Govt announces bonus on paddy MSP

Written by Commodities Bureau | New Delhi, Oct 16 | Updated: Oct 18 2008, 05:15am hrs
Alarmed over reports of a drop in paddy arrivals and procurement, the government, on Thursday, declared a bonus of Rs 50 over the minimum support price (MSP). Currently, the MSP of common grade paddy is Rs 850 per quintal, while that of grade 'A' paddy is Rs 880 per quintal. After the bonus, the procurement price would be Rs 900 per quintal for the common variety and Rs 930 per quintal for the grade 'A' variety.

"The Cabinet Committee on Economic Affairs (CCEA), on Thursday, approved the incentive bonus of Rs 50 per quintal on paddy over and above the minimum support price for the entire kharif marketing season of 2008-09," minister for science and technology Kapil Sibal told reporters after a meeting of the CCEA.

He said that the additional incentive has been provided to boost procurement as well as output.

Till last week, both arrivals and procurement were down as compared to last year as most farmers held on to their stocks in anticipation of the bonus. Official sources said, till October 14, that the state-run agencies had procured 4.69 million tonne of paddy, down from around 4.84 million tonnes procured during the same period last year.

For 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 dropped slightly, arrivals in major mandis across the country have also fallen to 5.40 million tonne, down from 6.60 million tonne.

In June, the government announced an interim MSP of Rs 850 per quintal for common grade paddy and Rs 880 per quintal for grade 'A' paddy. However, it referred the matter to the Prime Ministers's Economic Advisory Council (EAC ) for a final decision due to the disagreement between states. The EAC opined that the MSP had to be maintained at Rs 850 per quintal for the time being and an additional bonus be announced when the government started its annual paddy procurement.

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