The government has decided not to announce the minimum support price (MSP) for paddy this year, spreading disappointment among farmers who had expected a hike in the lowest legal price that can be paid for their harvest.

The Supplies Ministry said that the Cabinet had sent back the proposal it had submitted last week citing provincial and federal elections. The budget statement for the current fiscal year had also announced encouraging farmers by fixing the MSP timely.

A high-level advisory body of the Ministry of Agricultural Development had recommended a 9 percent increase in the floor price for paddy for this season. The advisory panel led by Agriculture Secretary Suroj Pokhrel approved the new MSP on September 10. The recommendation was sent to the Supplies Ministry, the executing body, on September 13.

“The proposal has been sent back by the Cabinet stating that prices cannot be announced during election season,” said Urmila KC, under-secretary at the Supplies Ministry. However, Nepal Food Corporation (NFC) has started procuring paddy from farmers by announcing the prices internally.

A minimum support price is an intervention by the government to protect farmers against sudden slumps in the market price. It is the rate at which the government buys farm produce when there are no other buyers in the market.

Normally, it is announced in time for farmers to make their production plans before the beginning of the planting season. The recommended MSP for common types of paddy for this year is Rs2,438 per quintal, up from Rs2,230 last year.  

Similarly, the recommended floor price for ‘mota dhan’ is Rs2,247 per quintal against Rs2,070 last year. The MSP is computed based on farmers’ cost of production, transportation costs and producers’ profit.

Farmers have been given a 20 percent profit. The government has to buy a certain amount of the total paddy harvest under the scheme.

Last year, the Cabinet had asked the Supplies Ministry to purchase paddy after assessing the market price through NFC against the recommendation made by the Agriculture Ministry.

Lawmakers at that time had charged the government’s policy of being ‘absurd’ because the MSP was announced in mid-November despite the fact that many farmers would have harvested and sold their paddy crops by October-end. Moreover, it was found that NFC had procured paddy for less than the MSP.

They charged that the MSP was supposed to be an incentive to farmers to boost output, but the floor price fixed by the government had ‘discouraged’ them instead.

In 2012, the government had announced it would resume the policy of fixing the minimum price following complaints that middlemen had been determining the market rate. It has been reported that Nepal does not have an effective MSP.

The MSP used to be announced for paddy and wheat until 1999. The practice was fully abandoned after the government launched the 20-year Agriculture Perspective Plan, according to reports. Even when the MSP was announced, it was not much relevant as it was set well below the projected market price to protect the government from having to buy farm products if prices should tumble.

Moreover, reports said that even when support prices were announced, it was not done before the beginning of the planting season so it did not help farmers to make production decisions.