CCEA may hike paddy MSP to Rs 900/qtl today

The Cabinet Committee on Economic Affairs (CCEA) is expected to take up the issue of increasing the minimum support price (MSP) for common grade paddy to Rs 900 per quintal and Rs 950 a quintal for grade ?A? paddy at its meeting scheduled for Wednesday. This is being done following a suggestion from the Prime Minister?s Economic Advisory Council keeping in mind demands made by some of the major rice producing states.

The move is aimed at extending a helping hand to farmers, whose crop realisation has been affected due to the export ban on Non-Basmati rice imposed by the Centre earlier in the year. The ban had been imposed in order to ensure that high global prices don?t impact availability of rice in the domestic market.

A high MSP will also help the government?s procurement efforts, which ensures supplies to the Targeted Public Distribution System and for buffer stocks. ?Invariably, there is a correlation between the buffer stocks with the Food Corporation of India (FCI) and the market price of rice and wheat. The higher the stocks with FCI, the lesser the volatility in market prices,? explains Alok Sinha, FCI chairman and managing director.

The CCEA had earlier approved the support prices for various kharif crops, including paddy and announced an ad-hoc MSP for paddy at Rs 850 a quintal. The Cabinet panel had referred the issue of fixing MSP for paddy to the EAC as southern states, major producers of rice, had been demanding a hike in the MSP to Rs 1,000 a quintal, at par with that of MSP for wheat.

The Commission for Agricultural Costs and Prices (CACP), which recommends MSP for various crops, had suggested the government to raise the paddy MSP to Rs1,000 a quintal for the 2008-09 season.

Last year, the MSP of paddy, including bonus, was Rs745 per quintal and Rs 775 for common and Grade ?A? varieties. Meanwhile, areas under paddy cultivation in the ongoing kharif season rose to 373.51 lakh hectares till September 19, compared with 361.81 lakh hectares in the year-ago period.

CACP?s logic in recommending an Rs 1,000 per quintal MSP for paddy was to bring it at par with the MSP of wheat fixed last year. Already, some states like Tamil Nadu have announced an MSP of Rs 1,000 per quintal for paddy, more than the one fixed by the Centre.

Last year, 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 MSP for paddy should also be raised to give incentive to rice growers as well.

Experts said one big reason for the government?s wheat procurement reaching a record 23 million metric tonnes in 2008-09 was mainly due to sharp increase in the wheat MSP. Last year, the MSP of wheat was around Rs 850 perquintal.