The Hindu Business Line : Decision on support price for wheat, mustard put off

Bone of contention
Farm Ministry wants a hike of Rs 100 a quintal, whereas the Finance Ministry is ready for an increase of Rs 50.
In the case of mustard, the Finance Ministry is pressing for cut as suggested by CACP.

New Delhi , Oct. 27

A decision on fixation of the minimum support prices (MSP) for wheat and rapeseed-mustard has been put off for the coming week.

While the deferral has been officially ascribed to the Finance Minister, Mr P. Chidambaram, not being able to attend the Cabinet Committee on Economic Affairs' (CCEA) meeting here on Friday, the real reason, sources say, is continuing differences between the Finance and Agriculture Ministries on the issue.

CACP recommendation

The Agriculture Ministry is pushing for an MSP of Rs 750 per quintal for the current year's wheat crop to be procured from April next. It has also mooted a bonus over and above the MSP, linked to market conditions during procurement time. The Rs 750 per quintal proposed MSP would be Rs 100 more than the level fixed for the 2005-06 crop, marking the highest ever increase granted in any year.

The Finance Ministry, on the other hand, is agreeable to only a hike of Rs 50, corresponding to the Rs 700 per quintal MSP recommended by the Commission for Agricultural Costs and Prices (CACP). The CACP had also suggested that a bonus be paid in case market prices ruled higher than the MSP.

`Can't afford repeat'

"Everybody agrees on flexibility with regard to payment of bonus. We cannot afford a repeat of last year when the Rs 50 bonus came only on April 21, by which time peak marketing was over. The difference of opinion is only on the base MSP, with Krishi Bhawan wanting it at Rs 750 and North Block not willing to budge beyond Rs 700," the sources noted.

The Agriculture Ministry's argument is that the country cannot risk yet another bad crop as the ever-tightening global supply position would render even the import option unviable next year. Farmers, then, should be given the best deal to encourage them to plant more wheat and deliver sufficient grain to the Central pool. The Finance Ministry, however, feel that any huge MSP increase is irreversible, even when the next downtrend in the price cycle sets in.

Rapeseed-mustard

In the case of rapeseed-mustard, the CACP has, for the first time, recommended a reduction in the MSP from Rs 1,715 to Rs 1,600 per quintal, keeping in view open market price trends. Of the total crop of 78 lakh tonnes in 2005-06, the state-owned Nafed purchased some 21 lt at Rs 1,715 per quintal, whereas it has been disposing of the same at Rs 1,500 to Rs 1,600 per quintal.

"The loss is being plugged by the exchequer and so the Finance Ministry wants an MSP reduction as per the CACP's suggestion. But again Krishi Bhawan feels such a move would send bad signals to growers, particularly when the country is importing half of its edible oil requirement. Also, a lower MSP would further push down market prices, adversely impacting growers whose crop is not being bought by government agencies", the sources added.

More Stories on : Agricultural Policy | Wheat | Oilseeds & Edible Oil

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