Minimum Support Prices for Agricultural Produce

What are India’s plans to avert a Wheat Crisis?

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Wheat cultivation in India

Mains level : Public procurement of wheat

On May 4, the government lowered its wheat production estimates by 5.7% to 105 million tonnes (MT) from the projected 111.32 MT for the crop year ending June.

Decline in wheat production

  • India is the second largest producer of wheat in the world, with China being the top producer and Russia the third largest — Ukraine is the world’s eighth largest producer of wheat.
  • After five straight years of a bumper wheat output, India has had to revise downwards its estimated production.
  • Unprecedented heatwaves across the north, west and central parts of the country, and March and April being the hottest in over 100 years, have caused substantial loss to the yield.
  • Researchers attributed the lower estimates to “early summer” affecting the crop yields in States, especially Punjab, Haryana and Uttar Pradesh.

Why is there a decline in govt procurement?

  • Ukrainian war: Private traders have been prompted to buy more wheat from farmers as the price of wheat at the international level has shot up due to Ukrainian war.
  • Higher prices: A large quantity of wheat was being bought by traders at a higher rate than the minimum support price (MSP).
  • Hoarding by farmers and traders: Also, farmers are holding on to some quantity of wheat, expecting higher prices for their produce in the near future.

How will this impact the public distribution of grain?

  • Wheat procurement is undertaken by the state-owned Food Corporation of India (FCI) and other agencies at MSP to meet the requirements under the Public Distribution System (PDS).
  • Other running welfare schemes is the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) introduced during the pandemic.
  • The government has revised the grain allocation under PMGKAY for May to September 2022.
  • According to the new guidelines, the FCI will fill the gap left by wheat with an increased allocation of rice.
  • Pointing out that from next year, fortified rice will be distributed to the entire Public Distribution System (PDS).

Will domestic wheat prices be hit?

  • As government wheat procurement has dipped, concerns are being raised about the stability of prices in the country.
  • The availability of grain for internal consumption, many agri-experts argue should be a priority.
  • The government has dismissed concerns about both prices and stocks, asserting that India is in a comfortable situation with the overall availability of grains.
  • India has enough stocks to meet the minimum requirement for next one year for meeting the requirement of welfare schemes.

How is the global supply situation shaping up?

  • In order to meet the gap created by reduced Russian and Ukrainian exports, importers are turning to alternative markets.
  • Wheat-producing countries like India are looking to increase exports.

Will farmers benefit?

  • Farmers will certainly benefit from the scenario as they are being offered a price above the MSP.
  • Amid the Russia-Ukraine crisis, new markets in countries like Israel, Egypt, Tanzania and Mozambique have opened up for India.
  • However, if private traders continue to buy above MSP, eventually that could stoke inflation.
  • More private buying of wheat will help India expand the agri-export basket to new countries, riding the current crisis situation.
  • This trade relationship will stay even when the global crisis is over, which means farmers will get about 10%-15% extra price as market prices are ruling above MSP.

What about export plans?

  • After Egypt, Turkey has also given approval for the import of Indian wheat.
  • India has been eyeing deals with new export markets in European Union countries too.
  • Despite the crop loss and revision of the output estimate, the Centre maintained that no curbs would be placed on wheat exports and that it was facilitating traders.

 

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Subscribe
Notify of
0 Comments
Inline Feedbacks
View all comments