What is MSP? Benefits, Works and Guidelines!

What is MSP Benefits, Works and Guidelines!

The government has established the Minimum Support Price (MSP) system in agricultural economies to guarantee farmers a minimum price for their commodities. The government sets the MSP in order to shield farmers from changes in the market and guarantee them a fair price for their produce. Here’s a summary of its advantages, methods, and rules:


1. Income Stability: MSP provides farmers with a stable income, shielding them from price volatility in the market.

2. Risk Reduction: It mitigates the risk associated with fluctuations in market prices and ensures farmers receive a fair price for their crops.

3. Agricultural Growth: MSP encourages farmers to cultivate crops by assuring them a minimum price, which helps in maintaining agricultural productivity.

4. Food Security: By supporting the production of essential crops through MSP, it contributes to food security by ensuring an adequate supply of food grains.


1. Government Announcement: Based on suggestions from the Commission for Agricultural Costs and Prices, the government releases MSP for a variety of crops prior to the sowing season (CACP).

2. Procurement: At MSP, farmers sell their produce to government organisations like the Food Corporation of India (FCI) and the National Agricultural Cooperative Marketing Federation of India (NAFED).

3. Market Intervention: Government organisations buy food to support farmers when market prices drop below MSP.

4. Price Revision: To guarantee farmers receive fair prices, MSP is routinely adjusted depending on variables including inflation, demand-supply dynamics, and input costs.


1. Crop Coverage: MSP is announced for various crops including cereals, pulses, oilseeds, and cotton among others.

2. Cost Consideration: MSP is determined considering factors such as cost of production, demand-supply situation, and price trends in the domestic and international markets.

3. Implementation: State governments play a crucial role in implementing MSP by facilitating procurement operations and ensuring timely payments to farmers.

4. Monitoring and Evaluation: The government monitors MSP implementation through various agencies to ensure farmers receive the benefits effectively and to address any issues or challenges.

In conclusion, MSP serves as a vital mechanism to support farmers, ensure food security, and promote agricultural growth by providing a safety net against price fluctuations in the market. However, its effectiveness depends on efficient implementation, periodic revisions, and addressing challenges such as procurement infrastructure and market access.