Non-Basmati Rice Prices Surge Over 10% as Monsoon Deficit and Supply Gap Bite
A demand-supply mismatch, an 11% deficient monsoon as of August 7, and a higher paddy MSP have pushed domestic rice prices up more than 10% in a matter of weeks — with premium varieties leading the charge.
The short answer
Domestic rice prices, especially non-basmati varieties, have risen over 10% in recent weeks driven by a demand-supply gap, fears of a deficient monsoon, and a higher paddy MSP for 2026-27. Premium varieties such as Sona Masuri, Ponni, and Masuri are worst affected, but the pressure is spilling into all categories including broken rice. Millers report a paddy shortage on the ground, even as the government's third advance estimate places rice production at a record 154.02 million tonnes.
The price surge
Prices Climb Across All Rice Categories
Domestic rice prices have risen by more than 10% over the past few weeks, with the sharpest pressure felt in premium non-basmati varieties such as Sona Masuri, Ponni, and Masuri. However, the ripple effect has spread well beyond these segments.
A trader in North Chennai noted that quality old white rice now commands up to ₹1,900 per 26-kg bag, compared with ₹1,600 for newer stock, with premiums visible in parboiled and steamed categories as well. At the mill level, the impact is even more stark: M Madan Prakash, President of the Tamil Nadu Agri Commodities Exporters Association, confirmed that the Swarna variety from West Bengal has jumped to ₹34 per kg ex-mill from ₹30 in just a few weeks — a rise of at least ₹4 per kg. Across the board, rice prices have increased by at least ₹10 per kg as paddy rates have moved higher.
The supply deficit
Millers Report Paddy Shortage Despite Record Output Figures
The government's Ministry of Agriculture, in its third advance estimate, placed rice production at a new record of 154.02 million tonnes for 2025-26. Yet on the ground, millers are reporting a different reality — limited paddy availability and a tightening supply chain.
A New Delhi-based analyst attributed the disconnect to the government's continued reliance on the "historical statistics system", which he said creates gaps in production data. He added that a similar discrepancy may exist in stocks held by the Food Corporation of India. As of July 1, the FCI held 40.31 million tonnes of rice and 38.74 million tonnes of paddy — the latter capable of yielding roughly 26 million tonnes of rice. Even so, millers say they do not have ample supply.
The seasonal calendar adds another layer of pressure: arrivals from the zaid (summer) and rabi crops have ended, and the kharif crop is not expected to arrive at mandis until after October, leaving a multi-month gap in fresh supply.
It is a case of demand and supply despite the Centre saying rice production was record high in the 2025-26 crop year. But this might result in headline inflation, as the RBI fears.
Demand drivers
Monsoon Fears and Ethanol Demand Add Upward Pressure
Two structural demand drivers are compounding the supply shortfall. First, as of August 7, the monsoon was running 11% deficient — a level that historically correlates with tighter rice output and higher prices, according to the New Delhi-based analyst quoted in the source.
Second, a fall in the area under maize cultivation is set to boost rice's role as a feedstock for ethanol production. "As a result, rice will be in demand for ethanol production," the analyst noted — adding yet another competing claim on available stocks beyond traditional food consumption.
The MSP hike for paddy — from ₹2,369 to ₹2,441 per quintal for the common variety in 2026-27 — has also lent upward support to market prices, according to New Delhi-based exporter Rajesh Jain Paharia. Even basmati, typically insulated by its export-driven pricing, has seen prices tick upward.
Policy response
OMSS Offers Little Relief as Quality Concerns Deter Buyers
The government's Open Market Sale Scheme (OMSS) — the primary tool for releasing buffer stocks to cool domestic prices — has so far failed to gain momentum. Rajesh Jain Paharia said prices may ease once OMSS activity picks up, but identified a critical barrier: "Right now, the rice quality is 'just marketable'. So no one is coming forward in the OMSS tender."
This quality constraint significantly limits the scheme's effectiveness as a near-term price-cooling mechanism. The analyst further questioned the progress of a government-appointed committee tasked with examining consumer-preferred rice varieties, asking when it would submit its report — a pointed reference to the structural gaps in variety-level supply planning.
With the kharif harvest still months away, the OMSS stalled, and monsoon performance uncertain, policymakers face a narrow window to prevent rice inflation from feeding through to the broader consumer price index — a scenario the RBI has explicitly flagged as a risk.
Why it matters
A sustained rice price spike risks feeding directly into headline inflation — a concern the RBI has already flagged. With kharif arrivals not expected until after October, near-term relief is limited unless the Open Market Sale Scheme gains traction, which traders say is unlikely given the poor quality of current OMSS stocks. Policymakers should also note the dual pressure from ethanol demand: reduced maize acreage could divert additional rice volumes toward blending programmes, further tightening the consumer market. The gap between the government's record production figures and ground-level miller shortages points to a data-reliability issue that warrants urgent attention.
Frequently asked
- Why have rice prices risen in India in 2026?
- A combination of factors is driving prices up: a demand-supply gap at the mill level, a monsoon that was 11% deficient as of August 7, the end of zaid and rabi crop arrivals, and a hike in paddy MSP to ₹2,441 per quintal for 2026-27. Reduced maize acreage is also pushing more demand toward rice for ethanol production.
- How much have rice prices increased, and which varieties are most affected?
- Prices have risen by over 10% in recent weeks and by at least ₹10 per kg broadly. Premium non-basmati varieties such as Sona Masuri, Ponni, and Masuri have been worst hit. The Swarna variety in West Bengal rose from ₹30 to ₹34 per kg ex-mill. Quality old white rice now fetches up to ₹1,900 per 26-kg bag.
- What is the government doing to control rice prices?
- The government's Open Market Sale Scheme (OMSS) is the primary intervention tool, but it has not gained traction. Exporters say the rice quality on offer under OMSS is only 'just marketable', deterring buyers from participating in tenders. As of July 1, the FCI held 40.31 million tonnes of rice and 38.74 million tonnes of paddy in buffer stocks.
- Does record rice production mean supplies are adequate?
- Not necessarily. While the Ministry of Agriculture's third advance estimate pegged 2025-26 rice output at a record 154.02 million tonnes, millers on the ground report a shortage of paddy. A New Delhi-based analyst attributed this to gaps in the government's 'historical statistics system' for production data, suggesting official figures may not fully reflect actual available supply.
Source
This report summarises and analyses coverage from The Hindu BusinessLine — Agri Business. The analysis and India context are IndianAgri's own.