Economy & BudgetImportant2025-10-01

Cabinet Approves Higher MSP for Rabi Crops 2026-27

In News

What Happened

On October 1, 2025, the Cabinet Committee on Economic Affairs (CCEA) approved an increase in the Minimum Support Prices (MSP) for six mandated Rabi crops for the 2026-27 marketing season. Safflower saw the highest absolute increase of ₹600 per quintal, while the MSP for wheat was raised by ₹160 to ₹2,585 per quintal.

Why It Matters

The MSP increase ensures remunerative prices for farmers and provides incentives for crop diversification, particularly towards oilseeds like safflower. It fulfills the government's policy commitment to fix MSP at a minimum of 1.5 times the All-India weighted average cost of production, bolstering rural income security.

Background

History & Context

The Minimum Support Price (MSP) regime was introduced in the 1960s to protect farmers from sharp market price fluctuations. The Commission for Agricultural Costs and Prices (CACP) recommends these prices based on the A2+FL formula, which covers actual paid-out costs plus the imputed value of family labour. While the Swaminathan Commission recommended using the comprehensive C2 formula (which includes imputed rent and interest on owned land), the government formally adopted the policy of setting MSP at 1.5 times the A2+FL cost starting from the 2018-19 Union Budget.

What Changed

▶
Wheat MSP: Increased by ₹160, moving from ₹2,425 per quintal in the previous season to ₹2,585 per quintal for the 2026-27 marketing season.
▶
Safflower MSP: Received the highest absolute hike among the crops, increasing by ₹600 per quintal to encourage oilseed cultivation and reduce import dependency.
▶
Margin of Profit: Ensured that the profit margin over the All-India weighted average cost of production (A2+FL) remains strictly at or above the mandated 50% for all six Rabi crops.

Prelims Angle

NCERT Connection

This connects directly to NCERT Class 9 Economics Chapter 4, 'Food Security in India'. The chapter explains how the government announces the Minimum Support Price before the sowing season to incentivize farmers, which the Food Corporation of India (FCI) then uses to procure food grains for buffer stocks.

Practice Questions

Q1

Correct Statement(s)

Which of the following statements is/are correct regarding the Minimum Support Price (MSP) framework in India? 1. The MSP is announced by the Cabinet Committee on Economic Affairs (CCEA) based on the recommendations of the Commission for Agricultural Costs and Prices (CACP). 2. The current policy mandates fixing the MSP at a minimum of 1.5 times the comprehensive 'C2' cost of production.

Up next