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With the rabi-planting season picking up pace, the central government on Tuesday hiked the minimum support price (MSP) for six mandated crops, raising the price for whole wheat by 5.46 per cent.
Prime Minister Narendra Modi said on Tuesday that the hike in the MSP will further energise the agriculture sector.
The new MSP for wheat will be Rs 2,125 per quintal as against Rs 2,015 per quintal earlier. In absolute terms, this is the highest increase since 2018-19 marketing year. However, wheat prices are trading at a much higher level than the new support price.
This year, farmers opted to sell their produce to private players as market prices were much higher than the MSP. This led to an almost 57 per cent drop in official procurement to around 19 million tonnes (MT), as against 43.3 MT last year.
The MSP for mustard was raised about 8 per cent to Rs 5,450 a quintal, that of lentil (Masur) was raised by over 9 per cent to Rs 6,000 a quintal.
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“The MSPs have been raised keeping in mind the need to provide farmers fair remuneration. This year, however, the government would have interest in ensuring that wheat procurement is on target as stocks have come down as of September due to deployment in the food scheme for the poor,” said Madan Sabnavis, chief economist of Bank of Baroda.
He added that concerns over inflation appeared to have played a part as a bigger increase in MSP for wheat could have pushed market prices even higher.
The hike in the MSP for mustard is in line with the government’s policy of encouraging farmers to shift from cereals and grains to oilseeds and pulses.
“The government’s priority is on increasing production of oilseeds and pulses and thus fulfilling the objective of Atmanirbhar Bharat. The strategies are to increase production through area expansion, productivity through high yielding varieties, MSP support and procurement,” the government said.
Meanwhile, in the case of wheat, the government said the MSP is higher than the cost of production. It added that that was also the case with mustard, where it was higher by about 100 per cent. This is despite the fact that as per the changed rules MSPs are fixed at 50 per cent over the A2+FL cost.
“Wheat inflation for September was at 17.4 per cent, while masur was at 6.6 per cent. In the case of gram, it was less than 1 per cent, hence, a low increase in MSP. The 7.9 per cent increase in MSP for mustard is to enable farmers to increase production, which will help lower import dependency of edible oils,” Sabnavis said.
Wheat prices in North Indian markets started to firm with the beginning of the Navratri festivities last month as flour makers scrambled to replenish waning inventories.
Trade and market sources said wheat prices in the wholesale markets of Delhi have risen by around Rs 100 per quintal since September 1, with almost 75 per cent of the increase occurring from September 24.
Market players are hopeful that the sown area of wheat would increase by at least 10 per cent thanks to the good prices and favourable weather. Similarly, mustard acreage is also expected to increase. The crop is usually sown in around 6.4 million hectares.
As on October 1, wheat stocks in the central pool were estimated at 22.76 MT, which is precariously close to its buffer norms of 20.52 MT.
