Food Ministry opposes proposal to hike MSP of paddy by 15%

The ministry of food is against the proposal of agriculture ministry increasing the minimum support price (MSP) of paddy by more than 15% to Rs 1,250 per quintal for FY13. The food ministry is of the view that such a move would place a pressure on the food subsidy bill. It is estimated that the hike in the MSP would increase the overall food subsidy bill by Rs 15,000 crore this year, over and above the government budgeted Rs 75,000 crore on food subsidy for 2012-13.

In the 2011-12 crop year (July-June), the MSP of paddy of common and 'A' grade varieties stood at Rs 1,080 and Rs 1,110 per quintal, respectively. However, the agriculture ministry has proposed Rs 1,250 per quintal for common variety and Rs 1,280 per quintal for 'A' grade variety, mainly to compensate the rising cost.

Before the sowing season, government normally announces MSP for over 20 crops. The support price also acts as benchmark price for the market, where the government buys wheat and paddy from farmers at the support price to make sure assured returns to farmers. With good monsoon and higher support price, it is expected to have a record production of 103.41 million tonnes of rice in the 2011-12 crop year.

The hike was proposed by the agriculture ministry after taking into account the recommendations of the Commission for Agriculture Costs and Prices (CACP). It is of the view that higher support price of paddy is essential as the production cost has risen considerably in last one year. Further, the proposal to raise the MSP of kharif crops is also expected to be placed before the Cabinet Committee on Economic Affairs (CCEA) next week.

The Kharif sowing begins with the onset of the southwest monsoon in June and harvest initiates from October 2011. Paddy is grown in both Kharif and Rabi season.