Recent Developments Associated with MSP

The Cabinet Committee on Economic Affairs (CCEA) approved an increase in the Minimum Support Prices (MSP) for all the mandated Rabi crops for the Rabi Marketing Season (RMS) 2022-23 with an aim to realign the MSPs in favour of oilseeds, pulses and coarse cereals.

Farm Bills, 2020 and MSP:

The following were recently passed by Parliament during its monsoon session.

  • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, allows farmers to sell their harvest outside the notified Agricultural Produce Market Committee (APMC) mandis without paying any State taxes or fees.
  • The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020, facilitates contract farming and direct marketing.
  • The Essential Commodities (Amendment) Bill, 2020, deregulates the production, storage, movement and sale of several major foodstuffs, including cereals, pulses, edible oils and onion, except in the case of extraordinary circumstances. The government hopes the new laws will provide farmers with more choice, with competition leading to better prices, as well as ushering in a surge of private investment in agricultural marketing, processing and infrastructure.
  • The Centre only purchases paddy, wheat and select pulses in large quantities, and only 6% of farmers actually sell their crops at MSP rates, according to the 2015 Shanta Kumar Committee’s report using National Sample Survey data. None of the laws directly impinges upon the MSP regime.
  • The bills give greater freedom to farmers to sell their produce. They will abolish intermediaries, or at least some levels of intermediaries between farmers and buyers. This will ensure that the farmer gets a bigger share of the price paid by the consumer and will, therefore, improve agricultural incomes.
  • The clamour for incorporating Minimum Support Prices (MSPs) into the law is a pursuit of vested interests as only a handful of farmers enjoy the benefits of MSP-based procurement in the country today. The agricultural practices in Green Revolution regions of Punjab, Haryana and Western Uttar Pradesh, where MSP was the cornerstone, have prevented reforms and these changes will lead to a creative destruction in agriculture.
  • With the new changes while MSP is being continued, it has given farmers the choice and the freedom to sell outside the mandis


The future of Indian agriculture cannot be salvaged by simply allowing greater freedom to farmers. Agriculture can have a better future only when the excess workforce employed in farming moves to the non-farm sector and there is a greater demand for agricultural products as incomes increase. Because the majority of Indians cannot even afford a decent food basket, many commentators have reached a wrong conclusion that Indian agriculture is facing a problem of plenty.

India’s policymakers need to realise that agriculture is heavily supported by governments in most countries. Producer support to farming in India as a share of total farm receipts is negative, something which goes against the stereotype of agriculture being heavily subsidised. Promises of future gains from deregulation can hardly be a substitute for budgetary support for Indian farmers.