The prices of pulses, oilseeds, and rice may rise if the government accepts the recommendations of an expert panel to increase farm-gate price of these commodities by up to 30%. Although the recommendations are in line with the government’s intention to shift cultivation towards oilseeds and pulses from foodgrains to reduce dependence on imports for proteins and fats, it could lead to a further increase in food inflation.
The Commission on Agricultural Costs and Prices (CACP), under the ministry of agriculture, has recommended a 25% rise in the floor price of cotton, 16% rise in paddy, 30% rise in soyabean and sunflowerseed, 25% in urad and moong, and more than 40% in bajra and jowar. The CACP's price recommendations are eagerly watched by industry and traders because they are an important indicator of how the market for these commodities will move in the coming months.
If the minimum support prices (MSPs) on the commodities are indeed increased then their prices will shoot up and food inflation might become difficult to control even if we have a bumper crop. Inflation in food items rose sharply to 9.94% in March, as against 6.07% in February government data showed. Food articles have 14.3% share in the WPI basket. During the month, rice and cereals turned costlier by 4.73% and 4.41% respectively. The price of pulses was up 10.05% in March. The rate of price rise was lower than 20% in February.
If the MSP of paddy is increased it will mean a rise in the procurement cost of the Food Corporation of India, which is expected to buy half the marketed surplus in rice. Further if this price is not transferred on to the consumer it could mean a larger subsidy bill for the government.
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