Modi delivers on agri promise! Cabinet OKs MSP hike for Kharif crops, and it may not stoke inflation

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Updated: July 04, 2018 1:13 PM

The Union Cabinet on Wednesday approved the proposal to hike the Minimum Support Price (MSP) for Kharif crops, which was made in the Budget 2018 by Finance Minister Arun Jaitley.

Cabinet approves hike in MSP for Kharif crops; paddy MSP raised by Rs 250/quintalThe Union Cabinet on Wednesday approved the proposal to hike the Minimum Support Price (MSP) for Kharif crops.

The Union Cabinet on Wednesday approved the proposal to hike the Minimum Support Price (MSP) for Kharif crops, which was made in the Budget 2018 by Finance Minister Arun Jaitley. The MSP for paddy has been raised by around Rs 250 per quintal.

The decision, taken by the Union Cabinet headed by Prime Minister Narendra Modi, comes less than a year before next general election. In the Budget 2018, the government proposed to hike MSP of crops to one-and-half times of the procurement cost.

While there have been some concerns over the hike in the MSP leading to higher inflation, NITI Aayog Vice Chairman said that he did not think there should be any concern on fiscal slippage. Speaking with ET Now, Rajiv Kumar said that one must not look at negatives of the decision. It is food and fuel that is contributing to current inflation.

Siraj Hussain of ICRIER also said that the hike in MSP may not have a direct impact on inflation unless the market prices rise as well. However, if the paddy MSP goes up, wheat MSP cannot be left behind, he told CNBC-TV18. He said that the decision is likely to impact food subsidy bill of the government.

Hike in paddy MSP will increase the food subsidy bill by over Rs 11,000 crore based on procurement figure of the 2016-17 marketing year (October-September), PTI reported. The Food Corporation of India (FCI), the government’s nodal agency for procurement and distribution of foodgrains, buys wheat and rice from farmers at MSP and supply the grains under the food security law.

The announcement of higher MSP coupled with the forecast of the normal monsoon this year could boost foodgrains output.

MSP hikes:

  • The MSP of paddy (common grade) has been increased by Rs 200 to Rs 1,750 per quintal, while that of Grade A variety by Rs 160 per quintal to Rs 1,750.
  • The MSP of paddy (common) was Rs 1,550 per quintal and Rs 1,590 per quintal for paddy (grade A) variety.
  • The MSP of cotton (medium staple) has been increased to Rs 5,150 from Rs 4,020 and that of cotton (long staple) to Rs 5,450 from 4,320 per quintal.
  • In pulses, tur MSP has been raised to Rs 5,675 per quintal from Rs 5,450, and that of moong to Rs 6,975 per quintal from Rs 5,575. Urad MSP has been hiked to Rs 5,600 from Rs 5,400 per quintal.
  • Hike in paddy MSP will increase the food subsidy bill by over Rs 11,000 crore based on procurement figure of the 2016-17 marketing year (October-September).

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