The Hindu Business Line : Rice soup

Buffeted by political pressure on one side and financial constraints on the other, the Centre is dithering in the matter of minimum support price (MSP) for rice. Unlike in the past, when the government usually bettered the price recommendation of the Commission for Agricultural Costs and Prices (CACP), this time it has, at least for the time being, ignored the CACP recommendation to hike the MSP to Rs 1,000 a quintal. The CACP usually does a thorough job of estimating cost s and prices, though its recommendations are not binding on the government. It is unclear if the CACP independently arrived at an MSP of Rs 1,000 a quintal or whether there was external pressure. But to contain the political backlash, the Government has referred the CACP recommendation to the Prime Minister’s Economic Advisory Council. What purpose the reference will serve is anybody’s guess; but the idea seems to be to buy time.

Meanwhile, as if to test the waters and provide a palliative to growers, an ad hoc decision has been announced to raise the MSP by Rs 105 to Rs 850 a quintal for ‘common’ paddy and to Rs 880 a quintal for ‘Grade A’. It may well be seen as too little, too late. Late, obviously, because the southwest monsoon is already up on us, and paddy transplantation has commenced in many areas; and little considering the tremendous political pressure to equate the MSP for rice with that for wheat. The fact that production costs are going up cannot be overlooked. However, the government should not fall prey to the demands of political pressure groups that want the same MSP for rice and wheat; it should go by an independent assessment of costs and prices (including global prices, as in wheat). In short, the considerations before policy-makers when the wheat MSP was decided shall not be lost sight of either.

A few issues deserve close attention. Paddy is grown virtually nationwide, unlike wheat, which is largely confined to the northern parts because of agro-climatic reasons. A rough estimate is that the number of paddy growers is a least three times that of wheat growers, although there would be some overlap in States such as Punjab and Haryana. A higher MSP for rice will help improve the incomes of a larger number of farmers across the country. Admittedly, paddy is a highly water-intensive crop; but over 80 per cent of output is from the kharif season, cultivated under rain-fed conditions. As in case of wheat, a sharp hike in MSP would result in a cost spiral. In an election year, one can expect the government to be liberal with almost everything. Only, this time, it wants to do things in a less obvious way. So, it may not be surprising if the MSP for rice is eventually raised to Rs 1,000 a quintal. More serious is the failure to come up with MSPs for other kharif crops, even by mid-June. It looks as if New Delhi is treating the MSP more as a ritual than as an instrument to influence cropping patterns.

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Ad hoc Rs 850/quintal support price for paddy