Major MSP Update by Government of India: Historic Rabi Crop Price Support for 2026-27

India aims for a record food grain production and seeks to provide farmers with better support. The new MSP changes demonstrate the government’s focus on increasing farmers’ incomes, enhancing food security, and promoting sustainability. In the past, most benefits were allocated to wheat and rice farmers in Punjab and Haryana, where procurement is robust. Eastern states, where less than 20% of crops are procured, have not received the same support. Input costs have increased by 30% over the past five years, but MSP (Minimum Support Price) increases have not always kept pace, making it harder for small farmers. The latest reforms are meant to close these gaps and make the system fairer.

However, not everyone agrees with the current MSP revisions. Some agricultural economists and opposition party members argue that while the increases are a step in the right direction, they might not adequately address the rising input costs and the uneven distribution of benefits across different states and crops. Critics argue that further structural reforms are needed to ensure the long-term viability and equity of the MSP system.

MSP increases for six Rabi crops approved by the GOI for the 2026-27 marketing season, showing absolute increase amounts in rupees per quintal

Comprehensive MSP Revisions for Rabi Crops

Wheat Leads the Cereals Category

The MSP for wheat has increased by Rs 160 per quintal to Rs 2,585 for the 2026-27 season, providing farmers with a 109% margin over average production costs. Punjab and Haryana benefit the most because their procurement systems are strong, but eastern states see fewer gains due to weaker infrastructure. To help more farmers, the government could invest in additional procurement centers, improved transportation, storage, and digital tools.

The wheat MSP hike is significant because it affects over 30 million hectares of farmland and supports food security programs, such as the National Food Security Act and the PM Garib Kalyan Anna Yojana, which assist approximately 81 crore people. The government now aims to produce 119 million tonnes of wheat in 2025-26, up from the previous record of 117.51 million tonnes.

Pulses and Oilseeds Receive Priority Treatment

The government is clearly encouraging crop diversification with big MSP increases for pulses and oilseeds. Safflower got the largest increase of Rs 600 per quintal, raising its MSP to Rs 6,540 per quintal. This move aims to boost oilseed farming and reduce edible oil imports.

Lentil (masur) got the second-biggest increase of Rs 300 per quintal, now at Rs 7,000 per quintal, and gram’s MSP went up by Rs 225 to Rs 5,875 per quintal. These changes support the government’s goal of making India self-sufficient in pulses.

Rapeseed and mustard, which are important for India’s oilseed supply, got a Rs 250 per quintal increase to Rs 6,200 per quintal. Farmers are promised a 93% return over production costs. Barley’s MSP also went up by Rs 170 to Rs 2,150 per quintal.

Scientific Basis for MSP Determination

The MSP increases follow the Union Budget 2018-19 commitment to fix MSPs at least 1.5 times the all-India weighted average cost of production. The Commission for Agricultural Costs and Prices (CACP) uses the A2+FL formula, which includes all paid-out costs (A2) plus the imputed value of family labor (FL) to calculate the base cost.

This method gives farmers solid margins over their production costs: wheat (109%), rapeseed and mustard (93%), lentil (89%), gram (59%), barley (58%), and safflower (50%). The A2+FL formula includes both paid costs and the value of family labor. This way, farmers get better prices without putting too much strain on government spending.

Debate continues over whether the A2+FL formula fully reflects farmers' rising costs. Some suggest that the C2 formula, which includes land rent and other factors, would offer a fairer MSP but would increase government spending by about 15% for wheat. Balancing these options concerns both farmer support and budget impact, underscoring the complexity of setting fair MSPs.

Revolutionary Mission for Aatmanirbharta in Pulse

Comprehensive Six-Year Strategy

Alongside the MSP announcement, the government also approved the Mission for Aatmanirbharta in Pulses, a Rs 11,440 crore plan running from 2025-26 to 2030-31. This mission aims to help India, the world’s top producer and consumer of pulses, reduce its growing reliance on imports.

The mission plans to expand the area for growing pulses to 310 lakh hectares, boost production from 242 lakh tonnes in 2024-25 to 350 lakh tonnes by 2030-31, and raise yields to 1,130 kg per hectare. This is a broad plan to make India self-reliant in pulses by increasing both productivity and the area under cultivation.

Implementation Framework and Benefits

The mission will give out 126 lakh quintals of certified seeds to cover 370 lakh hectares and provide 88 lakh free seed kits to farmers. It also plans to set up 1,000 post-harvest processing units, offering subsidies of up to Rs 25 lakh each, with a focus on rice fallow areas and promoting intercropping.

A key part of the plan is the promise to buy all Tur, Urad, and Masoor crops under the Price Support Scheme (PSS) of PM-AASHA for the next four years. NAFED and NCCF will purchase these crops from registered farmers who sign up with them, providing pulse growers with strong market security.

Procurement Mechanism and Implementation

Streamlined Digital Infrastructure

MSP is implemented through a robust procurement system managed by the Food Corporation of India (FCI) and state agencies. Since RMS 2021-22, the government’s 'One Nation, One MSP through the DBT program has made sure farmers get paid directly into their bank accounts, cutting out middlemen.

