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CCEA to consider 9% increase in wheat MSP

The agriculture ministry is expected to propose a 9% rise in the benchmark price of wheat in the marketing year through June, although the recommending agency has prescribed against a hike to promote farming of non-grain crops.

The agriculture ministry is expected to propose a 9% rise in the benchmark price of wheat in the marketing year through June, although the recommending agency has prescribed against a hike to promote farming of non-grain crops. The Cabinet Committee on Economic Affairs (CCEA) will consider today the farm ministry’s proposal to raise the minimum support price of wheat to R1,400 a quintal, compared with R1,285 a quintal now, a senior government official told FE. The CCEA would also decide on the ministry’s proposals to hike the MSPs of other key winter crops such as mustard seed, safflower, barley, gram and masur.

Suggesting that the government keep wheat?s MSP unchanged due to the swelling inventory, the Commission for Agricultural Costs and Prices (CACP) had suggested that only in case of a ban on the grain’s exports, the benchmark rate should be raised by 10%. The CACP recommends MSPs of major farm produce to the agriculture ministry. The government lifted a more than four-year ban on wheat exports in September last year to ease storage space, and has since maintained a curb-free shipment policy. Wheat stocks with state-run Indian agencies as of October 1 stood at 43.15 mt, more than three times the requirement.

The food ministry has also opposed any proposal to raise the wheat MSP, as it would drive up the procurement costs for the government. ?Such high prices would increase the food subsidy bill and may also potentially stoke grain inflation,? a senior official said. The government’s food subsidy bill rose 14% to R72,800 crore in the fiscal year through March, widening the fiscal deficit. Although the government has budgetted food subsidy bill at R75,000 crore for 2012-13, sources said the burden could well reach R100,000 crore, thanks to an already 16% hike in the procurement price of paddy in summer.

However, an agriculture ministry official said the farmers should not be asked to pay for the consumer and be provided fair returns, considering the rise in input costs over the past year. Farmer leaders are asking an even more hefty rise in the price of wheat.

The CACP, however, has recommended a hefty rise in the MSPs of other crops, although they are not procured by the government and, hence, don’t affect its finances.

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First published on: 01-11-2012 at 02:34 IST
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