In a farmer-friendly move, the union government on Wednesday hiked the minimum support price (MSP) of paddy by `50 per quintal to `1,360 for this year. The decision may, however, fuel inflation even as the government said measures were being taken to control prices.
The decision to raise the MSP of paddy and other kharif crops for 2014-15 crop year (June-June) was taken by the Cabinet Committee on Economic Affairs (CCEA), after which law minister Ravi Shankar Prasad announced it.
Paddy MSP for Grade-A variety has been raised by `55 to `1,400 a quintal. Paddy is a major kharif crop, the sowing of which starts with the onset of monsoon in June.
When asked whether increase in paddy MSP would lead to rise in prices, Prasad disagreed and added, “In view of possibility of below-normal monsoon, the government has got into action and taken several steps to control prices.”
MSP is the benchmark price at which the government buys paddy from farmers to run its ration shops. An increase in MSP would also lead to higher subsidy bill.
The Commission for Agricultural Costs and Prices (CACP) had said it has recommended a moderate increase in paddy MSP keeping in view the excessive stock of rice in the godowns of state-run Food Corporation of India (FCI).
Rice prices increased by 9% to `25 per kg in the wholesale market in May from the past year,
while the general wholesale price index inflation rose to 6.01% in May.
To check rice prices, the government had last week announced release of additional 50 lakh tonnes through the public distribution system) over and above the normal allocation.
Stating that the government had accepted all the recommendations of the price advisory body CACP, Prasad said, “We have given the best possible deal to farmers."