Ministries flagged MSP concerns: Low returns to rising oil imports

Syllabus: GS-III

Subject: Indian Economy & Development

Topic: Issues related to direct and indirect farm subsidies and minimum support prices.

Context: Proposed unequal MSPs hinder crop diversification, favouring select states, say Union ministries on 2024-25 rabi crop pricing.Top of Form


Ministries’ Concerns on MSP Proposal for Rabi Crops (2024-25):

  1. Import Dependence (Department of Food & Public Distribution):MSP for oilseeds hasn’t boosted domestic production; 55% of dependence on imports persists.
  2. Unequal Benefits (Department of Expenditure): Skewed favoritism towards wheat procurement benefits limited states; need to address skewness and promote crop diversification.
  3. WTO Obligations (Department of Commerce): Adherence to the de-minimis subsidy limit crucial for WTO commitments; India breached limit for rice.
  4. Agriculture Ministry’s Response: MSP recommendations based on various factors; the increase proposed for wheat compensates for rising production costs.


  1. Advocate for a long-term MSP policy to incentivize oilseed production and reduce import reliance.
  2. Non-price recommendations implementation, including farm mechanization; scrutiny through Expenditure Finance Committee.
  3. MSP procurement should not be open-ended; set predetermined targets; ensure compliance with WTO regulations.
  4. Focus on reducing import dependence and promoting oilseeds and pulses; implement the Crop Diversification Programme.

Despite concerns, the Cabinet approved the MSP increase for rabi crops, emphasizing economic factors and strategies for reducing import dependence and promoting diversified agriculture.

What is Minimum Support Price or MSP?MSP is the minimum price which the government pays for the farmers’ produce at the time of procurement. It is aimed at saving the crops from price fluctuations in the market. The MSP fixed by the government is considered as being remunerative for farmers. However, MSPs do not have legal backing.

How is MSP fixed?

It is fixed by the centre based on the recommendations of the Commission for Agricultural Costs and Prices (CACP) which is a statutory body. CACP submits two separate reports for Kharif and rabi seasons and based on these, centre fixes MSPs twice a year.

Crops getting Minimum Support Price

As of now, 23 crops are being supported by the centre by fixing of MSP. They belong to the family of cereals (7), pulses (5), oilseeds (7) and commercial crops (4).

In response to the proposed MSP increase for rabi crops, ministries express concerns on import dependence and unequal benefits. Recommendations include a long-term MSP policy and adherence to WTO obligations.

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