Minimum support price for rice likely to be increased

India is likely to raise the price it pays to local farmers to buy rice in the new season which began this month, the food minister said on Thursday, a move that could help the government win political support but also stoke inflation.

The world’s second-biggest rice producer is expected to harvest at least 87 million tonne of summer-sown rice, adding to existing stocks of 22.7 million tonne. The government procures grain for its various welfare programmes.

“We have agreed to give a bonus to farmers for rice procurement. The government will take a decision soon,” K V Thomas told reporters.

The government currently pays local farmers R1,080 ($22.061) for a tonne of rice. While increasing the price it pays farmers will help the government win political support ahead of a string of state elections next year, it could worsen already high inflation.

India’s food price index rose 9.32% in the year to October 1 , and the central bank's raising of interest rates a dozen times in the past 18 months has hardly helped rein in prices.

Following a good monsoon, India is likely produce a record 245 million tonne of grain in 2011-12, up 1.4% from a year ago, raising hopes of more exports that could help bring relief to Asian importers trying to combat food-led inflation.

Thomas said the government would procure at least as much rice as it did last year— a figure that stood at 33.6 million tonne.We have enough space to store new season rice, he said.