Mint Explainer | Why India wants farmers to shift crops—without touching MSP or procurement

Successive governments have relied on public procurement to stabilize prices, support farmer incomes and ensure reliable supplies for the public distribution system (PDS). But in recent years, large-scale procurement, especially of rice and wheat, has outpaced underlying food security needs, resulting in chronically high buffer stocks and rising carrying costs.

At the same time, India remains structurally dependent on imports of edible oils, pulses and some feedstocks.

The Economic Survey 2025-26, tabled in Parliament on Thursday, flagged crop diversification as a policy priority, arguing that India’s production pattern must shift away from excessive concentration in rice and wheat toward pulses, oilseeds and other crops better aligned with consumption needs, resource sustainability and import reduction.

Mint explains why a voluntary approach, backed by targeted incentives and financed from efficiency gains within the existing system, is now preferred over altering the MSP (minimum support price), or weakening procurement.

Why is it necessary to diversify from the wheat, paddy cropping cycle?

The continued dominance of the wheat–paddy cycle has created economic, environmental and fiscal pressures.

Paddy cultivation is highly water-intensive, contributing to groundwater depletion, soil degradation and higher energy use, especially in north-western India. At the same time, limited crop choices expose farmers to income stagnation.

Procurement has also expanded sharply. During the rabi marketing season 2025-26, an estimated 30.03 million tonnes of wheat was procured, according to official data. As far paddy is concerned, during the kharif marketing season 2024-25, a quantity of 83.2 million tonnes of paddy was procured, while during ongoing season of 2025-26, 66.7 million tonnes of paddy has been procured till 29 January 2026.

According to the Food Corp. of India (FCI), total food grain stock (wheat and rice) in the central pool stood at 58.4 million tonnes as of 1 January 2026, about 10.9 million tonnes higher than the same period last year.

Large-scale production and procurement have led to excess stocks and rising storage costs, intensifying fiscal pressures. According to experts, excess procurement creates oversized stocks that remain in storage longer, increasing warehousing rentals, interest on carrying costs, handling and transport expenses, and losses from spoilage and wastage. Together, these higher storage, maintenance, and financing costs significantly raise the government’s fiscal burden.

“Excess inventories inflate storage, handling, and interest costs and strains public finances. Suppose the stock is held for a year, then the annual cost of carrying food grain stocks for the FCI is about ₹2,400 per tonne, or roughly ₹200 per tonne per month…So, ultimately it puts a burden on the exchequer,” said G. Chandrashekhar, an agriculture economist, who has been part of the World Bank-Government of India (ICAR) joint project – National Agricultural Innovation Project.

What crop options can replace or supplement paddy and wheat?

India remains structurally dependent on imports of edible oils, pulses and some feedstocks.

India produced 25.6 million tonnes of pulses in FY25 and imports around 5-7 million tonnes annually to meet domestic demand, according to official data. Current edible oil consumption is 25-26 million tonnes, while domestic production is about 11 million tonnes. The remaining 60% comes from imports.

The country imports edible palm oil from Indonesia and Malaysia, soybean oil from Argentina and Brazil, and sunflower oil from Russia and Ukraine.

This shows India faces significant import dependency in both edible oils and pulses, with over 60% of edible oils and substantial amounts of pulses imported in 2024-25, specifically 16.4 million tonnes of edible oil and 7.3 million tonnes of pulses.

These gaps create an opportunity to align farm support with changing consumption patterns, environmental sustainability and national self-reliance, while fully preserving the food security architecture.

Which regions are suitable for the initial phase?

The initial phase can focus on eastern and central regions, where rainfall patterns, soil conditions and market access make pulses, oilseeds and maize economically and agronomically viable.

“Regions that are strategically critical for national food security can be incorporated in later phases, once the approach has been tested and refined,” states the Economic Survey 2025-26.

In large parts of eastern India, maize, pulses and oilseeds fit naturally into existing cropping systems. In central regions, oilseeds such as gram and soybeans are well suited to prevailing rainfall and soil conditions.

These crops directly support national priorities: pulses and edible oils reduce import dependence, while maize and oilseeds contribute to the expansion of ethanol, livestock and bioenergy value chains.

For example, Punjab and Haryana is looking at crop diversification to address groundwater depletion and overdependence on paddy–wheat MSP procurement while improving farm incomes and ensuring long-term agricultural sustainability.

Why focus on incentives rather than MSP or procurement changes?

Price and income support policies remain essential because farm incomes are vulnerable to weather shocks, market volatility and rising input costs. Small and marginal farmers have limited resilience and weak bargaining power.

According to Economic Survey 2025-26, rather than altering MSP or weakening procurement, a calibrated strategy may use savings from improved stock management to support voluntary crop diversification.

Farmers can be offered financially attractive alternatives for part of their rice and wheat acreage, particularly in regions where procurement volumes are high but farm profitability remains modest and agro-ecological conditions favour other crops.

State-level diversification missions would be implemented through structured centre-state partnerships. The Centre’s contribution would come from procurement, storage and interest savings, while states would fund their share from complementary gains such as reduced input subsidies and existing incentive frameworks for sustainable agriculture.

Where required, transitional financing could be provided, conditional on verified acreage shifts and subsidy savings, the survey added.

How can farmer incomes be protected during the transition?

The survey pointed out that to ensure diversification does not expose farmers to income risk, per-quintal or per-acre incentives can offset yield differences and transitional costs.

Modest bonuses can make alternative crops financially more attractive than continued monocropping of rice or wheat, particularly when combined with lower input costs for water, fertilizer and energy.

These incentives can be financed from fiscal savings created by reducing the accumulation of excess stocks and associated carrying costs, making the approach fiscally neutral while remaining farmer-centric.

A portion of the savings should also be reinvested in post-harvest and value-chain infrastructure, such as oilseed processing, pulse milling, maize drying and ethanol linkages, leveraging public–private partnerships and the Agri-Infrastructure Fund.

Research institutions and agricultural universities can support the transition by providing region-specific seed and agronomic packages as part of an integrated diversification framework.

Utilizing efficiencies in the existing procurement system to finance voluntary, agronomy-led diversification offers a practical pathway to raise farmer incomes, ease fiscal pressure and strengthen long-term food and nutritional security.

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