State MSP bonuses fuelling excess rice procurement, warns CACP

NEW DELHI: Market distortion due to some states giving bonus over minimum support price (MSP) for paddy and open ended procurement policy have led to accumulation of rice stocks much higher than the stocking norms, CACP has said in its report released on Wednesday.

Govt fixes MSP for crops on the recommendations of the Commission for Agricultural Costs and Prices (CACP).

The commission in its kharif crops marketing season (2026-27) report has recommended imposing a limit on procurement, especially in surplus states that offer bonus over the MSP and have high market fee and other charges. It also has recommended a comprehensive review of open-ended procurement policy for paddy.

The report noted that as against 76.6 lakh tonne of stocking norms of rice for central pool as on Jan 1, total rice stocks were 336.7 lakh tonne, nearly 4.4 times higher. “Many state govts pay direct or indirect bonus, which adversely affects crop diversification initiatives, restrict private trade participation and competition and result in excess stocks,” it said.

Last month, the expenditure department had told states to refrain from announcing bonus over MSP for paddy and wheat procurement. “Bumper production of wheat and paddy has resulted in wheat and rice stocks far exceeding requirements for the public distribution system (PDS), buffer norms and other welfare and contingency needs. The surplus continues to rise year after year, creating a significant and recurring burden on the public exchequer,” expenditure secretary V Vualnam had said in a communication to Tamil Nadu govt.

At present, Odisha gives input subsidy of Rs 800 per quintal over the paddy MSP while Chhattisgarh pays Rs 9,000 an acre with a ceiling of 15 quintal paddy per acre. Kerala had announced, state incentive bonus for paddy farmers at Rs 631 per quintal for kharif marketing season 2025-26 over the centre’s MSP of Rs 2,389.

CACP has said that while govt’s food subsidy expenditure currently over Rs 2 lakh crore annually has ensured food security for the poor, the subsidy burden has risen substantially over the years. This is due to rising economic cost of foodgrains and the non-revision of the central issue price (rice provided free to states for distribution under the food security scheme).