While the Centre cries itself hoarse that private companies have pre-empted the FCI?s wheat buying from farmers this year, it may be telling only half the story. The percentage of wheat procured by the Centre compared with total production has been decreasing year-on-year since the start of the decade. In crop year 2006-07, it was just 14.83%, down from 26.24% in 2001-02.
Why has this happened? While the minimum support price (MSP) paid to farmers has increased by only 37% to Rs 850, from Rs 620 a quintal, the average market price has shot up by over 50% to Rs 1,100, from Rs 700 per quintal, in the same period.
The trend has become a serious problem for the government, which has to now use every available possibility to augment wheat stocks, including generous imports. The year 2005-06 was difficult, with procurement falling to below 10 million tonne for the first time in the decade, or a low of 13.26%.
The year-on-year procurement trend also shows that it would have been difficult for the government to augment its buffer stock without imports. ?Procurement quantity from the market is not guaranteed. As can be seen, there is a decline in the amount of wheat that the government has been able to buy. One cannot force the farmer to sell to the government,? said a government official.
?It is a known fact that private traders pay a token amount over the MSP and procure large quantities of wheat,? the official added. The government can only pay a certain amount, as it is also its responsibility to keep prices in check.
There has been widespread criticism about the government paying higher prices for imported wheat, but not paying a higher MSP to Indian farmers. However, according to the official, raising the MSP would mean that the market benchmark would also increase.