Govt increases wheat MSP to Rs 1,350/quintal

25 lakh tonnes more to be exported

With only a month to go for wheat harvesting, the Union Cabinet has approved an additional export of 25 lakh tonnes of wheat to manage storage space in its warehouses besides hiking the minimum support price (MSP) for wheat by about 5 per cent to counter the rising input costs.

The additional export will help to increase storage space in Food Corporation of India (FCI) godowns to accommodate the wheat from the bumper harvest anticipated this season.

“We have huge stocks. We have three times the buffer stock requirement and therefore we approved the export of additional 25 lakh tonnes of wheat,” Finance Minister P Chidambaram said. India needs to have a combined buffer stock and strategic reserve of 11.2 million tonnes of wheat on January 1 and the reserve at the moment is 37.6 million.

Keeping excess grains under the sky with inadequate protection often leads to rotting and wastage of food grains.

The move has come under criticism by the Supreme Court and non-governmental organisations, which wondered why the government did not utilise the grains or gave it to the needy rather than wasting.

The export, approved by the Cabinet Committee on Economic Affairs (CCEA) on Wednesday, would have to be completed by June 2013 with the floor price of $ 300 per tonne.

The decision follows Prime Minister Manmohan Singh’s decision in May to export 40 lakh tonnes of wheat to Iran and other west Asian countries for the disposal of excess stock. Subsequently, PM’s Economic Advisory Council headed by C Rangarajan suggested exporting 20 lakh tonnes of wheat from the public stock in the first batch, out of which tendering process of 17.30 lakh tonnes was completed and the average price realised is above $ 300 per tonne.

The CCEA approved Rs 1,350 MSP per quintal of wheat for 2012-13 season to be marketed in 2013-14, increasing Rs 65 per quintal over the last year’s MSP.

The government agreed to raise the hike notwithstanding early objections from the Commission for Agriculture Cost and Prices, which first recommended freezing the MSP at last year’s rate of Rs 1,285 per quintal and subsequently agreed to increase it by Rs 40.

However, farmers in Punjab and Haryana on Wednesday rejected the Rs 65 hike in MSP and said it is “grossly insufficient” in the wake of “exorbitant” increase in the cost of production.