The Central government today raised the (MSP) of common grade paddy for the 2020-21 crop season by a nominal 2.92 per cent over the 2019-20 price as it grapples to keep its burgeoning rising food subsidy under control.


A higher MSP of paddy coupled with extra purchases and additional release through the public distribution system (PDS) due to Covid-19 relief is already threatening to jeopardise the food subsidy calculations for 2020-21.



Food subsidy for 2020-21 has been budgeted at over Rs 2,50,000 crore, which includes an estimated Rs 136,600 crore borrowings from the National Small Savings Fund.


A higher MSP for paddy pushes up the economy cost, affecting the subsidy maths.


“Based on the recommendation of the Commission for Agricultural Costs and Prices (CACP), the cabinet has approved MSP of 14 crops. Paddy (common) MSP has been increased to Rs 1,868 per quintal for this year,” Agriculture Minister Narendra Singh Tomar told reporters after a meeting of the Union Cabinet.


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He said the increase in support price of paddy would ensure 50 per cent return over the cost to the farmers, he said.


As per government’s calculations, the expected returns to farmers over their cost of production are estimated to be highest in case of Bajra (83 per cent) followed by urad (64 per cent), tur (58 per cent) and maize (53 per cent).


For rest of the crops, return to farmers over their cost of production is estimated to be at least 50 per cent.


However, farmers say that the returns remain inadequate. This is because barring paddy and some pulses and oilseeds, most other crops for which government sets the MSP are not procured by it.


“The Central Government is only indulging in window-dressing or attractively packaging a bundle of lies. The MSP announced for paddy is not even 3 per cent higher than last year though costs of cultivation have drastically escalated. The CACP’s cost calculations are questionable and weighted average costs are arrived at by making drastic undervaluation and are nowhere near the actual costs,” the All India Kisan Sabha said in a statement.


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Siraj Chaudhury, Managing Director of National Collateral Management Services Ltd told Business Standard that one side it is good that the Government has raised the MSP for kharif crops, but a bigger and more pertinent question is how far the farmer will get benefit of it especially in those crops where government is not a big buyer.


Citing the example of maize, Chaudhury said that while the MSP for 2019-20 was set at Rs 1760 a quintal, the crop in most of the months sold barely at Rs 1200-1300 a quintal in most of the markets.


“In those crops where the consumption is directly linked to the industry and the government isn’t a major player, the farmer will remain exposed to the vagaries of the market and these MSP don’t have any meaning,” Chaudhury said.


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He said that many times, it has been seen that farmers are lured by these high MSP while then the crop comes into the market the prices are much lower and he suffers a loss.


Meanwhile, the government said that among other crops, the MSP of maize has been raised by 5.11 per cent as compared to 2019-20, while that of tur has been increased by 3.45 per cent, moong by 2.07 per cent and urad by 5.26 per cent as compared to 2019-20. The MSP of cotton has been raised by almost 5 per cent in 2020-21.

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