Minimum Support Price (MSP) policy is one of the main agricultural policies in India for providing farmers a guaranteed and reasonable price for their crops. Declared by the Government of India prior to every sowing season, MSP functions as a protection against sudden drops in market prices. MSP induces farmers to cultivate critical crops by guaranteeing them a minimum price even if market prices drop.
The MSP is suggested by the Commission for Agricultural Costs and Prices (CACP), taking into account inputs such as cost of production, supply and demand, and trends in the market. At present, MSP is announced for 23 important crops, i.e., cereals, pulses, oilseeds, and commercial crops. MSP procurement is mainly done by government entities like the Food Corporation of India (FCI).
The policy serves a crucial function in assuring stable farm incomes and food security. Yet, it is marred by issues such as uneven distribution of benefits, with some states and crops getting more advantages. Further, excessive procurement of rice and wheat has created environmental and fiscal issues. There is a need for reform based on diversification and better procurement mechanisms to make the MSP system equitable and sustainable.