The government of India approved the proposal to hike the minimum support price (MSP) of paddy by 13% compared to what it did a year ago. With this hike, the MSP of common variety paddy will be raised by about Rs.200 per quintal. In addition to paddy, MSP has also been raised for various kharif crops including corn, cotton, ragi, sunflower seed, etc., under this decision made by the Union Cabinet.
During the recent Union Budget, the government promised farmers that it will hike the MSP for various crops by 50% of the cost. In line with the promise, the MSP has been increased by 50% for most of the kharif crops. Sources reveal that the MSP of paddy, the main kharif crop, has been increased to Rs.1,750 for both common variety and grade A variety. Prior to this hike, the MSP per quintal of common variety paddy was Rs.1,550 and that of grade A paddy was Rs.1,590.
Among the other crops, the MSP per quintal of cotton has been hiked to Rs.5,150 from Rs.4,020 a year ago. MSP has also been hiked for pulses such as toor dal, moong dal, and urad. The prices of toor, moong, and urad now stand at Rs.5,675, Rs.6,975, and Rs.5,600 per quintal, respectively.
The prices set under the MSP are used by the Food Corporation of India (FCI) to procure wheat and rice from farmers in the country. The grains procured using this process are supplied under the food security law.
It is estimated that this hike in minimum support price for kharif crops will require an additional funding of Rs.33,500 crore. Moreover, the hike in MSP for paddy will increase the food security bill by about Rs.11,000 crore. The food grain output is likely to be high this year because of the increase in MSP along with the forecast for a normal monsoon. However, the overall increase in support price could also increase food inflation.