The Union Ministry of Agriculture and Farmers Welfare recently notified a committee to promote zero-budget based farming and to make the MSP more effective and transparent. However, the committee’s terms of reference (headed by former agriculture secretary Sanjay Agrawal) do not include any legal guarantee on MSP.


Terms of reference of the committee

  • To promote Zero budget natural farming (ZBNF) —
    • ZBNF guides farmers toward sustainable farming practices, which helps to retain soil fertility, ensure chemical-free agriculture, and ensure low production costs (zero cost), thereby increasing farmers’ income.
  • To provide suggestions on 5 points regarding natural farming including —
    • Suggestions for programmes and schemes for value chain development, protocol validation and research for future needs.
    • Support for area expansion under the Indian Natural Farming System by publicity and through involvement and contribution of farmer organisations.
  • To change crop patterns keeping in mind the changing needs of the country.
  • To recommend measures to strengthen the Agricultural Marketing System in response to the country’s changing needs. This is to ensure higher value to farmers through remunerative prices for their produce by capitalising on domestic and export opportunities.
  • To provide suggestions on 4 points related to crop diversification including —
    • Mapping of existing cropping patterns of agro-ecological zones of producer and consumer states;
    • Strategy for diversification policy to change the cropping pattern according to the changing needs of the country;
    • Arrangement for agricultural diversification and system to ensure remunerative prices for the sale of new crops;
    • Review and suggestion on micro irrigation scheme.
  • To make MSP more effective and transparent — It will also make recommendations to give CACP more autonomy as well as measures to make it more scientific.



  • India’s agriculture was devastated under British rule and the farmers were impoverished.
  • The Food-Grain Enquiry Committee, established by the Jawaharlal Nehru administration in 1957, was the first attempt to address the agricultural earning issue. However, it turned out to be insignificant.
  • Then, in 1964, Lal Bahadur Shastri formed the Food Grain Price Committee (under LK Jha), to push for a minimum support price (MSP) regime.
  • Despite the fact that the report was quickly accepted by the Shastri government, the first MSP announcement was made in 1967.
  • Thus, the MSP regime came into existence as a policy decision and the government set up the Agricultural Prices Commission (renamed as the CACP in 1985) for fixing MSP for crops.


About MSP

  • MSP is a form of market intervention (a policy decision not enforceable by law) by the Government of India to insure agricultural producers against any sharp fall in farm prices during bumper production years.
  • These are announced by the Cabinet Committee on Economic Affairs (Chaired by the Prime Minister of India).
  • The recommendations of the Commission for Agricultural Costs and Prices (CACP) at the beginning of the sowing season for certain crops forms the basis of these announcements.
  • The CACP considers the following factors when recommending MSPs —
      • A commodity’s demand and supply;
      • Its cost of production;
      • Market price trends (both domestic and international);
      • Inter-crop price parity;
      • The terms of trade between agriculture and non-agriculture (the ratio of farm input and farm output prices);
      • A minimum of 50% as a margin over cost of production; and
      • The likely implications of an MSP on consumers of that product.



  • MSPs are a guarantee price for farmer’s produce from the Government to prevent the farmers from distress sales and to procure food grains for public distribution.
  • E.g., if the market price for a commodity falls below the specified minimum price due to bumper production and a market glut, government agencies will buy the entire quantity supplied by farmers at the announced minimum price.