The Hindu Business Line : Govt hikes wheat MSP by Rs 10 per quintal

THE Government has announced a Rs 10 per quintal increase in the minimum support price (MSP) of the current year's wheat crop to be procured during the rabi marketing season (April-June).

The decision, taken at a meeting of the Cabinet Committee on Economic Affairs (CCEA) here today, is expected to cost the exchequer an additional Rs 200 crore, assuming that the Food Corporation of India (FCI) and State agencies procure around 20 million tonnes (mt) of wheat in the coming season.

The burden would be higher if one adds all the various levies that are imposed on the MSP, which gets passed on to FCI and is reflected in a higher food subsidy outgo. States such as Punjab and Haryana, which account for roughly 85 per cent of the total wheat purchases for the Central pool, have a 4 per cent purchase tax, a 2 per cent rural development cess, a 2 per cent market fee and a 2.5 per cent `dami' charged by commission agents — all of which are levied on the MSP.

Wheat procurement hit a high of 20.63 mt in the 2001-02 rabi marketing season, falling to 19.03 mt in 2002-03, 15.80 mt in 2003-04 and 16.80 mt in 2004-05. With good late-October rains expected to bolster acreages and produce a good crop of 75 mt plus this year, there is a likelihood of the procurement crossing the 20 mt level in the coming wheat marketing season.

The decision to hike the MSP of wheat by Rs 10 per quintal for the 2004-05 planting season follows a similar increase effected for paddy. Last year, the National Democratic Alliance (NDA) Government had refrained from raising effective procurement prices of both wheat and paddy by merging the special drought relief of Rs 10 per quintal with the MSPs for 2002-03.

Besides wheat, the CCEA also approved increases in the MSPs of rapeseed-mustard by Rs 100 per quintal (to Rs 1,700), safflower by Rs 50 per quintal (to Rs 1,550), barley by Rs 15 per quintal (to Rs 540) and gram and masur (lentil) by Rs 25 per quintal each (to Rs 1,425 and Rs 1,525, respectively).

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