New Delhi: Punjab chief minister Parkash Singh Badal and his Haryana counterpart Bhupinder Singh Hooda on Monday asked the Centre to increase the price at which it will buy wheat in the coming harvest season that starts next week by Rs400 a quintal or Rs 4 a kg, according to a Punjab government press release. If the government agrees to the demand, the result could be a significant spike in inflation which is already at a three-year high.
Every year the government announces a minimum support price, or MSP, for crops ahead of the sowing season and this serves as the floor price at which it buys produce from farmers. Punjab and Haryana, are demanding that government pay out a bonus on the procurement price of Rs1,000 already announced. If accepted, this would mean an almost 65% increase over the MSP of Rs850 per quintal for the preceding season.
MSP on agenda: Union agriculture minister Sharad Pawar with chief ministers of Punjab and Haryana in Chandigarh on Monday.
However, Union agriculture minister Sharad Pawar, while stating that inflation is a concern at this point and the government has to think of the consumers as well, said that “no immediate increase in the MSP for wheat is possible.”
He denied that the Punjab government had sought a bonus of Rs400.
“They (Badal and Hooda) said that there was an expectation of bonus among the farmers, since it has been a precedent that every time the prices are announced, the bonus is given along with it,” he said, adding when the decision for increasing the MSP from Rs850 per quintal was being taken, it was the Punjab government that suggested the price and bonus should be announced together, leading to the price finally being fixed at Rs 1000 per quintal.”
Pawar also refuted the Punjab government’s claim that the rise in MSP had been lower during the United Progressive Alliance’s tenure when compared to that during the National Democratic Alliance’s. “This is not a correct claim. While the MSP rose by 14.5% during the NDA government’s rule, it has risen by 59% during the UPA government’s tenure,” he added. Experts and analysts say the government will find it difficult to refuse demands such as Badal’s that will likely come its way.
One reason is the price the government has shown it is willing to pay for imported wheat should it be able to procure less of the grain then it needs.
On Sunday, The Hindu Business Line first reported that the government had entered into an agreement with Cargill International to buy wheat at $406 (Rs16,199) a tonne should it feel the need to do so. If the government doesn’t go ahead with the purchase, under the so-called call option, it will pay a premium of $35 a tonne, the report said. This price translates into Rs16,250 a tonne (excluding freight costs) or Rs 16.250 a kg.
The second reason is coming elections to five key states— including Madhya Pradesh, a significant producer of wheat —and next year’s Lok Sabha elections.
Renowned agriculture scientist M.S. Swaminathan, justified the demand for raising MSP. “This rabi (winter crop) season witnessed lesser than normal rainfall and hence the farmers had to pay more in order to irrigate. Moreover, there was a shortage of Di-ammonium phosphate (DAP), which is a crucial fertilizer, during the sowing season. As a result, the farmers had to buy DAP from the black market. So the cost of production this year is far more than what has been calculated by the Commission for Agricultural Costs and Prices.”
He recommended that the government should announce a bonus of at least Rs200 per quintal and challenged the view that raising the MSP would fuel inflation. “The government should procure at the best prices possible...inflation would be higher if government fails to procure adequate stocks,” Swaminathan said.
Meanwhile, agriculture secretary P.K. Mishra said the country would meet wheat production targets this season. He said the target of 74.8mt would be met despite heavy rains and storms in north India that some say could have damaged the crop. “We are assessing the crops, but a shortfall appears unlikely at this stage,” he said, seeking to play down speculation that the foodgrain might need to be imported in significant amounts.
Bloomberg contributed to this story.