The Hindu Business Line : Wheat MSP hiked by Rs 100

The Centre has fixed the minimum support price (MSP) of the current year's wheat crop, to be procured from April next, at Rs 750 per quintal. This is Rs 100 more than the Rs 650-per quintal price set for 2005-06.

For the last year's crop, the Centre had also declared a bonus of Rs 50 per quintal, over and above the Rs 650-per quintal MSP. But since its announcement came as late as April 21 (by which time, the procurement operations had virtually come to an end), farmers were effectively paid a rate of only Rs 650 per quintal by the Food Corporation of India (FCI) and State agencies.

But this time, with elections in Punjab due around February, the Centre has straightaway raised the MSP to Rs 750 per quintal. The decision, taken at the meeting of the Cabinet Committee on Economic Affairs (CCEA) here on Monday, overrules the Commission for Agricultural Costs and Prices' (CACP) recommended MSP of Rs 700 per quintal.

The Rs 100-per quintal increase is not only the highest-ever in history, but also marks an end to a prolonged period, when the Centre kept a tight leash on procurement prices to curtail its spiralling food subsidy bill. But with wheat stocks in the Central pool being precariously low — at 6.41 million tonnes (mt) as on October 1, against the minimum buffer norm of 11 mt for that date — the Centre has been forced to change tack.

The CCEA also declared the MSP for rapeseed-mustard at Rs 1,715 per quintal, the same level as was fixed in 2005-06. The CACP had actually recommended a reduction in the MSP to Rs 1,600 per quintal, keeping in view the ruling open market prices. Moreover, in rapeseed-mustard, the Centre is facing a problem of holding excess stocks, unlike in the case of wheat. But it has, nevertheless, decided to play safe and retain the MSP at last year's level.

"There is both populism and some economic logic for the huge MSP increase. Last time, the private trade paid more to farmers and procurement for the Central pool fell from 14.79 mt to 9.22 mt. This time, nobody wants to take chances," sources pointed out.