Tej Bahadur Subedi, spokesperson for the Agriculture Ministry, said the ministry had proposed a minimum support price of Rs26 per kg for common paddy. Last year, the government had fixed the floor price at Rs24.60. The floor price is the lowest price that can be charged for a commodity.

The minimum support price for ‘mota dhan’ has been set at Rs25 per kg, up from Rs23.31 last year.

Subedi said the new pricing proposal had been sent to the Ministry of Industry, Commerce and Supply which will submit it to the Cabinet for final approval. An anonymous Commerce Ministry official said it would be sent to the Cabinet next week.

The minimum support price is an intervention by the government to protect farmers against sudden slumps in the market price. It is what the government will pay the farmers for their crops when there are no other buyers in the market.

The intervention is intended to encourage farmers to grow crops. The price is computed based on the cost of production, transportation charges and inflation.

The government resumed setting the minimum support price for paddy since 2016 after suspending the practice for nearly two decades.

Normally, the government announces the minimum support price for paddy in time for farmers to make their production plans before the beginning of the planting season. The support price fixed by the government means that farmers will get a reasonable price for their harvest even if there is a huge drop in prices.

In case the market price of paddy drops below the base rate fixed by the government, it is obliged to purchase it from farmers at the support price.

Last year, the government had fixed the minimum support price of paddy in the last week of July. This year, it is overdue by almost three months, and some farmers have already started to gather in their crops.

Subedi said that most farmers would be harvesting their produce only from next month. He admitted that fixing the minimum support price had been delayed due to holdups in the collection of information by the Department of Agriculture.

The government projected a fall in paddy output this year due to a late and ‘below normal’ monsoon and a critical shortage of chemical fertilisers caused by delays in imports during the peak season.

Nepal’s paddy harvest hit a record high of 5.61 million tonnes in 2018-19, with an all-time high productivity of 3.8 tonnes per hectare. Nepali farmers produced 5.23 million tonnes of paddy in 2017-18 and 5.3 million tonnes in 2016-17. In 2015-16, paddy output was recorded at 4.3 million tonnes.

The agriculture sector contributes 27 percent to the country’s gross domestic product, while the contribution of paddy alone stands at 6 percent. According to the Agriculture Ministry, the paddy acreage shrank to 1.37 million hectares this year, a sizeable reduction from last year’s 1.55 million hectares.

Rapid unplanned urbanisation and road construction have been identified as the root causes behind the decline in the land available for growing paddy.