With assembly elections due in Punjab and Uttar Pradesh in early 2017, politics and not economics may be the main determinant of the minimum support price (MSP) for wheat expected to be announced by the central government later this week.
Punjab and Uttar Pradesh being important wheat-growing states, the cabinet is likely to increase the MSP of wheat this year to levels higher than those of the past years. MSP is the price at which the centre purchases grains from farmers and distributes under the subsidized public distribution system.
The two states are the top two producers of wheat in the country, contributing over 40% of India’s wheat output. Farmers are a strong and vocal community in these states and seldom ignored by political parties.
The decision of the National Democratic Alliance (NDA) government will be crucial as a large number of people in both Punjab and UP depend on agriculture for their livelihood. The Bharatiya Janata Party (BJP), in its manifesto for the 2014 general election, promised to take a relook at the way MSP is calculated by the government.
Already, in Punjab, both the Congress and Aam Aadmi Party (AAP)—bidding to form the next government—have promised large debt waivers to farmers if elected.
According to a PTI report earlier this month, the hike in wheat MSP is likely to be a modest Rs100 per quintal, if the cabinet accepts the recommendations of the Commission for Agricultural Costs and Prices. A hike of Rs100 will be the highest given by the Narendra Modi-led government.
In the past two years, the hike in wheat MSP was Rs50 and Rs75, respectively. With a hike of Rs100 per quintal, the wheat MSP will rise by 6.5%, from Rs1,525 per quintal in 2015-16 to Rs1,625 per quintal in 2016-17.
“Given the centre’s concern on food inflation, the hike is unlikely to be more than Rs100, although farmer unions have been demanding a hike of over Rs300 per quintal,” said Devinder Sharma, a Chandigarh-based food policy analyst and convener of Kisan Ekta, a forum of farm unions across the country. “Besides the promise of debt relief, AAP is also telling farmers it will implement the Swaminathan Commission recommendation of MSP at costs plus 50%,” he said.
The contention of a conservative hike in MSP gains more ground as wholesale wheat prices are on the rise and the centre is liquidating stocks to keep retail prices in check. In September, the centre lowered import duty on wheat from 25% to 10% to allow for more imports to curb food inflation.