Minimum Support Prices for Agricultural Produce

Farmers’ Demands over Minimum Support Price (MSP) Guarantee

farmer, msp

From UPSC perspective, the following things are important :

Prelims level: MSP, National Commission on Farmers, 2004

Mains level: Farmers woes and role of MSP


  • More than 200 farmers’ unions from Punjab plan to march to Delhi, demanding a legal guarantee for Minimum Support Price (MSP).
  • The imposition of Section 144 across Delhi highlights the significance of this protest.

Behind the Protest: Key Demands

  • Legal Guarantee for MSP: Farmers demand a law to enforce MSP for all crops, aligned with the recommendations of the Dr. M S Swaminathan Commission.
  • Full Debt Waiver: Complete debt waiver for farmers and laborers.
  • Land Acquisition Act Implementation: Implementation of the Land Acquisition Act of 2013, with provisions for farmer consent and fair compensation.
  • Withdrawal from WTO: India’s withdrawal from the World Trade Organization (WTO) and freezing of all free trade agreements.
  • Pensions for Farmers: Provision of pensions for farmers and farm laborers.
  • Compensation for Protest Deaths: Compensation for farmers who lost their lives during protests, including job opportunities for their family members.
  • Scrapping of Electricity Amendment Bill 2020: Rejection of the Electricity Amendment Bill 2020.
  • Enhanced MGNREGA Benefits: Increase in the number of days of employment under MGNREGA, higher daily wage, and linkage with farming activities.
  • Penalties for Fake Seeds and Pesticides: Imposition of strict penalties on companies producing fake seeds, pesticides, and fertilizers.
  • National Commission for Spices: Establishment of a national commission for spices such as chili and turmeric.
  • Indigenous Peoples’ Rights: Ensuring the rights of indigenous peoples over water, forests, and land.

Why such furore over MSP?

  • Market Dynamics: Farmers often operate in a buyer’s market, lacking the bargaining power to influence prices for their produce.
  • Need for Stability: MSP provides farmers with a safety net, ensuring they receive a minimum price for their crops regardless of market fluctuations.

What is the Minimum Support Price (MSP)?

  • History of MSP:
  1. MSP in India originated in response to food shortages in the 1960s, notably during the Bihar famine of 1966–1967.
  2. Agricultural Price Commission (APC) was established in 1965 to implement price policies like procurement at pre-decided prices and MSP.
  3. Over time, the APC evolved into the Commission for Agricultural Costs and Prices (CACP) in 1985, with broader terms of reference.
  • Announcement: The government bases its announcement on the recommendations given by the Commission for Agricultural Costs & Prices (CACP).
  • Formulae for Calculation:
  1. A2: Costs incurred by the farmer in production of a particular crop. It includes several inputs such as expenditure on seeds, fertilisers, pesticides, leased-in land, hired labour, machinery and fuel
  2. A2+FL: Costs incurred by the farmer and the value of family labour
  3. C2: A comprehensive cost, which is A2+FL cost plus imputed rental value of owned land plus interest on fixed capital, rent paid for leased-in land
  • National Commission of Farmers also known as the Swaminathan Commission (2004) recommended that the MSP should at least be 50 per cent more than the weighted average CoP, which it refers to as the C2 cost.
  • The government maintains that the MSP was fixed at a level of at least 1.5 times of the all-India weighted average CoP, but it calculates this cost as 1.5 times of A2+FL.
  • Crops covered are-
  1. The CACP recommends MSPs for 22 mandated crops and fair and remunerative price (FRP) for sugarcane.
  2. The mandated crops include 14 crops of the kharif season, 6 rabi crops and 2 other commercial crops.

Criticism of MSP and Alternatives

  • Economists’ Perspective: Many economists criticize government-fixed MSPs, advocating for income support schemes as a more efficient alternative.
  • Income Support Schemes: Direct income support offers fixed payments to farmers, irrespective of crop choice or market conditions, aiming to provide stable income.

Approaches to Guarantee MSP

  • Conventional Methods: Historically, MSP was enforced through mandatory buyer payments or government procurement. However, these methods face challenges in implementation and sustainability.
  • Price Deficiency Payments (PDP): PDP offers an alternative approach, wherein the government compensates farmers for the difference between MSP and market price, without physical procurement.

PDP Models in Practice

[1] Madhya Pradesh: Bhavantar Bhugtan Yojana

  • Model: It experimented with PDP but encountered challenges in sustainability and central support.
  • Operational Mechanism: Market price is determined based on average modal rates in APMC mandis, with payments backed by sale agreements, weighment slips, and payment letters.

[2] Haryana: Bhavantar Bharpai Yojana

  • Model: It combines physical procurement with PDP, demonstrating feasibility in certain crops.
  • Operational Platform: BBY operates on the ‘Meri Fasal, Mera Byaura’ portal, where farmers register their details and area sown under different crops.
  • Registration Process: Registration for kharif and rabi crops is open during specific periods, followed by crop area verification through satellite imaging.
  • Hybrid Approach: Haryana combines physical procurement with PDP under BBY, depending on the gap between MSP and market price.
  • Payment Structure: PDP rates are fixed, derived from average quotes at the National Commodity and Derivatives Exchange, with farmers paid based on the three-year average yield for their block/sub-district.

Way Forward

  • Scaling PDP Nationwide: A nationwide PDP scheme, with central funding, could incentivize states to adopt similar models, leveraging existing market infrastructure for efficient MSP delivery.
  • Infrastructure Development: Investing in market infrastructure and transaction recording systems is crucial for widespread MSP implementation, ensuring transparency and accountability.


  • Policy Implications: The debate over MSP guarantee underscores the need for balanced policies that address farmers’ concerns while ensuring market efficiency.
  • Alternative: Exploring innovative mechanisms like PDP alongside traditional approaches can offer a viable solution to the challenge of MSP guarantee, benefiting farmers across diverse agricultural landscapes.

Back2Basics: National Commission on Farmers, 2004 (MS Swaminathan Commission)

  • Established in 2004 under the chairmanship of Prof. M. S. Swaminathan.
  • Submits five reports between December 2004 and October 2006.
  • Reflects priorities outlined in the Common Minimum Programme.

Key Recommendations

  • Addressing Agrarian Distress: Implement holistic national policy for farmers; Ensure farmers’ control over resources like land, water, credit, and markets.
  • Land Reforms: Distribute surplus land and prevent diversion of agricultural land; Advocate for inserting “Agriculture” in the Concurrent List of the Constitution.
  • Water Management: Ensure sustained water access and promote rainwater harvesting.
  • Infrastructure Investment: Increase public investment in agricultural infrastructure; Promote conservation farming and soil health.
  • Credit and Financial Support: Expand rural credit, lower interest rates, and establish agriculture risk fund; Provide debt restructuring and health insurance to farmers.
  • Food Security: Establish universal public distribution system and nutrition support programs.
  • Preventing Farmers’ Suicides: Provide measures to prevent farmers’ suicides, including health insurance and debt restructuring.
  • Market Reforms: Promote farmers’ organizations, improve MSP implementation, and market reforms.
  • Employment Opportunities: Focus on creating productive employment opportunities and improving wage parity.
  • Bioresources: Preserve traditional rights, conserve biodiversity, and enhance crop and animal breeds.

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Notify of
Inline Feedbacks
View all comments


Join us across Social Media platforms.

💥Mentorship New Batch Launch
💥Mentorship New Batch Launch