Rise in wheat MSP increases food ministry's cost by 5%

The Centre had procured 38.15 mn tonnes of wheat in 2012-13 rabi marketing year

The food ministry’s economic cost of wheat — the amount incurred in procuring and storing the grain — is set to rise by five per cent to Rs 19,147 a tonne, with the increase in the minimum support price (MSP) of the grain, an official said. Last month, the government had raised wheat MSP by Rs 65 to Rs 1,350 a quintal for the 2013-14 marketing year (April-March).

“The hike in wheat MSP will also lead to a rise in the economic cost of procuring and storing the grain. It will now rise to Rs 19,147 a tonne in 2013-14 marketing year from Rs 18,225 a tonne in the 2012-13 marketing year,” a ministry official said.

The Centre had procured 38.15 million tonnes of wheat in 2012-13 rabi marketing year — 10 million tonnes more than the procurement made in the 2011-12 marketing year.

“With a higher MSP, conducive weather and progress in sowing, the procurement of wheat is expected to rise. Already rice procurement is expected to touch 40.13 million tonnes in 2012-13 marketing season (October-September) and this will lead to a rise in the food subsidy Bill,” the official added.

The food ministry has already sought an additional Rs 14,300 crore during this financial year for rice procurement in the 2012-13 marketing season.

Another food ministry official said with the rise in MSP and other incidental costs involved in procurement, the economic cost of wheat and rice procured by public agencies had been increasing.

“As the central issue price (CIP) remains unchanged, the gap between the economic cost and CIP, which is borne by the Centre, as food subsidy has been rising,” the official added.

CIP is the rate at which the central government issues foodgrains for the Public Distribution System (PDS) to states and union territories.

The Centre incurred an expenditure of Rs 72,370 crore on food subsidy in 2011-12 and in the current financial year, out of the total allocation of Rs 74,552 crore it has spent Rs 61,259 crore till December 15, 2012.