Last month, the government announced the minimum support prices (MSP) for wheat and paddy. While the MSP of wheat has been substantially increased from Rs750 to Rs1,000 a quintal for the rabi season next year, the MSP for paddy was increased to Rs645 for the common variety and Rs675 for the super-fine variety, from Rs580 and Rs610, respectively.

The higher MSP for wheat was mandated by the precarious position of wheat stocks, spiralling international wheat prices and the flak that the United Progressive Alliance (UPA) government has received on account of expensive wheat imports recently—at Rs1,600 per quintal, while domestic farmers were paid only Rs850 per quintal (including Rs100 as bonus) as the procurement price.

Farmers’ protests

The decision to increase the MSP of wheat steeply, while effecting only moderate increases in paddy MSP, has raised the hackles of paddy growing farmers in southern states, particularly in Andhra Pradesh, where the issue has acquired significant political overtones.

Paddy farmers, farmer associations and political parties are alleging a distortion in the price parity of wheat and paddy, and a deliberate discrimination against paddy growers.

The difference between the procurement price of wheat and that for “Grade A" paddy was only Rs50 per quintal until 2004-05, which has now increased to Rs325.

Following the protests, the government then announced a bonus of Rs50 per quintal on the MSP for paddy during the current procurement season. The Cabinet Committee on Economic Affairs last week deferred a decision on the issue of raising the bonus further.

Earlier last month, leader of the Opposition and senior BJP leader L.K. Advani, in a letter to Prime Minister Manmohan Singh, demanded that urgent steps be taken to raise the MSP for paddy to Rs1,000 per quintal for the current procurement season.

While appreciating the hike in the MSP for wheat, he voiced the concerns of the paddy growers that the current MSP in the range of Rs645-675 has no relation to the cost of cultivation leading to “growing unrest among paddy growers across the country, particularly in the southern states".

Telugu Desam Party leader Chandrababu Naidu has obviously come out in support of farmers’ groups and railed against the alleged stepmotherly treatment meted out to the paddy growers by the UPA government.

This has put the pressure on Andhra Congress chief minister Y.S. Rajasekhara Reddy, whose government is feeling the heat from a growing disenchantment among the state’s paddy cultivators. That the issue is of huge significance is evident from the contribution of Andhra to the procurement of rice by the Food Corporation of India (FCI). In 2006-07, the state contributed 20% of the total rice procurement of 265.75 units. Little wonder then that Naidu is mixing economics with emotions when he also alleged that Singh wasn’t giving him time to discuss the issue and how it is an example of an insult to Telugu pride.

Bonus decision

Despite repeated demands and exhortations, the government has delayed a decision on bonus for paddy procurement for an upward revision will then increase the open market prices of rice, which, in turn, hurts consumers and the coffers of the government as well.

FCI and state government agencies directly procure paddy from states such as Punjab and Haryana, while in states such as Andhra, paddy is procured from farmers by millers, who, after milling, supply rice to FCI. Farmers in states such as Andhra have already sold paddy to the millers at the current MSP, and a delayed announcement of any hike will only benefit the millers.

The farmers are, therefore, asking openly whether the delay in government’s decision is intended to benefit the millers’ lobby.

MSPs are based largely on costs of production as estimated by the Commission on Agricultural Costs and Prices using a “full cost" measure, which includes costs of variable inputs, the rental value of land, the imputed value of family labour, and a 10% return on investments.

The National Commission of Farmers, headed by scientist M.S. Swaminathan, had, in a draft national policy for farmers last year, recommended that the MSP should be, at least, 50% more than the weighted average cost of production.

Of late, there has been a shortfall in wheat procurement while that of rice has steadily increased. But the decline in procurement of rice so far in the current season—by some 6%—is perhaps a sign of things to come.

Of the many real and perceived shortcomings of the UPA government, poor management of food supplies would rank as a glaring failure. And if the government does not adopt a credible policy, rice procurement and even production may suffer, thus severely hurting the nation’s interests.

G.V.L. Narasimha Rao is a political analyst and managing director of Development & Research Services, a research and consulting firm. Your comments are welcome at