The cost of production of paddy in Andhra Pradesh was higher than the minimum support price (MSP) of Rs 1,080 a quintal in the last year mainly because of higher expenditure on wages, says the latest study undertaken by the RBI’s research wing.

Andhra Pradesh is one of the leading producing States in the country.

The study, conducted by the Development Research Group (DRG) of RBI, also said the Commission for Agricultural Costs and Prices (CACP) has underestimated the production cost of paddy for the State while recommending MSP to the Centre.

“A considerable rise in the demand for labour in the non- agricultural sector, implementation of Mahatma Gandhi National Rural Employment Guarantee Scheme and migration have also resulted in a sharp rise in wage costs, and thereby pushed up the cost of cultivation,” the report said.

The DRG report titled “Pricing of Paddy: A Case Study of Andhra Pradesh” has been prepared by Ramana Murthy and Rekha Misra. A sample survey was undertaken covering 192 households in 13 villages from eight districts.

Highlighting that the agrarian structure in Andhra Pradesh was dominated by small and marginal farmers, the report said: “The average cost of production of paddy in the state during 2011-12 was above MSP. The MSP covered only paid-out costs...the cost of cultivation has gone up in the State, irrespective of the region.”

In order to ensure better price to paddy growers, the DRG report has suggested assigning procurement operations to self-help groups in selected locations could be experimented for the State as a whole.

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