CCEA approves MSP hike for rabi crops, no decision on wheat

On wheat, CACP recommended freezing of MSP at last yr's level of Rs 1,285 per quintal considering huge stock in central pool

The Cabinet Committee on Economic Affairs (CCEA) today deferred a decision on Minimum Support Price (MSP) of wheat for the 2013-2014 crop marketing season (April-March) amid differences between food and agriculture ministries.

CCEA, however, raised the MSPs of other competing rabi crops like mustard seed, gram and lentil by 7-20%.

Officials said the food ministry was in support of the recommendations made by Commission for Agriculture Costs and Prices (CACP) to freeze the MSP of wheat at 2012-2013 level of Rs 1,285 per quintal to curtail the rising subsidy, but agriculture ministry officials felt that a bonus of 10% should be declared upfront to compensate farmers for rising cost of diesel.

 

"For wheat, there would be further consultation," an official statement said..
News agency PTI reported quoting an unnamed official source that a fresh cabinet note on MSP of wheat is being prepared which will address all the concerns of different stake holders. 

Some officials said that CACP could be asked to reconsider its recommendations on wheat. However, senior officials from the Commission said that they have not received any formal communication from the government to rework the wheat MSP.

Officials said CACP submitted its recommendations before the government raised diesel prices by Rs 5 a litre in September and hence should re-assess its suggestions on wheat MSP to incorporate this impact.

The CACP in its report on pricing policy for rabi crops in 2013-2014 had in fact recommended freezing the MSP at the current year’s level to encourage growers to plant more oilseeds and pulses in place of foodgrains.

However, the agriculture ministry was not in favour of the freeze and wanted a nominal bonus of 5-10% upfront  to compensate farmers for the rising cost of diesel.

The food ministry in its note sent to union cabinet is believed to have supported the idea of a freeze in MSP on the grounds that any hike in MSP next would further inflate the annual food subsidy bill of the government by another Rs 4,000-5,000 crore.

The food subsidy requirement which was pegged at Rs 75,000 crore in 2012-13 Budget has already exceeded Rs 1,00,000 crore because of record purchases of wheat and rice by the government for central pool at high prices and increased sale through the Public Distribution System (PDS) at lower rates.

“There is absolutely no  need to further encourage planting of wheat as the country has already produced wheat in 2011-2012 as required by expected demand during the terminal year of the 12th five-year plan in 2016-2017,” a senior CACP official said. India produced a bumper 94 million tonnes of wheat in 2012-2013, almost 8% more than the previous year.

“There is no point in producing more wheat and letting it rot in government warehouses instead focus should be laid more on improving production and productivity of oilseeds and pulses, which we (India) import in large quantities. In 2011-2012, the country imported around Rs 55,000 crore of oilseeds and pulses,” the CACP official explained.

Madan Sabnavis, chief economist of CARE Rating said if the wheat MSP is kept unchanged for the time being, it will encourage farmers to plant more oilseeds and pulses. This will also ease  government's concerns over food subsidy and fiscal deficit to some extent, he added.

He said increasing the MSPs of other competing crops by 10-20% could further push up the food inflation. The MSP of all other rabi crops has been raised in line with CACP's recommendations.

An official statement said that CCEA okayed raising the MSP of gram and masur by Rs 100-200 per quintal to Rs 3, 000 per quintal for gram and Rs 2,900 for lentil for the 2013-14 marketing year (April-March).    

The cabinet has also approved increasing the MSP of mustard seed to Rs 3,000 per quintal for the 2013-14 marketing year from Rs 2,500 per quintal in 2012-13 and by Rs 300 per quintal for safflower from Rs 2,500 per quintal to Rs 2,800.     

Among cereals, the official statement said that CCEA has freezed the support price of barley at Rs 980 per quintal for 2013-14.