(Adds comments from analyst on effects of the price hike and the weather
outlook, background on the rice and other crops, Cabinet decisions support
prices of other crops)


  NEW DELHI (Dow Jones)--India's government increased minimum support prices
for rice by INR100 per 100 kilograms, hoping to buy more from farmers to build
stocks and cushion the impact of drought across large parts of the country.

  The federal Cabinet Thursday decided to hike the minimum support prices of
common-grade rice to INR950 per 100 kilogram and of Grade-A rice INR980/100 kg,
federal Home Minister P. Chidambaram said at a news conference after the
Cabinet meeting.

  Rains are crucial for crops as about 60% of the country's farmlands are
rain-fed, and the price increase will help to cushion the impact of the drought
on farmers' income.

  However, S. Raghuraman, head of trade research at industry portal
www.agriwatch.com, said the price increase "is a bit too late," as sowing of
the summer-sown rice crop is almost complete.

  Area under rice cultivation between June 1-Aug. 12 has dropped by 19% from
the same period last year to 24.74 million hectares. Rice output is expected to
fall by 10 million tons this year, according to federal Agriculture Minister
Sharad Pawar.

  The Cabinet also approved proposals to raise the minimum support prices of
two varieties of pulses by INR240-INR300/100 kg, but kept support prices for
cotton, oilseeds, corn and coarse cereals unchanged.

  Rains have been 27% below the 50-year average for June 1-Aug. 17. Industry
officials said that the most of the damage to crop output was due to a lack of
rainfall in June and July.

  "Late rains this month may help to improve the yields of some of the crops,"
Raghuraman said.

  Pawar said 246 of the 625 administrative districts in the country have been
affected by drought. State agriculture ministers are scheduled to meet Pawar
Friday to discuss the damage to the crop, extension of federal aid and
preparations for the winter crop.

  Summer-sown crops contribute between 50% and 52% of the total farm output in
the country, according to analysts, who have forecast an 18%-20% drop in crop
output in 2009-10.

  India harvested a bumper rice crop of 99.15 million metric tons in fiscal
2008-09, of which 84.58 million tons was summer-sown.

  Due to last year's increase in minimum support prices, the federal
government's rice stocks have swelled to 32.6 million tons.