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Opinion Reading the MSP hike: Reset needed

But for now, increase in MSPs is well-timed and well-intentioned

There's no reason those growing regular field crops can’t — with some government direct income support.

May 30, 2025 07:02 AM IST First published on: May 30, 2025 at 07:02 AM IST

With the southwest monsoon setting in over Kerala on May 24, eight days before schedule, it’s just as well that the Narendra Modi government has approved the minimum support prices (MSP) for kharif crops. Unlike last year, when they were declared on June 19, the MSP announcement comes early enough this time for farmers to make informed planting decisions. Equally welcome is the MSP of paddy being hiked by only Rs 69 per quintal, as against Rs 117 and Rs 143 for the last and preceding year’s crops. Ideally, given the record 63.1 million tonnes (mt) of rice in government godowns, the paddy MSP should have been frozen. The latest increase, the lowest in five years, is a second-best solution to a problem that has both economic and environmental dimensions: India is producing too much rice (public stocks at over 4.6 times the required buffer, even after exports of 20.2 mt in 2024-25, is proof), which is a water-guzzler to boot.

The MSPs of other crops have been raised significantly. These range from 5.4-6 per cent for urad (black gram) and arhar (pigeon-pea), to 7.1-8.3 per cent for groundnut, maize and cotton, and 8.9-13.9 per cent for soyabean, jowar (sorghum) and ragi. When compared to the mere 3 per cent higher MSP granted for paddy, these seem quite major and well-intentioned too. India should definitely be growing more pulses and oilseeds considering the value of their imports, touching $5.5 billion and $17.3 billion during 2024-25. The same goes for cotton (where India has turned a net importer) and maize (the domestic consumption of which, both as feed and fuel grain, is rising faster than production). Their nutritional advantages, apart from lower water requirement and climate hardiness, make millets similarly worthy of MSPs providing fair and remunerative returns over cultivation costs. But why would farmers grow crops where the MSPs are simply on paper? Take soyabean, which is currently selling in Maharashtra’s Latur market at Rs 4,300 per quintal. That’s below not only the just-announced MSP of Rs 5,328, but even last year’s level of Rs 4,892.

The MSP system needs a reset. The government must procure grain that is sufficient to meet its requirements for the public distribution system and open market operations. This would mean capping the quantity of produce purchased — say, 100 quintals of paddy per farmer. Over time, it should move from crop-specific MSPs to flat per-acre income support. This will incentivise farmers to grow crops that the market wants and also produce these through cost-efficient use of water, nutrients, energy and other inputs. Poultry, dairy and vegetable farmers are already doing this. There’s no reason those growing regular field crops can’t — with some government direct income support.

# Minimum Support Price (MSP)