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Hike in paddy MSP could lead to inflation: Farm economists

Increase in the support price of paddy could lead to rise in retail prices of rice but the decision to hike MSP was necessary to cover high input costs,leading farm economists said today.

Written by Agencies | New Delhi | Published: June 14, 2012 7:38:35 pm

Increase in the support price of paddy could lead to rise in retail prices of rice but the decision to hike MSP was necessary to cover high input costs,leading farm economists said today.

However,the possible increase in retail price of rice can be contained as the government is sitting on a huge stock of over 32 million tonnes as on June 1,they added.

“There could be possibility of inflation in rice. But the government has huge stock and it can intervene anytime to contain prices,” Planning Commission member Abhijit Sen said.

He said,however,there is no reason to worry on account of pulses and oilseeds as their market prices are higher than the minimum support price (MSP).

The government today hiked paddy MSP by 16 per cent at Rs 1,250 per quintal for 2012-13 crop year. The support price of pulses and oilseeds have been raised by up to 37 per cent.

Echoing similar views,the Commission for Agriculture Costs and Prices (CACP) Chairman and noted farm economist Ashok Gulati said,”The hike MSP was needed as the average cost of production of paddy comes to Rs 1,185 per quintal and we recommended only 5.5 per cent returns to farmers on it.”

Gulati said the higher return was not offered to farmers as there is surplus rice in the country.

Asked if 16 per cent increase in MSP of paddy would lead to inflation on rice,he said,”The government covers 60 per cent of the population through the Public Distribution System.

The rest can afford to pay if there is any increase in retail prices as their income has risen.”

Gulati also noted that Indian paddy farmers are getting lowest price for their produce compared with rice growers in China,Thailand,Indonesia and others. He also mentioned that the cost of production of paddy is estimated to go up by 53 per cent in 2012-13 crop year (July-June).

In case of pulses and oilseeds,the CACP chief said the market prices are higher than the MSP and therefore it is unlikely to have any impact on retail prices,which are now ruling in the range of Rs 25-30 per kg.

He defended the sharp increase in oilseeds and pulses MSP as the country is heavily dependent on imports to meet its domestic demand.

India imports nearly nine million tonnes of vegetables oils,more than half of the domestic demand,and three million tonnes of pulses every year.

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