Cabinet clears MSP increase, highest-ever for paddy crop

Economist PM,'Know-It-All Finance Minister Ruined Economy PM Modi

The median increase in the so-called minimum support prices (MSPs) approved by the government on Wednesday was 25 percent, compared with 3-4 percent in the first four years in office for Modi, whose bid for a second term next year is expected to be much tougher than his landslide victory in 2014.

The MSP of paddy (common) was Rs 1,550 per quintal and Rs 1,590 per quintal for paddy (grade A) variety. Farmer agitations all across the country in the past few months have been focused on demanding that MSP be increased so it is at par with 1.5 times the cost of production.

Announcing the Cabinet's "historic" decision, Union Home Minister Rajnath Singh said that the MSP for common grade paddy has been increased from Rs 1,550 per quintal to Rs 1,750 per quintal, an increase of almost 13 per cent.

Singh said the Cabinet Committee on Economic Affairs had cleared a proposal to pay the farmers the price difference between the MSP and market price if the procurement agencies failed to buy the crop.

To woo distressed farmers, the government had assured farmers in the Budget for 2018-19 that it would increase MSPs for the summer-sown season so that they get 50% returns over cost.

The Indian Express had reported Wednesday that the government was set to implement the highest ever single-year raise in MSP for paddy from this Kharif season to the tune of about Rs 200 per quintal.

The Narendra Modi government has cleared a new list of minimum support price for 14 summer (kharif) crops - the biggest in its tenure that will cost the state almost Rs 15,000 crore in public funds.

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"The MSP increase comes as a big relief for Indian farmers as it would aid their incomes". Urad MSP has been hiked to Rs 5,600 from Rs 5,400 per quintal.

Arhar, on the other hand, has only seen an increase of 4% to Rs 5,675 per quintal.

On the sectoral front, stocks which get direct benefit from the hike in MSP such as consumer, auto, FMCG as well as banking are likely to benefit the most, suggest experts. The MSP of jowar (hybrid) has been raised by Rs 730 per quintal to Rs 2,340 for this year, while that of Maldani variety by Rs 725 per quintal to Rs 2,450, the government said. "Farmers were in despair and their plight was understood by the Prime Minister".

"We will ensure that grains are procured at least at MSP rates", he added. India is estimated to have harvested a record foodgrains production at 279.51 million tonnes in the 2017-18 crop year (July-June) on all-time high output of rice, wheat, coarse cereals and pulses.The announcement of higher MSP coupled with forecast of normal monsoon this year could further boost foodgrains output.

For more than a decade now, the farming communities have been agitating across the country demanding the government to fix the MSP based on the C2 formula. It asked the Modi government to "stop hoodwinking farmers with an eye on elections".

The opposition has been painting a picture of "their choice" on the job front because there is not sufficient data available on employment, says Prime Minister Narendra Modi.

He said there are many factors that can lead to an increase in the rate of inflation, and to say that the hike in MSP will lead to a higher rate of inflation will not be correct.

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