The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved a 5% hike in the minimum support price (MSP) of wheat for the marketing year through June 2013.
“The CCEA decided on wheat MSP at R1,350 a quintal for the 2013-14 marketing year, which is higher by R65 than last year,? Finance minister P Chidambaram told reporters here. Although the rise in the MSP would enhance returns for farmers, it would also raise the Centre’s procurement costs and drive up the food subsidy bill.
The food subsidy burden is expected to easily cross R90,000 crore in the current fiscal against the budgeted R75,000 crore, partly due to a 16% rise in paddy MSP.
CCEA’s approval comes despite the Commission for Agricultural Costs and Prices (CACP) earlier suggesting freezing the benchmark price of wheat at last year’s level of R1,285 a quintal if exports are not banned, and subsequently recommending a bonus of R40 a quintal to farmers. The CACP recommends the pricing of key crops to the agriculture ministry.
However, as the farm ministry had proposed a R115 a quintal hike in the wheat MSP, the CCEA had in early November suggested the CACP review the MSP and asked the agriculture ministry to submit a fresh proposal after that.
In its latest proposal, the agriculture ministry had sought a R100 hike in the wheat MSP.
Official sources told FE because of the difference between agriculture and finance ministries, the decision on hike in MSP of wheat could not be taken then and the CCEA opted for a middle path. The agriculture ministry has maintained farmers should be compensated adequately in view of the rising costs of farm inputs.
CACP chief Ashok Gulati had been advocating reduction in wheat production due to excess stocks with the government against domestic demand. At present, Food Corporation of India (FCI) has close to 36 million tonne of wheat stocks which is far excess of the strategic reserve and buffer stocks norms.
?With such huge wheat stocks, we will be facing huge storage crunch next year when the crop starts arriving in mandis from April 1,? Gulati told FE. An agriculture ministry official said the increase in wheat MSP is expected to give benefits to farmers in the upcoming winter or rabi season when sowing activities are on full swing. The hike could hit consumers with products such as wheat flour, bread and biscuit getting costlier.
