Need to shift to market-determined prices from MSP, says Nabard Chairman Shaji

KV Shaji, Chairman, Nabard, speaking at the businessline Agri Summit 2025 in New Delhi on Friday | Photo Credit: BIJOY GHOSH

Outlining the three imperatives of agricultural development — economic, climate and social — Nabard Chairman KV Shaji said on Friday that the minimum support price (MSP) system can be replaced if some structural shifts are implemented. He suggested market-determined prices as an alternative, provided risks to farmers are covered.

Addressing the businessline Agri & Commodity Summit 2026 in New Delhi, Shaji said: “Right now, the problem is that the minimum support price, which is government-determined, is a drain on the exchequer. So, we need to graduate from that into market-driven support prices.”

Explaining further, Shaji said commodity derivatives can help in this endeavour. “We are working with NCDEX to develop such derivatives. We are now doing a pilot programme where farmer producer organisations (FPOs) are encouraged to enter into put options for selling their produce so that wherever prices move, they can keep the upside,” he said. A put option is a derivative contract for which farmers need to pay a small fee to lock in the price; whatever upside there is, they can retain. If there is a downside, only the fee they have paid is the loss to the farmer, he added.

Highlighting that Nabard has a major project underway — graduation of rural income projects with the ultra poor — he said the government wants to find permanent solutions to uplift them by integrating them into mobile financial systems. In the context of value chain fixing, there is a need to close several gaps, he said, adding that the commodity market gap is one of them.

He also noted that Nabard is working with cooperatives on warehouse improvement, enhancing facilities as part of the world’s largest grain storage structure programme announced by the Prime Minister. In partnership with the Department of Cooperation, Nabard is building around 500 cooperative storage structures, which will be linked to platforms.

“We are working with NCDEX on how to link these storage structures to the derivative market so that there are proper physical structures to help farmers realise better income,” he said.

In that context, MSPs can be replaced with market-determined prices, he said, adding that some sort of formalisation structure needs to be in place.

structural shifts

He identified five important structural shifts that should happen, one of which is the formal recognition of women as farmers. “For that, ownership of land is very crucial. The government is encouraging it, for which several initiatives have been taken so that women should own farms. Even if they are not earning, their activities can be appropriately mapped through digital means and interactive processes,” he said.

Commenting on agricultural credit, he said the government’s AgriStack initiative will help in linking farmers to various activities. However, he also highlighted that Nabard has been making efforts to create awareness among cooperative and regional rural banks to disburse credit to a larger number of women farmers.

Noting that almost 50 per cent of the rural workforce in the agricultural sector comprises women, he said due to historical reasons women are not landowners and have been excluded from meaningful economic activity.

Stressing that Nabard was supporting self help groups (SHGs) which, when launched in the early 1990s, were basically informal institutions without any registration or legal identity, he said currently 17 crore rural households are covered under SHGs, of which almost 95 per cent are women.

Shaji also said that 1.45 crore SHGs are savings-linked, of which 83 lakh are credit-linked, with an outstanding bank credit of nearly ₹3 lakh crore.

Stressing that farmer producer organisations (FPOs) are rural enterprises, the Nabard Chairman said that women FPOs, which are more close-knit, are building on the successes achieved through SHGs.

On the climate resilience imperative, he said that as a large share of India’s cultivable area is rainfed (48 per cent), women, being the frontline managers of water resources, manage mixed cropping systems, including allied activities integrated with agriculture.

Published on February 27, 2026