Fertilizers and diesel prices have increased,” said All India Kisan Saba leader from Rajasthan Amra Ram. “Production is decreasing due to no significant increase in MSP. The Centre should have implemented [recommendations of the] Swaminathan Committee report,” he added.
| Photo Credit: AJAY VERMA

The Cabinet Committee on Economic Affairs (CCEA) has increased the Minimum Support Prices (MSP) for all Rabi crops for the finanicial year 2024-25. The increase for wheat, the major Rabi crop, is ₹150 per quintal and the new price will be ₹2,275.

Farmers’ organisations have criticised the “meagre” increase. The Centre procures wheat from about a dozen wheat-growing districts in Madhya Pradesh and Rajasthan. The two States are among those that will witness upcoming Assembly elections.

Welcoming the announcement, Union Agriculture Minister Narendra Singh Tomar said the policies of the Centre have helped farmers to make agriculture a profitable vocation. He said the MSP is much higher than the input cost.

The highest increase in MSP compared with last year is for lentils (masur) at ₹425 per quintal (new price: ₹6,425 per quintal) followed by rapeseed and mustard at ₹200 per quintal (new MSP: ₹5,650 per quintal). For wheat and safflower, the increase is ₹150 per quintal (₹2,275 and ₹5,800 per quintal, respectively). For barley (new MSP: ₹1,850) and gram (new MSP: ₹5,440), the increase is ₹115 and ₹105 per quintal, respectively.

Farmers’ organisations said the MSP did not match the increase in input costs. “Fertilizers and diesel prices have increased,” said All India Kisan Saba leader from Rajasthan Amra Ram. “Production is decreasing due to no significant increase in MSP. The Centre should have implemented [recommendations of the] Swaminathan Committee report,” he added. Five districts in Rajasthan and about eight districts in Madya Pradesh contribute to the wheat procurement by Food Corporation of India.

Coordinator of Bharatiya Kisan Union (Ekta Ugraan) Pavel Kussa said the increase was not sufficient. “Where is the procurement? Without procurement MSP is meaningless. Such announcements do not have any meaning when the government goes away from procurement and leaves everyting to private traders,” Mr. Kussa said.

Separately, the Centre also announced the final estimated production of major crops during 2022-23. Rice production is estimated at 1,357.55 lakh tonnes, wheat at 1,105.54 lakh tonnes, nutri and coarse cereals at 573.19 lakh tonnes, maize at 380.85 lakh tonnes and pulses at 260.58 lakh tonnes.

Oilseeds production could touch 413.55 lakh tonnes, while sugarcane output could reach 4,905.33 lakh tonnes. Cotton is estimated at 336.60 lakh bales of 170 kg each and jute at 93.92 lakh bales of 180 kg each.

A policy brief argued for a rational trade policy to contain food inflation which takes into account both consumers and producers.
| Photo Credit: TRAVELLINGLIGHT

A policy brief issued by the Indian Council for Research on International Economic Relations said that the recent steps taken by the government to curb inflation, such as wheat and rice export bans and increasing export duties, were “knee-jerk approaches rather than a well-thought-out strategy”. It argued for a rational trade policy to contain food inflation which takes into account both consumers and producers.

In August 2023, retail inflation accelerated to 6.83%, which is higher than the ceiling of 6%. As food and beverages carry a 57% weightage in India’s retail inflation calculation, and food inflation was 9.94%, rapid acceleration in that segment had a severe impact on retail inflation (Chart 1).

Chart 1 | The chart shows the trend of retail inflation (dark blue) and food inflation (light blue) over time.

Chart appears incomplete? Click to remove AMP mode.

To date, the Indian government has implemented a series of actions aimed at controlling food inflation such as prohibiting the export of wheat in May 2022 and halting the export of broken rice in September 2022. Additionally, in June 2023, the government imposed stocking limits on wheat traders and millers. In July 2023, an export ban was placed on non-basmati white rice, followed by a 20% export duty on parboiled rice. In August 2023, a Minimum Export Price of $1,200 per tonne was set for basmati rice, along with a 40% export duty on onions.

Chart 2 | The chart shows the chronology of trade and domestic stock policy measures to tame the inflation of rice and wheat. 

