MSP
Also known as: Minimum Support Price · MSPs
Minimum Support Price — the government's floor price for select crops, primarily wheat and rice. A guarantee that procurement agencies will buy at this price if market rates fall below.
Introduced in 1965 as part of India’s response to recurring food shortages, the Minimum Support Price was meant to insulate farmers from price volatility. In practice it has become a de facto procurement program for two crops, wheat and rice, in two states, Punjab and Haryana, while leaving most farmers in most regions outside its protection.
The MSP is set annually by the Commission for Agricultural Costs and Prices (CACP) and announced by the central government. Procurement agencies, primarily the Food Corporation of India and state agencies, purchase grain from farmers at the announced price.
Critics argue the system distorts cropping patterns, depletes groundwater, and fails to reach the small and marginal farmers it was originally meant to help. Defenders argue that without it, farmers in the procurement states would be at the mercy of trader cartels.
Discussed in 5 FAQs
- How can policy treat farmers as entrepreneurs who are free to stay, free to leave, and free to trade? … years of bureaucratic procedure. The second is incentives. Input subsidies, MSP procurement, and water pricing currently combine to tell farmers, in effect,…
- Who really decides what a farmer grows on their land? stretches the word past its useful meaning. The most powerful shaping force is MSP procurement. The Food Corporation of India guarantees the purchase of wheat…
- Why do so many farmers grow water-hungry crops in dry regions? … responding logically to the incentives placed before them. The government\'s Minimum Support Price (MSP) system guarantees the purchase of paddy and wheat at announced prices.…
- Why does the Food Corporation of India buy and hold such large grain stocks? … of India was established in 1965 with three core objectives: 1. Procure at MSP to provide price assurance to farmers (mainly wheat and paddy) 2. Maintain…
- Why can a policy seem ‘good’ and still cause harm? … pushed Punjab farmers toward rice and wheat, away from traditional crops. MSP guarantees and free electricity for groundwater pumping made intensive rice…
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