ExplainerAgriculture
MSP explained: how it is set, and who actually benefits
The Centre announces minimum support prices for 22 crops, but government buying is concentrated in a few crops and a few states. Here is how the system works.
The short answer
The minimum support price (MSP) is the price at which the government offers to buy a crop. The Centre sets it for 22 crops, with a fair and remunerative price for sugarcane, and says it fixes MSP at no less than 1.5 times the all-India weighted average cost of production. Its benefit reaches mainly farmers who sell to government agencies, and procurement is concentrated in wheat and rice in a few states.
What is MSP?
The minimum support price is the price at which the government stands ready to buy a crop from farmers. PRS Legislative Research describes MSPs as prices “fixed by the central government in order to ensure remunerative prices to farmers”. The government announces MSPs for 22 crops and a fair and remunerative price for sugarcane.
MSPs are announced separately for kharif crops and rabi crops. The Cabinet Committee on Economic Affairs, chaired by the Prime Minister, approves them.
How is the MSP calculated?
Since 2018–19, the government says it fixes MSP at no less than 1.5 times the all-India weighted average cost of production. The PIB release on the 2027–28 rabi MSPs says the new prices follow that Budget commitment.
The cost it uses includes paid-out costs such as hired labour, rent for leased land, inputs, irrigation, depreciation and interest on working capital, plus an imputed value for the farmer’s own family labour. PRS lists the factors considered as the costs of cultivation and production, productivity of crops and market prices.
Because the formula sets only a floor, actual margins vary widely by crop.
What are the current MSPs?
For the 2027–28 rabi season, wheat is ₹2,610 a quintal, and for the 2026–27 kharif season, common paddy is ₹2,441. The rabi MSPs were approved on 30 September 2026. Wheat rose by ₹25, while safflower rose by ₹675, rapeseed-mustard by ₹413 and masoor by ₹390.
The kharif MSPs for 2026–27 were approved in May 2026 for 14 crops. Paddy rose by ₹72, and sunflower seed got the largest increase, ₹622 to ₹8,343 a quintal, according to a PTI report.
Selected MSPs (₹ per quintal)
- ₹2,610wheat, rabi 2027–28
- ₹2,441common paddy, kharif 2026–27
- ₹6,613rapeseed and mustard, rabi 2027–28
- ₹8,450tur (arhar), kharif 2026–27
How much is spent buying crops at MSP?
The government says MSP payments for the six rabi crops came to ₹8.36 lakh crore between 2014–15 and 2025–26. That compares with ₹2.65 lakh crore between 2004–05 and 2013–14, according to the PIB release on rabi MSPs. The later period covers 12 years and the earlier one 10, and neither figure is adjusted for inflation.
Procurement volumes rose too. The government bought 3,921 lakh tonnes of the six rabi crops in 2014–15 to 2025–26, against 2,302 lakh tonnes in the earlier decade.
For the 2027–28 rabi season alone, Outlook India puts the estimated financial implication of the new MSPs at ₹90,962 crore. The PIB release does not give a figure.
Does the government buy every crop at MSP?
No, government buying is concentrated in a few crops and a few states. PRS notes that procurement “mainly happens for wheat, rice, sugarcane and cotton, in a few states”. In 2015–16, the central government procured 33% of the wheat and 30% of the rice produced in India, according to the PRS report, which uses data up to early 2017.
The government’s own figures for rabi crops show the same pattern. Of the 3,921 lakh tonnes of the six rabi crops procured between 2014–15 and 2025–26, wheat accounted for 3,715 lakh tonnes, or about 95%, by our calculation from the PIB release. Wheat farmers received ₹7.31 lakh crore of the ₹8.36 lakh crore paid at MSP for those crops, about 87%.
So who actually benefits?
Mainly farmers who can sell to government agencies, which in practice means wheat and paddy growers in states with strong procurement.
Punjab shows what large-scale procurement looks like. The Centre has asked the state to procure 180 lakh tonnes of paddy for the central pool this kharif season. By 7 October, agencies had bought 7.50 lakh tonnes, and the RBI had released a cash credit limit of ₹42,786.68 crore to fund purchases, UNI reported.
Awareness is another limit. A NITI Aayog study cited by PRS found that only 10% of farmers knew the MSP before sowing, while 62% learned of it after sowing.
Why are pulses and oilseeds getting bigger increases?
The government says it wants farmers to diversify away from cereals. The PIB release on rabi MSPs says it has been promoting crops other than cereals, such as pulses and oilseeds, through higher MSPs. PRS notes that procurement focused on a few crops has pushed farmers toward them and away from pulses and oilseeds.
The 2027–28 rabi increases follow that pattern: largest for safflower, mustard and masoor, and smallest for wheat.
The documents
- Cabinet approves Minimum Support Prices (MSP) for Rabi Crops for Marketing Season 2027-28Press Information Bureau, 30 September 2026
- State of Agriculture in IndiaPRS Legislative Research