Due to heatwaves, the production of wheat has suffered in the last two years. Wheat procurement by the government has also been low in the last two cycles. Wheat inflation was 9.22% in August. All this prompted the government to ban wheat exports in May 2022, argues the brief. “But this sudden ban on wheat exports, instead of bringing wheat inflation down, led to greater uncertainty in the market and wheat inflation surged to 15.7 per cent in August 2022, when GOI also banned exports of wheat flour (atta) products,” says the policy brief. Just before the harvest season, wheat inflation accelerated to 25.4% in February 2023. Following this, the government off-loaded wheat under the Open Market Sales Scheme at much cheaper prices and announced wheat stocking limits, according to the policy brief. While these measures did bring down inflation, the report argues that the implications of such measures on farmers who bore the brunt have to be taken into account.

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Chart 3 | The chart shows trends in cereal exports in India. 

Data from the report shows that non-basmati exports increased from 1.38 MMT in FY20 to 6.40 MMT in FY23, by 363%. The report argues that in the fiscal year 2023, the per-tonne export value for non-basmati rice stood at $344, falling below India’s Minimum Support Price (MSP) for rice. This indicates that millers may be sourcing rice directly from farmers or that there could be an increase in rice supply due to potential distribution leakages from the expanded PMGKAY free rice programme. 

Chart 4 | The chart shows the offtake of rice and wheat under the National Food Security Act and PMGKY from the central pool. 

Chart 3 and Chart 4 underscore the growth in rice and wheat offtake within the last three years, as well as the significant rise in grain exports from India over the same time period.

In July 2023, when rice inflation was 13%, the government banned the export of non-basmati rice. Yet, inflation remained at 12.5%. Rather than imposing export duty and gradually increasing its impact, the government called for a ban which created panic among the African and Indian diaspora in the U.S., according to the report.

Source: A report called “Tackling food inflation: Is restricting exports and imposing stocking limits the optimal policy?” published by the Indian Council for Research on International Economic Relations

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New Delhi:

The government on Thursday further reduced the stock limit on wheat traders, wholesalers and big chain retailers to 2,000 tonnes from 3,000 tonnes with immediate effect amid uptick in prices.

Announcing the decision, Food Secretary Sanjeev Chopra said: “Keeping in view of recent uptick in the prices, we have had a review of the stock limits and effective today the stock limit on traders, wholesalers and big chain retailers stand reduced to 2000 tonne.”

Three months back on June 12, the government had imposed a stock limit of 3,000 tonnes on these wheat players till March 2024.

The stock limit has been reduced to 2,000 tonnes as the government found there is an “an uptick in the wheat prices on the NCDEX by 4 per cent to Rs 2,550 per quintal in the past one month.”

“Although there is adequate availability of wheat in the country, I think there are some elements which are trying to create some artificial scarcity,” Chopra told reporters.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

A worker arranges sacks of wheat flour inside a factory in Siliguri.
| Photo Credit: Reuters

The Central government has decided to restrict the export of wheat flour in order to curb the rising prices of the commodity and ensure food security of the most vulnerable sections of the society. The decision was taken by the Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi here on Thursday.

The government will accordingly amend the policy of exemption for the commodity from export restrictions or ban.

The Directorate General of Foreign Trade (DGFT) will issue a notification to this effect, a Government release said. The decision is taken against the backdrop of the Russia-Ukraine war. The Centre said both the countries are the major exporters of wheat accounting for around 1/4th of the global wheat trade and the conflict between them led to the global wheat supply chain disruptions increasing demand of Indian wheat. “As a result, the price of wheat in domestic market showed an increase. In order to ensure food security of 1.4 billion people of the country, the decision was taken to put a prohibition on export of wheat in May 2022,” the release said.

However, the Centre said, due to the prohibition on export of wheat, the demand for wheat flour has increased in foreign markets and its exports have registered a growth of 200% during April-July 2022 compared to the corresponding period in 2021. “The increased demand for wheat flour in international market led to significant price rise of wheat flour in the domestic market,” the release added.

“Earlier, there was a policy not to prohibit or put any restrictions on the export of wheat flour. Therefore, a partial modification of the policy was required by withdrawing the exemption from ban/ restrictions on export for wheat Flour in order to ensure food security and put a check on mounting prices of wheat flour in the country,” the release added.