As food subsidy bill weighs heavy,paddy MSP hike may be marginal

As food subsidy bill weighs heavy,paddy MSP hike may be marginal

This works out to be about 5 per cent hike in the paddy MSP.

As against a massive hike of about 16 per cent in the minimum support price (MSP) of paddy last year,the Commission for Agriculture Costs and Prices (CACP) is learnt to have suggested little under 5 per cent hike for the next crop starting later this year.

Government sources said Monday CACP recommended MSP for paddy (common grade) at Rs 1,310 a quintal for the next kharif crop as against Rs 1,250 a quintal last year. This works out to be about 5 per cent hike in the paddy MSP.

The CACP has recommended similar hike of about 5 per cent for Grade-A paddy at Rs 1,345 a quintal as against Rs 1,280 per quintal for last year. This hike pales in comparison to Rs 170 per quintal hike (16 per cent) announced last year over the previous year.

The Rs 60 a quintal hike is likely to face opposition from BJP-ruled Chhattisgarh since the state,which has emerged as a major rice producing state,goes to polls later this year. Paddy MSP has become a major issue for Chhattisgarh politics with CM Raman Singh in his Budget speech this year announcing a bonus of Rs 270 a quintal for paddy procured last year. In the backdrop of Singh’s bonus,paddy producers in Chhattisgarh would fetch Rs 1,520 a quintal for their crop produced last year. The Rs 60 a quintal proposed by the CACP would still make Rs 1,310 a quintal MSP for paddy this year — much less than what Chhattisgarh farmers would have availed for their crops last year. The BJP,consequently,may corner the government on the proposed meagre hike of paddy MSP pointing to the bonus granted to Chhattisgarh farmers last year.


Paddy sowing will begin from the onset of monsoon and the government announces MSP in advance to send a price signal to farmers to encourage them to cultivate the crop. But given rising food subsidy burden and the need for enhanced procurement to meet demands of proposed food guarantee law appears to be working heavy on the mind of policy planners that goes against the popular demand of substantial hike in MSP of crops.

The fact that rising food subsidy burden is weighing against demands of substantial hike in MSP is reflected from proposed 5 per cent MSP for paddy proposed during the poll year. Ahead of 2009 elections,the government had announced over 20 per cent hike in effective prices for paddy (including MSP plus bonus).