The government on Wednesday hiked the minimum support price (MSP) or purchase price for paddy crops up to Rs 200 per quintal as it looked to fulfill its poll promise to give farmers 50 per cent more rate than their cost of production.
The decision, taken by the Union Cabinet headed by Prime Minister Narendra Modi, comes less than a year before the 2019 general election.
An announcement to give farmers a price of 1.5 times of cost was made by Union Minister Arun Jaitley in Budget 2018 presented on February 1.
The announcement of higher MSP coupled with the forecast of normal monsoon this year, could further boost foodgrains output.
However, a higher support price could also fuel food inflation.
The Cabinet Committee on Economic Affairs (CCEA), in its meeting, approved the MSP of 14 Kharif (summer-sown) crops.
According to sources, the MSP of paddy (common grade) has been increased by Rs 200 to Rs 1,750 per quintal, while that of Grade A variety by Rs 160 per quintal to Rs 1,750.
The MSP of paddy (common) was Rs 1,550 per quintal and Rs 1,590 per quintal for paddy (grade A) variety.
The MSP of cotton (medium staple) has been increased to Rs 5,150 from Rs 4,020 and that of cotton (long staple) to Rs 5,450 from 4,320 per quintal.