Growth and Effectiveness of Minimum Support Price for Paddy in Gujarat, India

Abstract

The Minimum Support Price (MSP) policy remains a cornerstone of India’s agricultural price support mechanism, intended to ensure remunerative prices to farmers, reduce price risk and incentivize crop production. This study critically examines the performance and effectiveness of the MSP system for paddy in Gujarat over the period 2002–2022. The analysis is segmented into two sub-periods, 2002–2012 and 2012–2022, to identify changes in trends, responsiveness and regional variations. The study draws on extensive secondary data from government publications, including the Directorate of Economics and Statistics, CACP reports and the Directorate of Agriculture, Agriculture & Co-operation Department, Government of Gujarat. The findings reveal that MSP for both common and A-grade paddy increased consistently over the study period, with relatively sharper growth during the first decade compared to the second, indicating a slowdown in MSP revisions in recent years. Conversely, Farm Harvest Prices (FHP) exhibited greater volatility. Although FHP remained above MSP for most years during the first sub-period, they fell below MSP in four consecutive years after 2017, with the widest negative deviation observed in 2020–21. While a majority of the years recorded positive FHP–MSP deviations, the recent emergence and persistence of negative deviations point to a declining effectiveness of MSP in safeguarding farmer’s incomes. This trend suggests that MSP announcements alone may not be sufficient to ensure remunerative prices in the absence of effective market support. Strengthening procurement operations and improving price transmission mechanisms are therefore crucial to enhancing the effectiveness of the MSP policy for paddy farmers in Gujarat.