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Centre increases MSP for jute; farmers in West Bengal, Assam to benefit

February 24, 2026 5 min read Economics GS Paper 3 (Agriculture Indian Economy)
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What Happened

  • The Cabinet Committee on Economic Affairs (CCEA) approved an increase in the Minimum Support Price (MSP) of raw jute (TD-3 grade) for the 2025-26 marketing season to ₹5,650 per quintal.
  • This represents an increase of ₹315 per quintal over the 2024-25 MSP, based on the recommendation of the Commission for Agricultural Costs and Prices (CACP).
  • West Bengal and Assam are the primary beneficiaries — West Bengal accounts for 82% of jute farmers, with Assam and Bihar each contributing approximately 9%.
  • The MSP hike is aimed at improving farm income for the approximately 40 lakh jute farm families who depend on the crop across eastern India.
  • Over the decade from 2014-15 to 2025-26, the MSP for raw jute has risen from ₹2,400 per quintal to ₹5,650 per quintal — an increase of ₹3,250 per quintal (2.35 times).

Static Topic Bridges

Minimum Support Price (MSP): Mechanism and Policy Framework

The Minimum Support Price (MSP) is an administered price guarantee announced by the Union government, designed to insulate farmers from sharp price falls in the open market. MSPs are announced at the beginning of the sowing season for 23 crops — 7 cereals, 5 pulses, 7 oilseeds, and 4 commercial crops (including jute). The Commission for Agricultural Costs and Prices (CACP), under the Ministry of Agriculture and Farmers' Welfare, recommends MSPs after considering cost of production, demand-supply situation, domestic and international price trends, and terms of trade between agriculture and non-agriculture sectors.

  • CACP uses three cost formulas: A2 (actual cash costs), A2+FL (cash costs + family labour), and C2 (comprehensive cost including imputed rent of owned land and interest on fixed capital).
  • Government currently fixes MSP at 1.5 times A2+FL, not 1.5 times C2.
  • Swaminathan Commission (National Commission on Farmers, 2004) recommended MSP = C2 + 50% (i.e., 1.5 times C2) — a key demand in farmers' protests.
  • MSP has no statutory or legal backing — there is no law mandating procurement at MSP if market prices fall below it.
  • Final MSP is announced by the CCEA (Cabinet Committee on Economic Affairs), chaired by the Prime Minister.
  • Jute Corporation of India (JCI), established in 1971, is the nodal price support agency for procurement of raw jute at MSP in West Bengal, Bihar, Assam, Meghalaya, Tripura, Odisha, and Andhra Pradesh.

Connection to this news: The ₹315 per quintal hike for jute illustrates the annual MSP announcement cycle — CACP recommendation → CCEA approval → benefits flowing to farmers. However, the gap between MSP and the Swaminathan C2+50% formula remains a live policy debate.

India's Jute Industry: Geography, Economy, and Policy

Jute, often called the "golden fibre," is a rain-fed crop grown predominantly in the Ganga-Brahmaputra delta region. India is the world's largest producer of jute goods, accounting for approximately 70% of global production. The crop is labour-intensive and ecologically benign — requiring no pesticides and consuming CO2 during growth.

  • West Bengal has 70 of India's 94 composite jute mills; remaining mills are in Andhra Pradesh (10), UP (3), Bihar (3), Odisha (3), Assam (2), Chhattisgarh (2), and Tripura (1).
  • The sector provides direct employment to approximately 3.70 lakh industrial workers and supports 40 lakh farm families.
  • West Bengal, Bihar, and Assam account for nearly 99% of India's total raw jute production.
  • Jute Packaging Materials (Compulsory Use in Packing Commodities) Act, 1987 mandates use of jute bags for packaging food grains and sugar — a key demand support mechanism.
  • The National Jute Manufacturers Corporation (NJMC) and the National Jute Board (NJB) are the other institutional pillars of the sector.

Connection to this news: The MSP hike specifically benefits the two states — West Bengal and Assam — that together account for over 90% of jute farmers, directly supporting rural livelihoods in eastern India's agrarian economy.

Agricultural Price Policy and Terms of Trade

Agricultural price policy in India has historically served two objectives: ensuring remunerative prices for farmers and keeping food prices affordable for consumers. MSP is the primary instrument of price support, supplemented by procurement operations by agencies like FCI (for foodgrains) and JCI (for jute). The challenge of terms of trade — the ratio of prices farmers receive to prices they pay for inputs — is central to agricultural economics and UPSC Mains discussions.

  • India follows a dual pricing strategy: MSP as floor price + open market procurement by government agencies.
  • The Economic Survey regularly tracks the agricultural terms of trade index, which measures whether farm output prices are rising relative to input prices.
  • Jute enjoys a special policy status because of its use as packaging material (Jute Act, 1987) and its export potential.
  • India's jute exports: primarily to Bangladesh, USA, UK, Australia — jute sacks, yarn, and diversified jute products.
  • The shift from traditional jute products to diversified jute goods (geotextiles, composites) is an ongoing policy push under the National Jute Policy.

Connection to this news: The ₹315 increase in jute MSP must be seen in the context of rising input costs (fertilisers, labour) to assess whether it genuinely improves farmer welfare or merely keeps pace with inflation.

Key Facts & Data

  • New MSP (2025-26): ₹5,650 per quintal for raw jute (TD-3 grade)
  • Increase: ₹315 per quintal over 2024-25 (₹5,335)
  • Approval authority: Cabinet Committee on Economic Affairs (CCEA)
  • Recommending body: Commission for Agricultural Costs and Prices (CACP)
  • Nodal procurement agency: Jute Corporation of India (JCI), established 1971
  • Major producing states: West Bengal (82% farmers), Assam (9%), Bihar (9%)
  • Total jute mills in India: 94 (70 in West Bengal alone)
  • Employment: ~3.70 lakh industrial workers + 40 lakh farm families
  • Historical MSP trajectory: ₹2,400 (2014-15) → ₹5,650 (2025-26); up 2.35 times
  • India's global status: World's largest producer of jute goods (~70% of global production)
  • Total crops under MSP: 23 (7 cereals, 5 pulses, 7 oilseeds, 4 commercial crops)