The Cabinet Committee on Economic Affairs (CCEA) on Thursday raised the minimum support price (MSP) for rabi crops such as mustard seeds, grams and lentils by seven-20 per cent. However, the CCEA did not take a decision on the wheat MSP for the 2013-2014 crop marketing season (April-March) due to differences between the food and agriculture ministries, sources said.
Officials attached to the food ministry said it was in support of the recommendations of the Commission for Agriculture Costs and Prices (CACP) to freeze wheat MSP at the 2012-2013 level of Rs 1,285 a quintal to curtail the rising subsidy. According to agencies, the finance ministry, too, was believed to be not in favour of raising the wheat MSP, as it would impact the government’s fiscal deficit calculation and further push up food inflation. However, agriculture ministry officials said a bonus of 10 per cent should be declared upfront to compensate farmers for the rising diesel cost. “For wheat, there would be further consultation,” an official statement noted.
According to a PTI report, which quoted an unnamed official source, a fresh Cabinet note on wheat MSP is being prepared to address the concerns of all stakeholders.
Some officials said the CACP could be asked to reconsider its recommendations on wheat. However, senior CACP officials said they had not received any communication from the government to rework the MSP of wheat. According to officials, CACP had given its recommendations before the government raised diesel prices by Rs 5 a litre in September, and, hence, should re-assess its suggestions on wheat MSP to incorporate this impact.
The CACP, in its report on pricing policy for rabi crops in 2013-2014, had recommended freezing MSP at the current year’s level to encourage growers to plant more oilseeds and pulses in place of foodgrains.
While the agriculture ministry was not in favour of the freeze, sources said the food ministry in its note to the Cabinet had supported the idea, on the grounds that any rise would further inflate the annual food subsidy bill by Rs 4,000-5,000 crore.
The food subsidy requirement, which was pegged at Rs 75,000 crore in the 2012-13 Budget, has already exceeded Rs 1 lakh crore thanks to record purchases of wheat and rice by the government for the central pool, at high prices and increased sale through the Public Distribution System at lower rates.
“There is absolutely no need to further encourage planting of wheat, as the country has already produced wheat as required by the expected demand during the terminal year of the XII Five-Year Plan in 2016-2017,” said a senior CACP official.
India produced a bumper 94 million tonnes of wheat in 2012-2013, almost eight per cent more than the previous year. The CACP official explained: “There is no point in producing more wheat and letting it rot... The focus should be more on improving production and productivity of oilseeds and pulses. In 2011-2012, the country imported around Rs 55,000 crore of oilseeds and pulses.”
Madan Sabnavis, chief economist of CARE Ratings, said if the wheat MSP was kept unchanged for the time being, it would encourage farmers to plant more oilseeds and pulses. This would also ease the government’s concerns over food subsidy bill and fiscal deficit to some extent, he said. Increasing MSP of other competing crops by 10-20 per cent could further push up food inflation, he added.
MSP of all other rabi crops has been raised in line with CACP’s recommendations.
An official statement said that the CCEA approved raising the MSP of grams and masur (lentil) by Rs 100-200 a quintal to Rs 3,000 for gram and Rs 2,900 for lentil for the April 2013-March 2014 marketing year. The Cabinet has also approved increasing the MSP of mustard seeds from Rs 2,500 crore a quintal to Rs 3,000 a quintal for the 2013-14 marketing year and from Rs 2,500 to Rs 2,800 for safflower.
Among cereals, the official statement said that the CCEA has frozen the support price of barley at Rs 980 a quintal for 2013-14.