Procurement centers are established in locations that correspond to where crops are grown and where it’s most convenient for farmers. Farmers can register online to get updates about MSP announcements, the closest purchase centers, and procurement dates.

State-wise Procurement Patterns

The effectiveness of procurement varies significantly between states. Punjab, Haryana, and Madhya Pradesh lead in wheat procurement, primarily due to their strong procurement infrastructure and government engagement. Meanwhile, Punjab, Telangana, Andhra Pradesh, Chhattisgarh, Odisha, and Haryana perform best in rice production. In contrast, states such as Bihar, Uttar Pradesh, and West Bengal lag behind in procurement efforts, primarily due to limited infrastructure and fewer procurement centers. These disparities affect how farmers benefit from MSP revisions. The government utilizes both centralized and decentralized systems to cover all regions. In the decentralized system, state governments purchase, store, and distribute grain within their own states, with any excess being allocated to the FCI. In the centralized system, FCI or state agencies buy the grain directly and send it to a central pool for distribution to other states. However, unequal infrastructure means procurement results remain uneven across different regions.

To improve procurement in all states, the government could invest in building more rural infrastructure, establishing additional centers, and enhancing transportation. In Maharashtra, pilot centers focused on farmers have helped more people participate and reduced costs. Karnataka has achieved positive results from utilizing digital tools, including real-time updates and e-procurement. Still, there are challenges, including insufficient funding, gaps in digital skills, and variations in how states operate. Measuring results clearly and rewarding top-performing regions could help share the benefits more fairly.

Economic Impact and Farmer Welfare

Enhanced Income Security

The new MSP rates are expected to provide wheat farmers with an additional Rs 4,500-5,000 per acre. Agriculture Minister Shivraj Singh Chouhan pointed out that MSPs have more than doubled since 2014-15 under the Modi government: wheat went from Rs 1,400 to Rs 2,585, barley from Rs 1,100 to Rs 2,150, and gram from Rs 3,100 to Rs 5,875 per quintal.

Government data reveals significant benefits for farmers: 1,175 lakh metric tonnes were purchased for Rs 3.33 lakh crore, supporting 1.84 crore farmers in 2024-25. This means a lot of direct income support for the farming community.

Budget Allocation and Financial Commitment

The Ministry of Agriculture and Farmers’ Welfare received an allocation of Rs 1,37,757 crore for 2025-26, representing 2.7% of the union budget. Key schemes include PM-KISAN (Rs 63,500 crore), Modified Interest Subvention Scheme (Rs 22,600 crore), and Crop Insurance Scheme (Rs 12,242 crore). Together with the MSP reforms, these funding commitments show the government’s intention to secure farmer welfare and strengthen the foundation of Indian agriculture for the years ahead.

The government’s support extends beyond MSP, with several schemes aimed at promoting farmer welfare. Since September 2018, PM-AASHA has bought 195.39 lakh metric tonnes of pulses, oilseeds, and copra worth Rs 1,07,433.73 crore, helping nearly one crore farmers.

Strategic Agricultural Transformation

Technology and Innovation Integration

The MSP system is supported by new technology, such as the SATHI portal for checking seed quality. The government also launched the Viksit Krishi Sankalp Abhiyan on October 3, 2025, to connect with farmers and encourage them to adopt new technologies.

Digital tools are making MSP support even better. Online procurement systems assist farmers by simplifying registration and tracking processes, and e-procurement modules provide real-time updates on MSP announcements, purchase centers, and schedules.

Climate Resilience and Sustainability

The government is also working on climate-smart farming by developing crop varieties that yield more, resist pests, and adapt to changing weather conditions. These new varieties are tested in various states to ensure they perform well everywhere.

The pulses mission also focuses on the environment by promoting climate-friendly farming, better soil health, and using fallow land more productively. This helps boost crop yields and protect the environment at the same time.

Farmer Response and Political Implications

Positive Reception from the Agricultural Community

Farmers in many states have welcomed the new MSP announcements, calling them 'historic decisions' and 'Navratri gifts.' Jasvir Singh from Shamli, Uttar Pradesh, said he’s happy with the steady MSP increases, and farmers in Guna, Madhya Pradesh, praised the government’s focus on their welfare.

The timing of the announcement, just before the Bihar Assembly elections, has caught political attention. Opposition parties and farmer unions are examining what the decision could mean for the elections, while the Punjab BJP said the decision brings 'festive cheer' to farmers.

Addressing Long-standing Demands

The MSP hikes meet some of the farmers’ demands for better prices, but some agricultural experts say the increases should also keep up with rising input costs. Still, the government’s promise of at least 50% margins over production costs is a big policy step.

There are still challenges with MSP coverage. Research by the National Bank for Agriculture and Rural Development (NABARD) indicates that only about 10% of farmers effectively benefit from the MSP regime due to limited procurement by government agencies. The impact of MSP also varies significantly by crop and region, with rice and wheat farmers, particularly in states like Punjab and Haryana, receiving the bulk of the benefits. A 2024 study by the Indian Council for Research on International Economic Relations (ICRIER) suggests that expanding the procurement infrastructure and ensuring more equitable resource distribution could enhance MSP reach across more diverse agricultural sectors.

