The Government on Wednesday hiked the minimum support price (MSP) for wheat by Rs 65 to Rs 1,350 a quintal for the 2012-13 crop year, from Rs 1,285 a year ago.
It also approved additional wheat exports of 2.5 million tonnes (mt), a move that may help liquidate surplus stocks and create storage space for the new crop.
The Cabinet Committee on Economic Affairs (CCEA) approved the higher MSP, Finance Minister P. Chidambaram said here on Wednesday.
The hike, however, is lower than the Agriculture Ministry’s latest recommendation of Rs 100.
However, the quantum of MSP hike is marginally higher than the bonus of Rs 40, suggested by the Commission for Agricultural Costs and Prices (CACP) recently.
In its earlier recommendation, the CACP had favoured a freeze on wheat MSP for 2012-13 at last year’s level of Rs 1,285. However, the CCEA, while approving the MSP for other rabi crops on November 1, had asked the advisory body to take a relook at wheat support price.
In its revised suggestion, the CACP is learnt to have again favoured freezing the MSP at last year’s level but recommended a bonus of Rs 40 while advising liquidation of a total of 15 mt wheat from the existing stocks.
The CACP had favoured exports of 7.5 mt and suggested offloading the remaining 7.5 mt in the domestic market, sources said.
As of December 1, 2012, the Government held wheat stocks of 37.65 mt in the Central pool stocks, almost thrice the buffer norm and strategic requirement at that point in time.
Wednesday’s hike in wheat MSP may prompt more farmers to plant the cereal crop. As of December 21, wheat acreage stood at 253.17 lakh hectares, marginally down from 257.15 lakh ha in the corresponding last year.
The Government is targeting a wheat output of 86 mt for the 2012-13 crop year.
In 2011-12, crop year, the country produced an all-time record of 93.9 mt.
Following the announcement of MSP, wheat futures gained marginally on Wednesday. The January 2013 contract on the NCDEX ended 0.38 per cent higher to end at Rs 1,591, while the February contracts closed higher by 0.77 per cent at Rs 1,566.
Nod for additional 2.5 million tonnes export
The Government on Wednesday approved additional wheat exports of 2.5 million tonnes (mt) from the central pool stocks of Food Corporation of India (FCI).
The Cabinet Committee on Economic Affairs (CCEA), which approved the additional exports through public-sector entities such as PEC, MMTC and STC, has set a floor price of $300 a tonne. These additional exports are to be completed by June 2013.
In July, the Government had allowed export of two million tonnes of wheat. The tendering process is complete for 1.7 mt.
Of this, the actual quantity shipped stands at over 1.1 mt, sources said.
The average price fetched by the PSEs so far stands at over $300 a tonne – the highest being $328, while the lowest was $296. About 70 per cent of the wheat exported by the PSEs is destined to Far Eastern countries, while the rest has been to West Asia.
“Prices should look better early next month when the US market resumes post-Christmas and New Year holidays,” an analyst said.
The Government’s latest move to export additional quantity of 2.5 mt from central pool stocks will create more space for storage in FCI godowns, a statement said.
Since April this year, wheat exports from India have crossed two million tonnes, with equal contribution from both private and public sector entities.