Govt likely to fix wheat support price at Rs 700/qtl

NEW DELHI: For the second year running, the Centre is likely to make a distinct difference between the minimum support price (MSP) and procurement price of wheat, the rabi staple.

The Cabinet Committee on Economic Affairs (CCEA), which met on Friday, put off the key decision on wheat support price for this rabi season on the technical ground of finance minister P Chidambaram’s absence.

But the finance ministry is understood to have already given its nod to the recommendation of the Commission on Agricultural Costs and Prices (CACP) that the MSP for wheat — meant to prevent distress sales by farmers — be fixed this rabi at Rs 700 per quintal as compared to the farm ministry’s recommendation of Rs 750 per quintal.

However, clear indications are that the finance ministry will leave a window well open for the announcement of a “good” bonus over and above the MSP for wheat, for the purpose of procurement for the Centre’s buffer stock maintained by the Food Corporation of India. The rabi marketing season runs from April 1, ’07, to March 31 next year.

In rabi ’05, the government was forced, in the face of abyssmal procurement, to announce a bonus of Rs 50 per quintal for wheat, bringing up the actual price for purchase from farmers to Rs 700 per quintal.
But the whole scenario would change should the government announce a bonus over and above an MSP of Rs 700.

The farm ministry had not only recommended a higher Rs 750 per quintal MSP for wheat, but also pushed hard for a substantial bonus. With a bonus of Rs 50 per quintal, that would bring the actual additional outgo for the Centre to Rs 100 higher per quintal compared with last rabi. Interestingly, the Commission on Agricultural Costs & Prices (CACP), recommended an MSP for wheat this year lower than what the farm ministry had urged. The farm ministry wanted the commission to factor in the low yield, higher input costs and the reluctance to sell produce to the government in the face of higher private sector price.

What is significant is that the commission rarely recommends an outright hike of Rs 50 per quintal for any commodity, as it has done this year. And that is a categoric signal that the government may be left with no option but to acknowledge that the fundamental contours of wheat marketing economics are changing drastically, demanding extraordinary responses.