Encouraged by the massive response from farmers to procurement of wheat, the Ministry of Agriculture has recommended a huge hike in the minimum support price (MSP) it pays for paddy. The Union Cabinet is expected to take a decision on the ministry's proposal for hiking the MSP for paddy from the present Rs 745 per quintal (including bonus) to Rs 1,000.
State Agriculture Minister Akhilesh Prasad Singh told Hindustan Times: "We have proposed an MSP of Rs 1,000 for common paddy and the Cabinet has to take the final decision. But we are hopeful it will go through. The revised MSP is based on the recommendations of Commission on Agricultural Costs and Prices (CACP)."
Singh added that the recommended MSP for Grade A paddy, which is now Rs 775 is even higher. The hike, if it goes through, is also expected to cause rice prices to rise.
Outlining the government's thinking on food security, Prime Minister Manmohan Singh said in his address to the nation on Wednesday evening: "We will continue to give a fair price to our farmers for their produce. This will certainly lead to some rise in prices of foodgrains but this is the only way in which we can incentivise higher production and assure the food security of our people."
The CACP makes its recommendations on the basis of several factors, including the cost of production and input prices, market trends and the demand and supply situation. Sources within the ministry said with the food crisis looming large and prices of agricultural commodities rising constantly, the steep hike is expected to go through.
"The high MSP announced for wheat showed good results and as a result wheat procurement has been very good. The same logic applied to paddy will take care of the food security problem at the time of the next harvest," a ministry official, who did not want to be identified, said.
Last year, the MSP for wheat was raised from Rs 850 per quintal (including bonus). The procurement of wheat last year fell short by almost 4 million tonnes (MT), while this year with the government agencies procuring wheat at the revised MSP of Rs 1000, were able to exceed the 15 MT target by more than 6 MT. In 2006-07, procurement for rice came down from 27.66 MT in the previous year to 25.07 MT.