Opinion Express View: Indian farmers need income, not price support

The Narendra Modi government has raised the minimum support price (MSP) for the 2025-26 wheat crop by Rs 160 to Rs 2,585 per quintal. The rise — more than the Rs 150-per-quintal each of the last two crop years — defies economic logic. Public wheat stocks, at 33.3 million tonnes (mt) on September 1, were the highest for this date in four years. The 2024-25 crop was good, reflected in official procurement crossing 30 mt for the first time after 2021 and wholesale wheat prices now ruling lower than a year ago. Given the recharged groundwater aquifers and near-full reservoirs from the surplus monsoon rains, one can expect a bumper crop in the ensuing season (November-December sowing and April-May harvesting) as well. In short, there is no dearth of wheat either in government warehouses or in the open market to justify the magnitude of MSP hike that has been announced.

Supply side aside, the MSP increase decision also lacks any production cost-based rationale. The Commission for Agricultural Costs & Prices (CACP) has projected the all-India average “A2+FL” cost — which includes all paid-out expenses on inputs incurred by the farmer and also an imputed value of unpaid family labour — for the 2025-26 wheat crop at Rs 1,239 per quintal. The MSP of Rs 2,585, then, works out almost 109 per cent higher than the estimated cultivation cost. That’s well above the minimum 50 per cent margin to be given as per the formula for determination of MSP. For comparison, the MSPs of other rabi season crops have been fixed at just 50 per cent over “A2+FL” cost for safflower, 58-59 per cent for barley and chana (chickpea), 89 per cent for masur (red lentil) and 93 per cent for mustard. Simply put, wheat farmers have been favoured over those growing pulses or oilseeds.

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The policy bias extends even to procurement (government agencies buy wheat and paddy at the declared MSPs, which isn’t so with soyabean, chana or millets) and imports (wheat and rice attract 40-80 per cent duty, as against 0-10 per cent on pulses and 16.5 per cent on crude vegetable oils). The CACP’s MSP recommendations are supposed to also factor in inter-crop price parity and domestic and global market price trends. The latest wheat MSP of Rs 2,585/quintal, translating into over $290 per tonne, is totally out of sync with current international prices of $225-230. Indian farmers need income, not price support. The best way to deliver that is not through MSP and government procurement, but by direct per-hectare income transfers. The farmer should grow what the market wants, which is already the case with animal and horticulture products. It should be no different with field crops.