Food Min against hike in wheat MSP

New Delhi: The Food Ministry has opposed the Agriculture Ministry`s proposal to raise the support price of wheat by a steep 10 per cent to Rs 1,285 per quintal for 2012-13, saying the move would result in increase in both retail prices and food subsidy bill.

The minimum support price (MSP) of wheat for the 2011-12 marketing season (April-May) was Rs 1,170 per quintal, including a bonus of Rs 50 per quintal. The Agriculture Ministry has proposed Rs 115 hike in the wheat MSP for 2012-13 to cover rising farm input cost and encourage farmers to increase acreage. In its comments on the CCEA (Cabinet Committee on Economic Affairs) note, the Food Ministry has objected to the proposed hike and suggested to maintain wheat MSP at Rs 1,170 per quintal.

"The average cost of production of wheat is Rs 927 per quintal and the proposed MSP of Rs 1285 per quintal means increase of about 39 per cent over such cost, which appears very high margin and therefore, not acceptable," sources said. "…this large increase in MSP shall involve huge increase in the food subsidy bill and will also lead to inflationary trend in the prices of wheat," the Food Ministry observed.

The food subsidy bill is estimated to rise to Rs 1,03,695 crore this fiscal as against last year`s Rs 62,929 crore. The government announces the support price for more than 20 crops just before the sowing season. The government buys wheat and paddy from farmers at the MSP to ensure assured returns to growers. The MSP also acts as benchmark price for the market.