depending on demand, supply and, for oilseeds, global import prices.
• MSP vs a legal guarantee: Farmer groups have long demanded a law that would make MSP a legal right, so private buyers must pay at least MSP. As of October 2026, MSP remains a policy commitment backed by government procurement, not a legally enforceable price floor for every private sale.
• MSP vs FRP: MSP is the price for the 22 mandated crops, paid when government agencies buy. FRP is the minimum price that sugar mills must pay sugarcane farmers.
• A2+FL cost vs C2 cost: A2+FL counts the money a farmer actually spends plus the value of unpaid family labour. C2 adds the rent value of the farmer's own land and the interest on the farmer's own capital, so it is higher. The government uses A2+FL; the Swaminathan Commission formula used C2.

Issues, criticism and the way forward

MSP for oilseeds gives farmers only limited real protection because government procurement of oilseeds is much smaller in scale than for wheat and rice, so the market price, heavily influenced by cheaper imports, usually decides what a soybean or groundnut farmer actually earns. When import duty on edible oil is cut, market prices for domestic oilseeds tend to fall closer to (or below) the MSP, but if the government does not step up procurement at the same time, farmers may not get the benefit of the announced MSP at all.

Farmer organisations have repeatedly asked for stronger, assured procurement of oilseeds at MSP alongside any import duty change, so a duty cut that helps consumers does not come entirely at farmers' expense. Farmer groups also keep asking for MSP to be fixed at C2 cost plus 50%, as the Swaminathan Commission suggested, instead of A2+FL cost plus 50%.

MSP has also come up in the fight against stubble burning, where farmers set fire to the paddy straw left in the field after harvest. In November 2018, the National Green Tribunal (NGT), a special court for environment cases, said farmers who keep burning stubble should be denied MSP benefits. In November 2023, the Supreme Court also suggested keeping such farmers out of MSP procurement. But the Court called MSP a sensitive issue and did not give a binding order on it.

Concepts to Know

• Kharif and Rabi seasons: Kharif crops are sown with the monsoon rains (June-July) and harvested around September-October; Rabi crops are sown after the monsoon (October-November) and harvested in spring.
• Procurement: The government (or its agency) actually buying the crop from farmers at the announced price, rather than just announcing a price.
• NAFED: The National Agricultural Cooperative Marketing Federation of India, the main agency that buys oilseeds and pulses from farmers when market prices fall.
• A2+FL cost: The cash a farmer spends (seeds, fertiliser, hired labour, diesel, irrigation, rent on leased land and so on) plus the value of work done by the farmer's own family. FL stands for family labour.
• C2 cost: The fullest measure of farm cost. It is A2+FL plus the rent the farmer could have earned on owned land and the interest on owned money and tools.
• Quintal: A unit of weight equal to 100 kilograms.
• Central pool: The national stock of wheat and rice that the FCI and state agencies buy at MSP for the Centre. It supplies ration shops and welfare schemes across the country.
• Shanta Kumar Committee: A high-level committee set up in 2014, which reported in January 2015. It suggested how to restructure the Food Corporation of India and improve the buying, storing and sharing of food grains.