The department of expenditure’ directives to states to refrain from announcing bonus over minimum support price (MSP) for paddy and wheat procurement, mainly attributed to rising central pool stocks which are currently three times that of buffer and has caused fiscal and ecological burden.
“Bumper production of wheat and paddy has resulted in wheat and rice stocks far exceeding requirements for the public distribution system (PDS), buffer norms and other welfare and contingency needs. The surplus continues to rise year after year, creating a significant and recurring burden on the public exchequer,” V Vualnam, expenditure secretary, in a communication to N Muruganandam, Chief Secretary, Tamil Nadu last week, noted.
Vualnum has urged Tamil Nadu to discontinue the practice of providing a bonus of Rs 156/quintal over MSP in the 2025-26 season (October-September) and requested attention be shifted towards incentives to promote pulses, oilseeds and millets. In addition to Tamil Nadu, Odisha, Chhattisgarh, Kerala, Jharkhand, West Bengal, Rajathan and Madhya Pradesh give bonuses over the MSP for paddy and wheat farmers.
With procurement of paddy and wheat far exceeding requirement under PDS for past sevral years. The central pool grain stock was about 60 million tonne (MT) – rice (38 MT) and wheat (22 MT) against the buffer of Rs 21 MT. This stock excludes 36 MT of rice yet to be supplied to the Food Corporation of India by millers.
Commission for Agricultural Costs and Prices (CACP) in its kharif crops marketing season 2025-26 has stated that “practice of providing bonus over MSP for paddy and wheat purchase create distortion in the market and limits private trade participation and discourages competition, as well as adversely affects global competitiveness,”.
Odisha’s input subsidy
Currently Odisha provides input subsidy of Rs 800/quintal over paddy MSP while the Chhattisgarh pays Rs 9,000/acre with a ceiling of 15 quintal paddy/acre. Kerala had announced, state incentive bonus for paddy farmers at Rs 631/quintal for kharif marketing season 2025-26 (October-September) over the centre’s MSP of Rs 2389/quintal.
Jharkhand and West Bengal have announced bonus of Rs 100 and Rs 20/quiintal over paddy benchmark price respectively in the ongoing season. Rajasthan and Madhya Pradesh have announced bonus for wheat purchase during the last several years.
“Creating distortions, skewing incentives in favor of rice and wheat. This is leading to accumulation of stocks way beyond the buffer stock norms. It leads to high carrying costs. It is breeding inefficiency,” Ashok Gulati, agricultural economist and former chairman, CACP said. Gulati said that the best way to help farmers would be to support them in their investments for raising productivity with sustainability.
In addition to market distortion, the finance ministry has stated in the advisory that paddy and wheat are comparatively water, fertiliser and input intensive crops and their disproportionate cultivation exacerbates groundwater depletion, soil degradation, biodiversity loss and stubble burning.
Officials said that inadequate domestic production of pulses and oilseeds compels higher imports. India imports 15% – 18% of its pulses and 57% of cooking oils consumption annually. In terms of value, India imported cooking oils valued at Rs 1.61 lakh crore in 2024-25 oil year (November-October). The pulses import in FY26 (April-January) was Rs 26,301 crore.
“Until now, bonus-driven incentives have largely reinforced paddy and wheat. The government advisory has shifted the conversation if diversification is the goal, incentives must move with it,” Shweta Saine, agri-economist and CEO, Arcus Policy Research, told FE.