To provide a more nuanced understanding of MSP benefits, recent data from the Ministry of Agriculture shows that states like Punjab and Haryana have consistently high procurement levels, capturing over 35% of the MSP distributed funds. Meanwhile, Bihar and Uttar Pradesh remain significantly underrepresented, accounting for less than 10% of MSP benefits together. Additionally, crop-specific analysis reveals that wheat and rice farmers in these high-performing states benefit more than those growing pulses or oilseeds, highlighting a persistent gap in equitable MSP distribution.

Internationally, countries employ various models to address support price challenges. For instance, the European Union employs the Common Agricultural Policy, which offers direct income support to farmers, thereby ensuring market stability and fair prices. In the United States, the Farm Bill outlines agricultural subsidies and safety nets to protect farmers from price volatility. These models underscore the importance of a comprehensive support system that encompasses direct payments and insurance schemes, providing valuable insights that India could consider to enhance the effectiveness of its MSP.

Considering these challenges, the recent reforms, including the new MSP hikes and the Mission for Aatmanirbharta in Pulses, have the potential to increase the percentage of farmers benefiting from the MSP system. If procurement infrastructure is effectively expanded and digital tools are fully implemented, it is plausible that a larger portion of farmers could gain from these benefits. Metrics such as the number of farmers covered, the regional distribution of benefits, and improvements in yield and income compared to baseline figures are likely to be used to assess progress. The success of these initiatives might also depend on regular feedback mechanisms to fine-tune policy implementation and address any region-specific disparities.

Future Outlook and Policy Implications

Production Targets and Food Security

The government aims to produce 362.5 million tonnes of food grains in 2025-26, including a record 119 million tonnes of wheat. These goals demonstrate strong confidence in the growth of Indian agriculture, supported by effective MSP policies.

The comprehensive approach combining MSP increases with production missions, technology integration, and infrastructure development represents a holistic agricultural transformation strategy. This framework aims to achieve the dual objectives of enhancing farmer income and ensuring national food security.

India’s farm policies also take into account global markets. The pulses mission aims to reduce imports, and higher MSPs for safflower and rapeseed-mustard are intended to lower the country’s edible oil import bills.

The government is attempting to strike a balance between food security at home and its international trade commitments. MSP policies are designed to help farmers while maintaining India’s competitive farm exports. Additionally, it is crucial that MSP policies align with World Trade Organization (WTO) rules to avoid potential trade disputes or sanctions. The WTO's Agreement on Agriculture imposes restrictions on subsidies, and India must ensure that its MSP system stays within permissible limits to maintain compliance with its international obligations. Exceeding these limits could lead to international consequences, including trade sanctions or disputes that could adversely affect India's agricultural exports.

To mitigate these risks, India plans to closely monitor its MSP policies in collaboration with the Ministry of Commerce and Industry and other relevant bodies to ensure adherence to WTO regulations. Regular reviews of subsidy schemes by a dedicated task force will assess compliance levels, with periodic reports submitted to international bodies as necessary. Additionally, proactive measures such as aligning subsidy allocations with WTO thresholds and engaging in continuous dialogue with WTO representatives are integral to the strategy for addressing potential concerns early. This vigilant approach aims to sustain India’s agricultural growth while fulfilling its global commitments.

To monitor compliance with WTO rules, the Ministry of Commerce and Industry, in collaboration with the Ministry of Agriculture and Farmers' Welfare, is primarily responsible for reviewing India's agricultural policies in the context of its international trade commitments. These ministries work closely with the WTO Secretariat, participating in regular reviews and submitting required notifications on subsidies and other support measures. This process ensures transparency and facilitates risk mitigation by providing a framework for addressing any potential discrepancies before they escalate into trade disputes. This balance is vital to safeguard India's position in global agricultural markets while supporting domestic agricultural stability.

Conclusion

The Indian government’s major MSP update for rabi crops in 2026-27, along with the new pulses mission, represents a big change in farm policy. By focusing on fair prices, providing strong financial support, and working together, the government aims to make a tangible difference for Indian farmers. The goal is to reach 50% more farmers with MSP by 2030 and cut pulses imports by 30% in five years. Regular data collection and public progress reports will help track these goals and enable adjustments if needed. These steps are designed to maintain transparency and help Indian agriculture move forward.

The Rs 11,440 crore pulses mission, along with higher MSPs, which provide farmers with up to 109% margins, offers more support than ever before. This plan helps farmers earn more now and sets the stage for a stronger, more resilient farm sector in the future.

The effectiveness of these plans will depend on effective implementation, a robust procurement system, and ongoing government support. The government has doubled MSPs since 2014-15 and used direct benefit transfers, which is encouraging. As India moves toward the Viksit Bharat vision, these reforms are important steps for rural prosperity and national food security.