Centre hikes wheat MSP by 7% ahead of polls, highest increase since 2014

Wheat is a primary rabi crop in Madhya Pradesh and Rajasthan, which are slated to go to the polls in the upcoming weeks. Here, the BJP and the Congress are locked in a close battle

The Centre on Wednesday raised the minimum support price (MSP) of wheat by Rs 150 per quintal, or 7.06 per cent, to Rs 2,275 for the 2024-25 rabi marketing season, which will start from April. This is the highest increase in the MSP of wheat — the most preferred staple in India after rice — since the Narendra Modi government came to power in 2014.

The decision comes ahead of the Assembly elections in five states, including Madhya Pradesh and Rajasthan, which are among the top wheat-growing states. The Bharatiya Janata Party (BJP) and the Congress are locked in a tough fight in Madhya Pradesh and Rajasthan, which will go to the polls on November 17 and November 23, respectively.

The sharp increase in the MSP also signals the Centre’s intention to aggressively build up its dwindling wheat reserves in the next crop season in order to ward off any price spike during an important election year. The Centre’s annual wheat procurement has been falling below the target over the past two seasons due to more attractive prices offered to farmers outside the official system and a drop in the overall crop output.

Among other crops, the MSP of masoor was increased by Rs 425 per quintal to Rs 6,425 — 7.08 per cent more than the price in the 2023-24 season — to encourage farmers to cultivate more of this vital crop.

India is one of the biggest importers of masoor in the world and consumes 2.2-2.4 million tonnes annually. Of this, 1.2-1.4 million tonnes is produced domestically, while the rest is imported. Nearly 70-80 per cent of the masoor imports come from Canada, with which India has had strained diplomatic relations of late. In recent years, Australia has emerged as a new source for masoor imports by Indian traders, but Canada still holds a sizable share of the trade. Poll bound MP is also one of the leading producers of Masoor.  In the case of mustard, the MSP has been hiked by 3.67 per cent for the 2024-25 crop marketing year to Rs 5,650 a quintal, while that of gram by 1.97 per cent to Rs 5,440 per quintal. In absolute terms, the increase in their MSPs is to the tune of Rs 200 and Rs 105 per quintal, respectively.

“These increased MSPs for rabi crops will not only support fair prices for farmers but also stimulate diversification in crop production. Prices for commodities like wheat, pulses, and sugar have been on the rise due to limited supply. However, it’s important to note that an increase in MSP will not necessarily contribute to inflation,” Tarun Satsangi, specialist - global commodity research and trade at SilkRoute.ag, told Business Standard. SilkRoute is a global agritrade company based in Dubai.

He said the fluctuation in prices was primarily a result of the interplay between demand and supply.

“In fact, there have been instances where commodity prices fell below the MSP, such as the recent drop in soybean prices to Rs 4,200 per quintal before rebounding. A similar situation occurred when maize fell well below its MSP in May 2023,” Satsangi said. The MSP increase of 2-7 per cent for all rabi crops was lower than the increase in composite input price index of 8.9 per cent between 2022-23 rabi and 2023-24 rabi seasons.

Rahul Chauhan, commodity analyst at iGrain India, said it was already known that due to the current high rates, farmers would cultivate more wheat in the coming rabi season. “But after the announcement of such a big increase in MSP, they will be more motivated.”

Farmers had not received attractive prices for mustard and masoor last year.  

“In the last two years, the total increase in the MSP of masoor is close to Rs 1,000 per quintal, which signals the government’s intention to lessen reliance on imports. In states like Maharashtra and Karnataka, the sowing of chana could increase more than other crops as chana needs very less water,” Chauhan told Business Standard.

 

Horticulture crop output may hit  352 mt in 2022-23  

Horticulture crop production in 2022-23 crop season is estimated to be a record 352 million tonnes, up from 347 million tonnes in 2021-22, a rise of 1.44 per cent.  This is as per the second advance estimate released today. In the first estimate, production of horticulture crops  was projected at 351 million tonnes. The horticulture crop season runs from July to June.