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LATEST NEWS UPDATES | Cabinet to consider hike in MSP of rice, wheat by Rajeev Deshpande

Cabinet to consider hike in MSP of rice, wheat by Rajeev Deshpande

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published Published on Jun 10, 2010   modified Modified on Jun 10, 2010


In a move expected to boost rural incomes but which will also impact retail prices, the government is set to raise minimum support price for the kharif season's rice crop from Rs 950 to Rs 1,050 a quintal while MSP for pulses is set to jump by between Rs 400-500.

The rise in procurement price of pulses is seen as a significant bid to encourage cultivation of foodgrains that are always in short supply. India is a major importer of pulses and has to carefully monitor production in countries like Myanmar, Canada and Australia every year.

The MSP for tur dal will rise from Rs 2,300 to 2,800 a quintal, moong from Rs 2,760 to 3,170 and urad from Rs 2,520 to 2,900. Apart from spurring production of pulses, the government seems keen to protect itself from the politically damaging criticism that it is willing to pay a higher price for imports in comparison with what it gives Indian farmers.

The recommendation of the commission for agricultural costs and prices for kharif rice was Rs 1,000 but the government proposes a hike of Rs 100. Both the rice and pulses MSP proposals will be considered by the Cabinet on Thursday and are expected to go through without much discussion given their clearly populist orientation.

In the 2009 national elections, UPA-1 consistently hammered home the point that it had raised MSP several times over in comparison to NDA years. The ruling coalition has been convinced that NDA paid a heavy price for perceived neglect of the rural voter and made sure to direct its policies towards the agrarian classes.

But while UPA-1 pumped money into the rural economy by way of schemes like rural employment guarantee and higher MSP, prices also went up. This was particularly true of the last phase of its tenure when a combination of drought and higher MSP drove up prices of ordinary quality rice and wheat in the shops.

This time too, the government has argued that higher cost of inputs necessitated MSP increases. Some of the costs have gone up due to decisions like partial decontrol of fertiliser and schemes like rural employment guarantee which has pushed up daily labour wages. Then again, inflation has not left the rural economy untouched either.

Higher support prices are also expected to incentivise production of rice to help the government meet its requirements when the proposed national Food Security Act begins to roll out. The total procurement of foodgrains last year was close to 600 lakh tonnes due the extra effort put in after the drought. Usually it is around 400 lakh tonnes.

Hikes in support prices have meant that even when food inflation moderates, retails rates remain steady but high. The current economic outlook points to high price of pulses and no decreases in wheat and rice rates. Sugar prices are now under control in comparison to earlier this year.


The Times of India, 10 June, 2010, http://timesofindia.indiatimes.com/India/Cabinet-to-consider-hike-in-MSP-of-rice-wheat/articleshow/6029341.cms


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