After 10 yrs, wheat MSP may be kept unchanged

The minimum support price (MSP) for wheat is not likely to be raised for the next marketing season, which starts from April 1, 2013. For 2012-13, wheat MSP stands at Rs 1,285 a quintal. The last time MSP for wheat was kept at previous year’s level of Rs 620 per quintal was in 2003-04 marketing season.

The Commission for Agriculture Costs and Prices (CACP) has not recommended any increase in the MSP of wheat for 2013-2014 crop marketing season, officials said. Reasons given are that higher MSP would make exports uncompetitive and that the country already has huge stocks of wheat. Any further increase in MSP would only add to subsidy burden of the government for the next fiscal, pegged at Rs 75,000 crore for this fiscal, officials said.

CACP is a recommendatory body, and the final call on the issue would be taken by the Cabinet only. However, the Commission said if there was any move to ban or curb exports of wheat, the government should immediately increase MSP by 10 per cent.

REAPING THE HARVEST
Year	Wheat MSP (Rs /quintal)	Wheat production (mn tonnes)
2007-08	750	78.5
2008-09	1,000	80.6
2009-10	1,080	80.8
2010-11	1,100	86.8
2011-12	1,120 +Rs 50 bonus	93.9
2012-13	1,285	—
Note: Wheat produced in one season is marketed in the next year. So, wheat produced in 2011-12 crop year that starts from June will be marketed in 2012-13 that starts from April. Source: Government of India

“The current MSP of wheat at Rs 1,285 per quintal is already quite high, leaving very little room for any further hike in support price,” a senior official said.

He added the MSP of mustard, another major crop grown during rabi has been recommended to be increased by Rs 500 per quintal to Rs 3,000 a quintal.

In 2012-2013, the MSP of wheat was raised to Rs 1,285 per quintal, around 15 per cent more than the previous year.

Though the sharp increase in MSP propelled farmers to grow more and the country harvested a record of over 92 million tonnes of wheat, critics flayed the move. They said high MSP had rendered Indian wheat uncompetitive in global markets and also contributed to pushing up the inflation.

When the purchase price of wheat in the domestic market was around Rs 13,000 per tonne, the overseas market was around $230-$240 per tonne (Rs 12,742 -13,290 per tonne, assuming an exchange rate of Rs 55), leaving little margin in exporting wheat from India, traders said.

“It is only in the last few weeks, that Indian wheat has become competitive in global markets, after world prices moved beyond $300 per tonne,” a leading trader said.

Inability to export in significant quantities despite opening up of the trade, makes the government the sole buyer of almost 90 per cent of wheat produced in the country. This compounded the storage problem and also inflated the food subsidy bill.

“In the current situation it, it will not be prudent to further inflate the food subsidy bill, which is already touching Rs 75,000 crore annually,” officials said.

Since September 2011, when India, for the first time, allowed export of wheat by private traders under the Open General License (OGL), private traders managed to export just over 2 million tonnes of the commodity.

As on August 1, 2012, India’s wheat stocks in the central pool was estimated to be around 47.5 million tonnes, which is 136 per cent more than the required quantity, according to buffer stocks and strategic reserve norms. The total foodgrain stocks in the central pool during the same period was around 76.1 million tonnes, more than double the required quantity.

Recently, the government allowed the export of around 2 million tonnes of wheat from its central pool stocks to ease the pressure on storage after a gap of more than six years.