Food Ministry against giving wheat bonus of Rs 130/quintal to farmers in 2013-14

NEW DELHI: The Food Ministry has opposed a proposal to give a bonus of Rs 130 per quintal to farmers over and above the wheat support price for the next season, saying the move would lead to increase in subsidies by Rs 5,000 crore and fuel the price rise.

The Agriculture Ministry has proposed no change in the minimum support price (MSP) of wheat at Rs 1,285 per quintal for 2013-14 season (April-March), but has suggested a bonus of Rs 130 per quintal over and above the MSP.

In its comments on a Cabinet Committee on Economic Affairs' note, the Food Ministry has objected to the proposal of giving bonus to farmers and suggested to go with the recommendation of the Commission for Agricultural Costs and Prices ( CACP), sources said.

The CACP, which advises the government on the floor price for major crops, has suggested retaining wheat MSP at the last year's level of Rs 1,285 per quintal for 2013-14, and announce 10 per cent bonus only if a ban is imposed on wheat exports.

The Food Ministry has observed that "with bonus, the support price would increase to Rs 1,415 per quintal in 2013-14. This large increase in wheat price shall involve huge increase in the food subsidy bill and will lead to inflationary trend in retail prices."

The food subsidy bill, which is estimated to be about Rs 1 lakh crore in this fiscal, is expected increase by Rs 5,000 crore due to the proposed bonus, it said.

Normally, bonus is announced to boost procurement. The Food Ministry argued that is no need to increase procurement as wheat stocks in the central pool is more than double the actual requirement, it said.

As on October 1, the government has wheat stock of 31.42 million tonnes against the buffer norm of 14 million tonnes.

Wheat production has been targetted at 85.59 million tonnes for the coming season.

The government announces the support price for more than 20 crops just before the sowing season. It buys wheat and paddy from farmers at the MSP to ensure assured returns to growers. The MSP also acts as benchmark price for the market.