Bonus delay hits paddy arrival, purchase

Written by Commodities Bureau | New Delhi, Oct 14 | Updated: Oct 15 2008, 06:19am hrs
A delay in the announcement of a bonus on the minimum support price (MSP) of paddy (de-husked rice) has started affecting paddy arrivals and procurement in the new crop season that started in October. Although procurement of this vital foodgrain touched 4.69 million metric tonne on Tuesday, it is still around 0.15 million tonne less than last year. According to officials, Indias state-run agencies procured 4.69 million tonne of paddy till Tuesday, down from around 4.84 million tonne procured during the same period last year. In terms of rice, the total procurement was estimated at 3.14 million tonne, down from 3.25 million tonne a year-earlier.

Not only has the procurement slightly dropped, arrivals at major mandis across the country have fallen to 5.40 million tonne, down from 6.60 million tonne. Paddy arrivals have been lower than last year till now, as farmers are holding on to their produce in anticipation of a bonus, Alok Sinha, chairman, Food Corporation of India (FCI), the countrys nodal agency responsible for procurement and storage of grain, said.

In June, the government announced an interim MSP of Rs 850 per quintal for grade A paddy and Rs 800 per quintal for common grade paddy. It referred the matter to the Prime Minister Economic Advisory Council (EAC) for a final decision because of disagreement between states.

The EAC opined that the MSP should be maintained at Rs 850 per quintal for the time being and could be raised when the government starts its annual paddy procurement. Sources said the government could announce a bonus of Rs 50 per quintal on the existing MSP to boost its procurement.

The Committee of Agricultural C osts and Prices (CACP), the nodal agency that fixes the minimum support price of various commodities, had recommended a MSP of Rs 1,000 per quintal for paddy to bring it at par with that of wheat. The CACP.s logic in recommending an Rs 1,000 per quintal MSP for paddy was to bring it at par with the the MSP of wheat fixed in 2007.

In 2007, the government had hiked the MSP of wheat by Rs 150 per quintal to Rs 1,000 per quintal prompting calls from several rice-growing states that the MSP for paddy should also be raised to give incentive to rice-growers as well. Experts said that the chief reason for the governments wheat procurement having reached a record 23 million metric tonne in 2008-09 was mainly due to the sharp increase in the MSP of wheat . In 2007, the minimum support price of wheat was around Rs 850 per quintal.

India is expected to produce 83.25 million tonne of rice in the current kharif season, up from an earlier estimate of 82.81 million tonne.