Financial Daily from THE HINDU group of publications
Wednesday, Apr 03, 2002
Agri-Biz & Commodities
Government - Policy
Wheat MSP raised by Rs 10 per quintal
NEW DELHI, April 2
THE Agriculture Minister, Mr Ajit Singh, has managed to wrest a Rs 10 per quintal increase in the minimum support price (MSP) of wheat for the 2002-03 rabi marketing season (April-June), amidst severe opposition from the Finance and Food Ministries, besides the Planning Commission.
Accordingly, the Food Corporation of India (FCI) and State Government agencies will procure the wheat crop of 2001-02 (to be marketed in the current fiscal) at Rs 620 per quintal, as against the previous year's rate of Rs 610 per quintal.
The Agriculture Ministry had originally proposed an MSP of Rs 625 per quintal for 2002-03. The Union Cabinet, which met here on Tuesday, settled eventually for a price of Rs 620 per quintal. The decision to substantially concede to Mr Ajit Singh's demand comes, even as the Commission for Agricultural Costs and Prices (CACP) had recommended a freeze at last year's level of Rs 610 per quintal.
The Finance Ministry and the Ministry of Consumer Affairs, Food and Public Distribution had also favoured an unchanged MSP, considering that FCI is expected to begin the new marketing season with wheat stocks of around 25 mt, which is over six times the minimum buffer norm of 4 mt for April 1.
Last year, the FCI and State agencies purchased a record 20.63 million tonnes (mt) of wheat (up from 16.36 mt in the previous year), despite a fall in total production from 75.57 mt to 68.46 mt. The 2001-02 crop size is expected to recover to 73.1 mt. This, together with the move to hike the MSP by another Rs 10 per quintal, is likely to result in an additional 25 mt of wheat being procured in the new rabi marketing season. The additional burden on the exchequer without taking into account the cost of `carrying' the extra stocks to be piled up in FCI's godowns would, thus, be around Rs 250 crore.
The Centre is hoping to offset a part of the higher financial implication by `convincing' State Governments to abolish various local levies on foodgrain purchased from mandis. Punjab alone currently imposes a 4 per cent purchase tax, a 2 per cent market fee, a 2 per cent `rural development' cess and a one per cent `infrastructure cess' all of which are charged on the MSP.
If one adds to this, the 2.5 per cent fee payable to the arhtia (commission agent), the total impact of these local levies on an MSP of Rs 620 per quintal comes to an additional Rs 71.3 per quintal, which is ultimately borne by the Centre.
The Haryana Government, too, imposes all these levies, save the one per cent `infrastructure cess'. The Cabinet will `very soon' consider a proposal that would aim at rationalisation of some of these cascading State-level imposts, officials told Business Line.
Apart from wheat, the Cabinet also announced the MSP for other rabi crops. For the 2002-03 marketing season, the MSP of oilseeds (rapeseed-mustard and safflower) have been fixed at Rs 1,300 per quintal, marking a Rs 100 per quintal increase over the previous year.
The MSP of gram has been similarly raised from Rs 1,100 per quintal to Rs 1,200 per quintal, with that of masur being hiked from Rs 1,200 per quintal to Rs 1,300 per quintal.
The MSP of barley for the 2002-03 marketing year has, however, been retained at the previous year's level of Rs 500 per quintal.
``We have fixed the MSPs for all crops, barring wheat, on the basis of the CACP's recommendations'', the Union Law Minister, Mr Arun Jaitley, told newspersons after the meeting of the Cabinet.
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