Cambodia Rice: World Rice News: Indian Government Considers Raising Paddy Purchase Price by $30 Per Ton

Indian Government Considers Raising Paddy Purchase Price by $30 Per Ton

Indian paddy rice could become more expensive if the government accepts a recommendation by the country’s agricultural costs and pricing body to hike the Minimum Support Price (MSP) for by about 16% to cover rising production costs.

According to sources, the government is considering a proposal by the Commission for Agricultural Costs and Prices (CACP), which has recommended that the MSP for common grade paddy rice should be increased from Rs 1,080 per quintal (around $210 per ton) to Rs 1,250 per quintal (around $240 per ton).

Production costs have increased significantly in India in the last few years, in part due to rise in oil and fertilizer prices, but also due to rising labor costs.

A hike in purchase price of paddy rice would be welcomed by rice farmers. However, India’s rice exports could dip if higher paddy prices translate to higher export prices. India’s rice output is expected to cross the 100 million tons mark this year, basis milled. The country also expects to become one of the top rice exporters in 2012 with total estimated rice exports of about 7 million tons. It has exported about 4 million tons of non-basmati rice from September 2011 to March 31, 2012, mainly due to its competitive prices. A rise in Indian paddy prices could lift the export price of Indian rice, possibly causing buyers to shift business to Pakistan and Vietnam among other origins.

An increase in the MSP for paddy will also make it difficult for the government to reign in soaring food inflation.

However, some argue that unless the government raises the MSP for rice paddy, Indian rice farmers may switch to grow other crops as the recommended MSP hike for other crops are much higher than for rice. Local sources say the CACP recommends a 25% increase for cotton, 30% for soybeans and sunflower seeds, 25% for urad and moong (popular lentils), and 40% in bajra and jowar (popular millets). If the MSP is raised for other crops but not rice, rice acreage may fall, thus lowering production forecasts and possibly raising prices. Source: Oryza

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