What will the hike in minimum support price (MSP) for wheat for crop year 2025-26 (marketing year 2026-27) approved by the Cabinet Committee on Economic Affairs achieve?

For the upcoming harvest in April/May 2026 wheat MSP is fixed at Rs 2585 a quintal

(100 kilograms), an increase of Rs 160 from last year. Estimated cost of production is Rs 1239 a quintal. These official numbers. 

The government says the estimated cost includes all paid out costs (hired human labour; bullock labour/machine labour; rent for leased-land; expenses on material inputs like seeds, fertilizers, manures; irrigation charges; depreciation on implements and farm buildings; interest on working capital; cost of diesel/electricity for operation of pump sets and miscellaneous expenses) as well as imputed value of family labour.

For the grower, the expected margin over all-India weighted average cost of production is 109 percent. 

While growers deserve to receive remunerative prices, routine MSP hikes will not help address the fundamental challenges the crop has been facing in recent years. 

To be sure, India is the world’s second largest producer of wheat after China. Along with rice, wheat contributes to the country’s food security or more precisely, grains security. However, Indian wheat is stymied by multiple challenges.

Heat tolerance: Indian wheat is at the limit of heat tolerance. Even a 1-2 degree Celsius increase in day temperature during critical growing period (mid-January to mid-March) can potentially result in yield losses. We witnessed it in 2022 and 2023 when heat wave hurt crop prospects. The government claims that heat tolerant wheat variety has been developed. Empirical evidence of its efficacy and performance data deserves to be in public domain.

Acreage: For this fine cereal, planted acreage is now stagnating at 31-33 million hectares. Area is most unlikely to expand rapidly as land constraints begin to bite. We need to identify new areas with suitable agro-climatic conditions.

Grain mono-cropping: Rice-wheat-rice cycle (high input grain mono-cropping) has already wrought havoc in Punjab and Haryana where soil health has deteriorated and water table has gone down to alarmingly low levels. An ecological disaster is waiting to happen. If anything, there is a strong case for Punjab (3.5 mln ha) and Haryana (2.3 mln ha) to break the multi-decade cycle of grain mono-cropping and practice crop rotation by shifting to say leguminous crops every alternate season. Is there land suitable for wheat elsewhere?

Yield: The national average is 3.5 tonnes per hectare; but there is stark variation among wheat growing States. Haryana (4.5 /ha) tops the list followed by Punjab (4.2 t/ha). Uttar Pradesh has the largest area 10 mln ha with average yield of 3.6 t/ha followed by Madhya Pradesh with 7 mln ha and yield of 3.4 t/ha. Other key States include Rajasthan 2.5 mln ha with 3.6 t/ha yield and Bihar 2.2 mln ha with 2.6 t/ha yield. 

UP, MP, Rajasthan and Bihar may be able to raise wheat yields with appropriate research support and investment support. In China, wheat yield is 5.8 t/ha while European Union averages 5.5 t/ha and Ukraine 4.6 t/ha. Can we learn from them?

The argument that India’s average yield is higher than that of USA (3.3 t/ha) and

Australia (3.2 t/ha) is specious as it fails to recognize that in USA and Australia wheat is cultivated in low rainfall areas or arid lands. For them land use is more important than yield enhancement. India is not in that league.

Procurement: Often, the Food Corporation of India (FCI) is the first, last and only buyer of wheat in Punjab and Haryana. Procurement is open-ended meaning there is no upper limit or ceiling. This results in FCI buying all that is offered by growers and ends up buying far in excess of national food security needs (PDS, welfare programs). To that extent, it reduces the role of the private sector.

Over the years, assured buying by FCI has lulled growers into some kind of complacency. They now seem to believe, along with higher MSP year after year, assured procurement of their harvested produce is their right. This situation is fraught and unsustainable. It blunts Indian wheat from becoming truly competitive. 

Production: The authenticity of government’s wheat crop estimates has become questionable in recent years - 117.5 mln t in 2024-25 up from 113.3 mln t in 2023-24 and up from 110.3 mln t in 2022-23. Private sector estimates are 5 to 10 percent lower. In 2023 and 2024, FCI procurement fell well short of the target. If harvest size were as big as claimed in official data, there’s no reason for wheat prices to rise, no justification for continuing with stock limits for the private sector and continued ban on export.

In sum, for India wheat is too precious a fine cereal to show benign indifference. It is crying for policy attention. Major exporters around the world are waiting for India to face shortage and open up import.

It is possible to design and implement a long-term policy for wheat that takes into account current challenges enumerated above and to balance the interests of growers, processors and consumers. While MSP hikes may be expedient, it is critical to recognize and holistically address the multiple challenges. This calls for political will and commitment. ERTF would be happy to engage with policymakers to brainstorm a long=term policy.