Crops Selling Below MSP Despite Bumper Harvests: RBI Raises Concerns for Farmers

26 May 2025, New Delhi: Average prices of major food grains in Indian mandis are currently trading below the government-declared Minimum Support Price (MSP), according to an article on the Indian economy published in the Reserve Bank of India’s (RBI) May 2025 Bulletin. The report attributes this trend to bumper harvests of both kharif and rabi crops. Wheat remains the only major crop maintaining prices above the MSP.

Most Crops Below MSP; Wheat an Exception

The RBI article highlights that from April 1 to May 19, 2025, prices of grains and pulses have declined significantly. While this could bolster national food security, experts warn it may pose serious concerns for farmers, whose incomes are under pressure.

The central government currently announces MSPs for 23 crops—14 kharif, 7 rabi, and 2 commercial crops. However, in practice, government procurement is largely limited to a few key crops like wheat and rice, which are stored for the Public Distribution System (PDS) and food security purposes.

Onion Prices Down, But Potatoes and Tomatoes Costlier; Mixed Trends in Edible Oils

The RBI report also notes a cooling of overall food prices by mid-May. However, edible oils showed mixed movements—prices of soybean, sunflower, and mustard oils increased, while those of palm and groundnut oils saw a slight decline.

In the vegetable category, onion prices continued to fall, but the prices of potatoes and tomatoes witnessed an uptick.

The article observes, “The combination of record harvests and policy interventions to control food inflation has pushed the average mandi prices of major crops below MSP levels. While this supports food security, it raises questions about farmers’ incomes.”

It is also noted that the views expressed in the article are those of the authors and do not necessarily reflect the official stance of the Reserve Bank of India.

State Governments Announce Bonuses to Support Farmers

Amid falling mandi prices, some state governments have stepped in to support farmers. Rajasthan has announced a bonus of ₹150 per quintal for wheat over the MSP, while Madhya Pradesh has declared a ₹175 per quintal bonus.

Summer Crop Sowing on Track; Monsoon Brings Optimism

The article further reports that the sowing of summer crops is almost complete. As of May 16, 2025, paddy sowing had reached 107.6% of the average seasonal area, while moong sowing was at 108.2%. Overall summer sowing had touched 8.07 million hectares, marking an 11.9% increase over the same period last year.

There is optimism regarding the upcoming kharif season, with forecasts indicating an early and above-normal southwest monsoon (105% of the long-period average). Fertilizer demand, particularly for nitrogen- and potash-based fertilizers, is also reported to be higher than last year for key food crops.

Is Announcing MSP Enough?

While mandi prices falling below MSP may benefit food consumers, they can adversely affect farmers’ earnings. This raises a crucial question—does merely declaring MSPs ensure farmer welfare, or is there a need to reform procurement mechanisms and implementation to truly benefit cultivators?

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