The Commission for Agricultural Costs and Prices (CACP) has highlighted that market distortions caused by some states offering bonuses above the minimum support price (MSP) for paddy, coupled with an open-ended procurement policy, have resulted in rice stocks far exceeding stocking norms. In its report for the kharif crops marketing season 2026-27, released on Wednesday, the commission recommended imposing procurement limits, particularly in surplus states that provide bonuses over MSP and levy high market fees and other charges.
Excessive Stock Accumulation
As of January 1, the total rice stocks in the central pool stood at 336.7 lakh tonnes, compared to the stocking norm of 76.6 lakh tonnes—nearly 4.4 times higher. The report stated, “Many state governments pay direct or indirect bonus, which adversely affects crop diversification initiatives, restricts private trade participation and competition, and results in excess stocks.”
Government Concerns
Last month, the expenditure department urged states to refrain from announcing bonuses over MSP for paddy and wheat procurement. Expenditure Secretary V Vualnam, in a communication to the Tamil Nadu government, noted that bumper production of wheat and paddy has led to stocks far exceeding requirements for the Public Distribution System (PDS), buffer norms, and other welfare needs. He added, “The surplus continues to rise year after year, creating a significant and recurring burden on the public exchequer.”
State Bonuses in Practice
Currently, Odisha provides an input subsidy of Rs 800 per quintal over the paddy MSP, while Chhattisgarh pays Rs 9,000 per acre with a ceiling of 15 quintals of paddy per acre. Kerala has announced a state incentive bonus of Rs 631 per quintal for the kharif marketing season 2025-26, on top of the central MSP of Rs 2,389 per quintal.
Subsidy Burden
The CACP noted that while the government’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 increase is attributed to the rising economic cost of foodgrains and the non-revision of the central issue price, under which rice is provided free to states for distribution under the food security scheme.
