The Hindu : Andhra Pradesh / Hyderabad News : MSP hike, rice scheme may put huge burden on exchequer

Online edition of India's National Newspaper
Friday, Oct 19, 2007
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Andhra Pradesh

Andhra Pradesh - Hyderabad

MSP hike, rice scheme may put huge burden on exchequer

M. Rajeev

HYDERABAD: The YSR Government’s twin promises of supplying rice at Rs. 2 a kg to the poor and enhancing the minimum support price (MSP) for paddy that have taken centre-stage in State politics are likely to pose a massive burden on the exchequer.

Not only will the open market price of rice rise steeply, but the extent of additional expenditure can be gauged by the fact that at current prices alone the Rs 2 a kg rice scheme has been estimated by the Government to place an additional burden of Rs. 1,012 crore.

The Centre recently enhanced the MSP on paddy to Rs. 695 a quintal with effect from October 1 this year. Even as the officials are calculating the exact impact of this Rs.70 hike on the existing subsidy scheme (of supplying rice at Rs. 5.25 a kg to white card holders), all political parties, including the Congress, are pressing the Centre to hike the MSP for paddy to Rs. 1,000 a quintal on a par with wheat. Before this hike, the subsidy burden on the Centre was Rs. 2,000 crore. In addition, the State Government spends more than Rs. 900 crore annually for supply of 2.5 lakh tonnes of rice per month at Rs. 5.25 a kg through fair price shops to over 1.7 crore white card holders and another 50,000 tonnes at Rs. 3 a kg under Antyodaya Annayojana scheme. Given that one quintal of paddy yields about 70 kg of rice (including brokens), the extent of subsidy would become “unimaginable” if the MSP is hiked to Rs. 1,000. Moreover, millers would have to pay more to paddy farmers and they, in turn, would raise the open market prices, a senior official said.

“Fixing a minimum support price of Rs. 1,000 a quintal will not have any major impact on the exchequer provided the issue price is enhanced correspondingly.

But the Government is planning to reduce the price from Rs. 5.25 to Rs. 2 a kg,” a senior official pointed out.

The Government is conscious of the financial implications judging by the recent response of Finance Minister K. Rosaiah that “we have to work out the modalities of the Rs. 2 a kg rice and explore funding sources to maintain the supplies.

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