The Narendra Modi government has hiked the minimum support price (MSP) for this year’s paddy crop by Rs 100 per quintal over 2021-22. It is higher than the Rs 72, Rs 53 and Rs 65 per quintal increase during the preceding three years, while below the Rs 180-200 of 2018-19, which was in the run up to the 2019 general election. This time’s MSP raise has less to do with politics. The Commission for Agricultural Costs & Prices (CACP) has estimated the average production cost of paddy (all paid-up expenses plus an imputed value of unpaid family labour) for 2022-23 at Rs 1,360 per quintal. The MSP of Rs 2,040 per quintal for common paddy, then, translates into a 50 per cent return over cost. Last year’s MSP of Rs 1,940 also delivered the same return over a projected cost of Rs 1,293 per quintal. Farmers, thus, are only being compensated for higher cultivation costs.
Production cost going up — probably more than the CACP’s 5.2 per cent estimate — is not the sole reason for the Modi government granting an above-trend MSP hike in paddy. A more pertinent factor has to do with public foodgrain stocks, which, at 311.42 lakh tonnes (lt) for wheat as on June 1, are the lowest in 14 years for this date. Although rice stocks, at 496.76 lt, are above last year’s corresponding level of 491.50 lt, the government clearly isn’t taking any chances. With the next wheat crop arriving only in April 2023, there will be that much added dependence on rice now to meet the requirements of the public distribution system. Hence, the need to ensure adequate stocks and procurement of paddy, whose plantings take off in June and marketing from October. Barely three months ago, the country had enough grain for free distribution through ration shops and also for exports. The post-March heat wave that took a toll on wheat crop yields and more than halved government procurement has made things a tad precarious.
This editorial first appeared in the print edition on June 10, 2022 under the title ‘MSP and more’.
