Centre approves higher MSP for kharif crops

The Union Cabinet on Wednesday raised federally fixed minimum support prices (MSPs) for crops grown by millions of farmers for the 2023-24 summer-sown (kharif) season to the highest increase in five years – a move that comes ahead of assembly elections in key states and amid tepid rural demand.

Read here: Cabinet increases paddy MSP to ₹2,183 per quintal, moong dal sees highest hike

The Cabinet chaired by Prime Minister Narendra Modi approved a decision to raise MSP of rice, the main summer staple, by 7% to ₹2,183 per quintal (100kg) for the common variety, Union minister of food, consumer affairs, commerce and public distribution Piyush Goyal said, briefing reporters. For the “Grade A” variety of the grain, MSP was raised to ₹2,203 per quintal.

Higher rates for paddy are aimed at raising output of the grain in the world’s biggest exporter. India imposed a 20% tariff on non-basmati rice exports in November 2022 to boost domestic supplies and ease prices, and there were fears that this could encourage some farmers to move away from the crop.

Cereal inflation in the country continues to be in double digits due to the impact of extreme weather on farming during 2022-23. “The government is not thinking of lifting export restrictions on rice right now, but a call will be taken to revisit the policy when appropriate,” an official said, requesting anonymity.

If rice production turns out to be high in 2023-24 and the export curbs remain, it will likely lead to a fall in market prices. The current tariff amid a glut could render India’s export of the grain quite uncompetitive in global markets, said BV Krishna Rao of the Rice Exporters’ Association.

The announcement of higher MSPs comes months ahead of elections in Telangana, Madhya Pradesh, Rajasthan and Chattisgarh, and as rural demand for products such as motorcycles and so-called fast moving consumer goods or FMCGs continues to lag. Inflation is believed to be one reason for this.

This year, though, the rural economy faces another threat.

The onset of the monsoon, which usually arrives on June 1 and on which much of India’s farm output depends, has been delayed. The rain-bearing system is critical for Asia’s third largest economy because it also is vital for drinking and power generation.

The likelihood of a monsoon-disrupting El Nino weather pattern remains a concern in 2023, which has worried food producers and the government alike. The El Nino’s impacts ripple across the globe, from heavier rains in the Americas to dry, hot summers in India.

The country’s food stocks are returning to sufficient levels after last year’s shortages and rocketing prices due to better-than-expected winter harvests.

Read here: Punjab farmers reject MSP hike for kharif crops as ‘peanuts’

The Cabinet also hiked floor rates of a range of pulses, amid tight controls to check prices following a drop in the output of some lentil varieties in 2022-23.

The Centre hiked the MSP for moong (green gram), a key pulses variety, by 10.4% to ₹8,558 per quintal for the 2023-24 season, while the benchmark for tur (pigeon pea), another lentil, was hiked to ₹7,000 per quintal, up 6.6% from the previous year.

The MSP for groundnut saw a 9% increase to ₹6,357 per quintal. Among other key oilseeds, MSP for sunflower saw a hike of 5.6%, from ₹6,400 to ₹6,760 per quintal. That for sesamum seeds has been raised by 10.2%, from ₹7,830 in 2022-23 to ₹8,635 per quintal for 2023-24.

The government raised floor rates for major millets by 6-7% on the back of the Modi government’s impetus to raise output of coarse cereals.

The floor rate for medium staple cotton has been hiked by 8.9% to ₹6,620 a quintal, while the long staple variety of the fibre was raised by 10% to ₹7,020 a quintal.

While food minister Goyal said the MSP hikes would enhance farm incomes, some analysts said that input costs were rising at a faster clip than MSPs. “The hikes in MSP hardly covers rising input costs on labour, pesticides and diesel incurred by farmers.

Read here: Deficient June rainfall may slowdown paddy sowing, say experts

Moreover, MSP is merely symbolic for most commodities other than paddy because the government either doesn’t procure them or procures token quantities,” said Sudhir Panwar, a farm economist with Lucknow University.