The government on Thursday approved proposals to raise the benchmark prices of five winter crops by up to 20% for the marketing year through June but deferred a decision on increasing the wheat rate amid differences between key ministries concerned.
A fresh note on the minimum support price (MSP) of wheat would be presented before the Cabinet Committee on Economic Affairs for approval, a senior government official said. The agriculture ministry had proposed a 9% increase in the wheat MSP to R1,400 a quintal to compensate farmers against rising costs of inputs, including diesel, overruling the Commission for Agricultural Costs and Prices (CACP), which had suggested a status quo to promote the farming of other crops in times of a glut in grains. Food ministry officials have opposed the hike, saying such a move, over and above the 16% increase in the paddy price this summer, would drive up the food subsidy bill.
However, CCEA cleared proposals to raise the MSP of gram by 7% to Rs 3,000 a quintal and that of masur will be hiked by 3.6% a quintal to Rs 2,900. “Higher MSPs for pulses are aimed at encouraging higher cultivation in the winter to reduce imports,” said the official. The country imports around one-fifth of its pulse requirements each year.
The CCEA approved hiking the MSP of mustard seed by 20% to Rs 3,000 a quintal and that of safflower by 12% to R2,800 a quintal. It also decided to keep the support price of barley at R980 per quintal. However, the MSPs of these crops are still below the market prices and mostly revenue-neutral for the government, as it doesn’t usually purchase them from farmers.
However, while recommending MSP of wheat, which is procured in large scale by the government, the CACP had suggested that only in case of a ban on the grain’s exports, the benchmark rate should be raised by 10%. The government lifted a more than four-year ban on wheat exports in September 2011 to ease storage space, and has since maintained a curb-free shipment policy. Wheat stocks with state-run agencies as of October 1 stood at 43.15 million tonnes, more than three times of the requirement.
“Such high prices would increase the food subsidy bill and may also potentially stoke grain inflation,” a senior official had said on Wednesday. The government’s food subsidy bill rose 14% to R72,800 crore in the fiscal through March, worsening the fiscal deficit that touched 5.8% of the country’s gross domestic product. Although the government has budgetted food subsidy bill at R75,000 crore for 2012-13, sources have said the burden could well reach R100,000 crore, if the 9% hike in the wheat MSP would have been approved.
However, an agriculture ministry official has said the farmer should not be asked to pay for the consumer and be provided fair returns, considering the rise in input costs, especially the 15% hike in diesel prices in September. Some farmer leaders have also demanded that the wheat MSP be raised to R1,500 a quintal.
