New Delhi: Weeks ahead of the harvest of the rabi crop, the government has raised the procurement price of wheat to Rs850 per quintal—the highest in the last 12 years.
It hopes that this will give the Food Corporation of India, the Centre’s procurement agency, the necessary edge to compete with private traders and buy sufficient quantities of food grain to bolster the country’s depleted food stocks. Wheat stocks as on 1 March stood at 5.5 million tonnes, compared to 5.7 million tonnes in the corresponding period last year.
The price hike was announced by agriculture minister Sharad Pawar in Parliament on Friday. Mint reported the government’s intention of raising the procurement price of wheat on 12 February.
A decision to raise the price was taken at a meeting of the cabinet committee on economic affairs (CCEA) on Thursday, but with Parliament in session , the government refrained from making a statement.
The increase in procurement prices should bolster the electoral prospects of the ruling United Progressive Alliance in the forthcoming state elections in Uttar Pradesh—a key wheat-producing state.
However, this may be offset by the inflationary push that the hike in procurement prices will trigger.
The current rise in inflation has been caused, in part, by higher grain prices. Wholesale inflation was at 6.46% for the week ended 3 March. The rise in procurement price is on account of a bonus of Rs100 per quintal.
With an estimated production of 72 million tonnes, India is the world’s second-largest producer of wheat. Wheat productivity in the country, however, has been declining.
Between 1999-2000 and 2005-06, it went down from 27.8 quintals a hectare to 26.1 quintals a hectare. Last year, the government was able to procure only 9.2 million tonnes, although it needed 12-15 million tonnes.
“The government has been concerned about food security and the deteriorating terms of trade in agriculture.
It is our commitment that the farmers in the country are given a better deal to ensure their well being and prosperity,” Sharad Pawar said in Parliament.
While officials at FCI welcome the decision to hike prices as realistic, agriculture economists say that the government should not disturb the balance in the market forces. “The government should compete with the market and buy at the same rate as the private sector,” said Ashok Gulati, Asia director, International Food Policy Research (IFPR).
Meanwhile, the government, as part of its efforts to bolster domestic supplies, will continue duty-free import of wheat till 31 December.
Sukhmani Singh also contribued to this story.