The Hindu Business Line : Panel moots Rs 1,000/quintal wheat support price

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Panel moots Rs 1,000/quintal wheat support price

This represents Rs 150 jump over the procurement price of Rs 850 for 2006-07

Higher price: Labourers cleaning wheat stocks.

Harish Damodaran

New Delhi, Sept. 17

In what could spell further trouble for the Centre on the wheat front, the Commission for Agricultural Costs & Prices (CACP) is understood to have recommended a minimum support price (MSP) of Rs 1,000 per quintal for the crop to be sown in the ensuing 2007-08 rabi season.

If accepted, it would translate into an Rs 150 per quintal jump over the effective procurement price of Rs 850 per quintal for 2006-07, inclusive of an MSP of Rs 750 and a bonus component of Rs 100. “Last year, too, the procurement price was raised by Rs 150, but the MSP per se went up by only Rs 100 (from Rs 650 to Rs 750). But this time, they have straightaway mooted an MSP of Rs 1,000, which works out Rs 250 more than the MSP for 2006-07 and Rs 150 over the final procurement price,” a Punjab Government official told Business Line.

Different views

The CACP note, despatched last week to State Governments to invite their views, is currently before the concerned ministries (Agriculture, Food, Finance, and Commerce) and the Planning Commission. “Based on the inputs and comments received, a final note would be drafted by the Agriculture Ministry, which may be taken up by the Union Cabinet by end-October before commencement of sowing operations,” the official said.

The Centre, on its part, is caught in a cleft stick over the CACP’s recommendation. This is more so after its decision earlier this month to contract 7.95 lakh tonnes of wheat imports at $ 389.45 a tonne, which comes to a landed price of almost Rs 16 a kg at Mundra or Kandla port.

“When imported wheat on the Government account can be bought at Rs 16, it would be politically difficult to deny the farmer here a price of Rs 10. Moreover, the old argument that it is cheaper to import wheat in the South than to transport grain from Punjab does not hold true any longer,” the official added.

CACP’s approach

It is not known on what basis the CACP has recommended the Rs 1,000 per quintal MSP. But unlike in the past, it has this time apparently gone beyond a narrow cost-based approach to factor in the current market realities. These include the precarious global wheat stocks position and diversion of food crops for bio-fuel applications, rendering imports an increasingly unviable proposition.

The CACP note is said to have also cited the report of the National Commission on Farmers under Dr M.S. Swaminathan, calling for fixing the MSP at 50 per cent more than the average cost of production. Besides, it has referred to the recently launched National Food Security Mission, targeting an additional eight million tonnes wheat production between 2007-08 and 2011-12.

Whether or not the CACP recommendation goes through, one thing seems clear: the days of Rs 10 per quintal increase or no increase at all are passé.