Explainer on why rice inflation remains in double digits despite various price control measures by the Union government:
What are the factors fuelling rice inflation?
Some of the key reasons for rice inflation include consistent increase in the minimum support price (MSP), government procurement of rice above MSP to fulfil poll promises, possibility of a decline in India's kharif rice production by about 4% due to the impact of El Nino on the monsoons, and strong demand from poultry and ethanol industry.
The increase in MSP of rice is also leading to higher rice prices, say industry experts. The MSP for the common variety of paddy for the year 2023-24 is Rs 2,183/quintal.
The new BJP government in Chhattisgarh is procuring paddy at Rs 3,100/quintal, which is 42% higher than the MSP, with a cap of 21 tonne of paddy per acre to fulfil the party's poll promise. As a result, the price of the rice variety that is distributed free or at subsidised rates under various welfare schemes has increased to Rs 40/kg in the open retail market from ?30 last year, say trade insiders.
The MSP policy has incentivised production of cheaper rice varieties that are distributed at subsidised rates through the public distribution system (PDS), said officials of the Rice Exporters' Association (TREA).
The government has also been selling the grain in the open market at Rs 29/kg by absorbing an 18% loss but there have been no takers due to protracted bureaucratic processes, said industry experts.
The government had directed the industry to reduce retail prices to optimal levels as rice prices were increasing 'despite good kharif crop and ample stocks with FCI'.