Centre saves over ₹76,000 cr as wheat procurement drops 57%

Prabhudatta Mishra | Updated on: Aug 01, 2022
According to latest FCI data, wheat procurement for 2022-23 season (April-March) reached 187.93 lakh tonnes (lt), down 56.6 per cent from 433.44 lt in 2021-22

According to latest FCI data, wheat procurement for 2022-23 season (April-March) reached 187.93 lakh tonnes (lt), down 56.6 per cent from 433.44 lt in 2021-22 | Photo Credit: Andrii Yalanskyi

Of the total estimated expenditure of ₹1.32-lakh crore to procure and distribute 444 lt of wheat, the Food Ministry will have to spend ₹55,976.83 crore

The Centre has saved more than ₹76,000 crore after wheat procurement fell short of target this year, which the Finance Ministry can utilise in meeting other demands such as additional subsidy burden on fertilisers or likely extension of the free foodgrain scheme for the whole year.

All that is saved

According to latest FCI data, wheat procurement for 2022-23 season (April-March) reached 187.93 lakh tonnes (lt), down 56.6 per cent from 433.44 lt in 2021-22. The government had fixed this year’s procurement target at 444 lt before the season began and the expenses could have been ₹1,03,193.37 crore — ₹89,466 crore for payment towards farmers at minimum support price (MSP) and ₹13,727.37 crore as procurement incidentals.

On top of it, an additional ₹29,054.96 crore would have to be spent as distribution cost had the entire targetted quantity been purchased, taking the expenditure up to ₹1.32-lakh crore. Due to lower purchase, ₹16,756.85 crore will be saved on account of distribution costs. Though some recovery could have been done from sale of the grain, it is negligible compared to the actual expenses incurred by the government.

The Food Ministry will have to spend ₹55,976.83 crore for the 187.93 lt of already purchased wheat — ₹43,678.72 crore as acquisition cost and ₹12,298.11 crore as distribution costs, according to a BusinessLine estimate, based on 2020-21 estimates on share of procurement incidentals and distribution cost in the economic cost. However, if the FCI’s estimated distribution cost and procurement incidentals projected for this year are added to MSP cost, the total spending will be ₹26,228.3/tonne on wheat procurement to distribution and on this cost, the saving will be about ₹67,000 crore.

According to FCI, procurement incidentals, which was 10.4 per cent of economic cost of wheat in 2020-21, include mandi/statutory charges, commission to Arthiya & Societies, gunny cost, milling charges and driage allowance, mandi labour, forwarding charges, internal movement, storage charges, interest, previous year arrear and administrative charges to State/agencies. Distribution costs, which was 21.97 per cent of economic cost in 2020-21, cover freight, handling and storage charges, interest, administrative overheads and shortages. For 2022-23, FCI has projected procurement incidentals at 13.1 per cent of economic cost and distribution costs at 10.4 per cent.

Besides, official sources also said since the all-India weighted average mandi price of wheat was ₹50/quintal more than the MSP of ₹2,015/quintal during April-June, the main procurement period, farmers have been benefitted by about ₹1,300 crore, based on the non-procured quantity against the target.

Unforeseen expenditure

“There is definitely a saving, which may be used to part-finance unforeseen expenditure after presentation of the Budget,” said DK Pant, Chief Economist of India Ratings and Research. However, it should also be seen holistically as the wheat stock on as July 1 at 28.5 million tonnes (mt) was the lowest in the last 15 years. Wheat stock was at 24.91 mt in 2008.

The government has estimated ₹80,850.67 crore as expenses on the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) for April-September period and a similar amount will be required if the scheme is extended for the remaining six months (October-March) of the current fiscal. Similarly, the government has said fertiliser subsidy may exceed ₹2-lakh crore against ₹1.05-lakh crore budgeted for FY23.

Published on July 31, 2022
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