Govt raises kharif paddy MSP by 7%; largest hikes for moong and groundnut

Hike for other crops between 5% and 10%

The Union Cabinet on Wednesday raised the minimum support price (MSP) of paddy by up to 7 per cent to Rs 2,183 per quintal for a common grade, while that of Grade A was raised by 6.94 per cent, from Rs 2,060 per quintal to Rs 2,203 per quintal. It is the largest foodgrain grown during the kharif season,

The hikes in absolute terms were Rs 143 per quintal, which, according to some reports, were the second highest in the past decade.

The highest increase in paddy MSP in absolute terms in 10 years was by Rs 200 per quintal in 2018-19. For other crops too, the increase was between 5 per cent and 10 per cent, with the maximum hikes reserved for pulses and oilseeds, notably moong and groundnut.

The MSP of moong, which is one of the main pulses grown during the kharif season, has been raised by 10.35 per cent in 2023-24, compared to 2022-23, from Rs 7,755 per quintal to Rs 8,558 per quintal.

The higher-than-expected increase in MSP of kharif crops (usually the increases are between 4 per cent and 6 per cent) comes ahead of crucial state elections in Madhya Pradesh, Rajasthan, Telangana, and Chhattisgarh, which are big growers of key kharif crops, namely paddy, pulses, and oilseeds.

Cotton MSP, too, has been hiked by over 10 per cent of the long-staple variety.

The decisions were announced after a meeting of the Union Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi.

“This is a good step taken by the government to increase the MSP of pulses sharply. Due to El Niño, sowing of pulses could take a hit. But with a higher MSP, farmers could be encouraged to bring more area under pulses. Among all kharif pulses, the MSP of moong has been increased the highest. Since moong is a short-duration crop, farmers in Rajasthan might be encouraged to plant more moong. Also, since the 40 per cent cap on procurement has been removed, farmers can sell as much pulses they want to government agencies,” said Rahul Chauhan, commodity analyst, iGrain India.

Among other crops, the MSP of jowar and sesame seeds has also been raised to encourage farmers to plant more of this less-water-guzzling and highly nutritious crop.

In the case of soybean and sunflower seeds, the MSP increase has been 6.95 per cent and 5.63 per cent, respectively. The lowest increase has been in the case of urad in 2023-24 at 5.3 per cent, compared to the previous year.

“The increases are quite aggressive and much higher than the expected 4-6 per cent. This means that in case of a shortfall in the production of any crop, prices can increase quicker and add to inflation. The MSPs will be another factor that will likely be considered by the central bank on Thursday when taking a call on interest rate stance,” said Madan Sabnavis, chief economist, Bank of Baroda.

Meanwhile, the MSP of the medium staple cotton variety has been raised by 8.88 per cent in 2023-24, compared to 2022-23, from Rs 6,080 per quintal to Rs 6,620 per quintal. That of the long-staple cotton variety has been raised by 10.03 per cent, from Rs 6,380 per quintal to Rs 7,020 per quintal.

“In the past few years, the production of pulses has risen by nearly 25 per cent, while that of oilseeds by 30 per cent. Food inflation has remained below the levels at what there were in the United Progressive Alliance years. Due to this, farmer income has gone up. Lower inflation and high MSP will benefit farmers,” Food and Consumer Affairs Minister Piyush Goyal told reporters after a meeting of the Union Cabinet.

“The increase in MSP hardly covers input costs, specifically on labour, pesticides, and diesel. Moreover, in the absence of market intervention through purchase centres by the Centre, MSP is a mere public relations exercise to impress farmers,” said Sudhir Panwar, farmer leader and former member of Uttar Pradesh Planning Board.