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New Delhi: In a move that could help farmers but add to the government’s food subsidy bill, an official advisory panel has recommended increasing the minimum support price (MSP) for unhusked rice and other grains for the forthcoming kharif or summer crop, season.

Higher input cost: Farmers in Punjab and Haryana were not happy with the Rs850 support price. A bonus of Rs50 was announced later. Madhu Kapparath / Mint

“The Commission for Agricultural Costs and Prices (CACP) has recommended an MSP in the band of Rs950-1,000 per quintal (100kg). It is now for the ministry to take a call," said a senior official in the ministry of agriculture, food and consumer affairs.

He added that CACP has recommended higher MSPs for pulses and coarse grains as well. He did not give more details on these recommendations, but said, “CACP has suggested moderate increase in MSP unlike in the past two years when raises have been more."

MSP is the base price at which the government procures grains to be sold to the poor at subsidized rates through the public distribution system.

This also serves as the base price for private traders.

In 2008-09, the MSP for rice was Rs850, 14% higher than in the previous year. For pulses such as moong (green gram) and urad (black gram) the support price was Rs2,520 per quintal in 2008-09, for tur (pigeon pea) it was Rs2,000, and for maize, Rs840.

Another official in the agriculture and food ministry said that once the ministry takes a view on MSP for rice, the matter will be discussed by the cabinet. “This may either happen by the end of this month or early next month," he added.

While CACP can advise the government on pricing of agricultural commodities, the cabinet makes the final decision. The MSPs of major agricultural commodities are announced before the beginning of the kharif and rabi (winter crop) seasons. Procurement of rice starts on 1 October.

Farmers in Punjab and Haryana, who grow one-third of the country’s total rice production, were not happy with the Rs850 support price as input costs had risen. A bonus of Rs50 was announced later in the middle of the procurement season.

The government still managed to procure 31 million tonnes (mt) of rice, 3.5mt above target. Experts are divided on the recommendation.

“The government may just increase the MSP nominally by Rs25-50 per quintal, just to please the farmers. There is no need for MSP to rise, as at Rs850 a quintal also there was record procurement," said S. Raghuraman, head of trade research, Agriwatch, a Delhi-based research body on agri commodities. “Plus the elections are over. So why unnecessarily add to (the) food subsidy bill?"

Madan Sabnavis, chief economist, National Commodity and Derivatives Exchange of India, has a different view. “It may not make economic sense to raise the MSP but if you look at raising the standard of living of farmers, an upward revision is required, especially when the Consumer Price Index for agricultural labour for 2008-09 has risen by 9.5% over last year," he said.

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