Steep 8% MSP hike likely for rabi wheat
The government is likely to announce a big hike of around 8% in the Minimum Support Price (MSP) of wheat for the forthcoming rabi marketing season (2024-25), in the wake of the high market prices of the grain.
Higher MSP is expected to encourage farmers to sell wheat to the Food Corporation of India, and prevent official stocks falling below the buffer.
A food ministry official told FE that with the current mandi prices of wheat ruling around Rs 2400/quintal against the MSP of Rs 2125/quintal for 2023-24 marketing season (April-June) in the key growing states of Punjab, Haryana, Madhya Pradesh and Rajasthan, a higher-than-usual hike in MSP would boost procurement and the government’s stocks.
The government had hiked MPS of wheat by 6% on year for 2019-20 marketing season while in the current season the increase in MSP was 5.45% compared to previous year.
“MSP in the next season should be increased by more than 8% to Rs 2300/quintal compared to current year so that the FCI can purchase a substantial quantity of grain from farmers to boost up stock,” the official said.
Sources said that the government is likely to announce a higher increase in MSP for all the rabi crops including wheat, chana and mustard, as there are several elections to states especially in Madhya Pradesh, Rajasthan and Chhattisgarh followed by general elections in May next year.
The official said a smaller increase in MSP may force farmers to sell their produce to private trade above the remunerative price fixed by the government. Based on the recommendation of the Commission for Agricultural Costs and Prices (CACP), the cabinet will announce MSP for rabi marketing season next month.
Because of lower output, FCI’s wheat procurement had dropped by 130% to 18.79 million tonne (MT) in 2022-23 marketing season on year while in the current year, FCI could purchase only 26.2 MT of wheat.
Free grain scheme launched in 2020 which was implemented till December, 2022 and lower procurement, has resulted in a sharp fall in stock held by FCI.
As on September 1, the wheat stock with FCI was 26.37 MT while the government needs 10.5 MT of grain for the implementation of the National Food Security Act till end of current fiscal. Buffer for October 1 is 20.52 MT.
With the government commencing open market sale of wheat from FCI stocks to bulk buyers from end of June against earlier practice of ‘lean’ January-March period, wheat stock with FCI is expected to fall to around 8 MT on April 1, next year against a buffer of 7.4 MT.
The FCI through weekly e-auction so far has sold 1.2 MT in the open market and plans to upload another 4.4 MT by end of December. “We will continue our OMSS operations till March 15, 2024 so that the rise in market prices is curbed,” an official said.
Wheat prices rose by 11.94% in July, a marginal decline from inflation of 12.37% in June. Inflation in cereals and products category was 13.4% in July and inflation in cereals had been in double digits since October last year.
To curb increase in prices, the food ministry has imposed a stock holding limit on wheat in June to improve supplies.
