Polls, procurement drive up wheat MSP

Polls, procurement drive up wheat MSP

Minimum Support Price (MSP) for wheat has been increased by 7.1% to 2,275 per quintal for the rabi marketing season (RMS) 2024-25. This is the highest year-on-year increase in wheat MSP since 2012-13 when the UPA II government was in office. Is the MSP announcement solely motivated by electoral considerations? It is difficult to rule out the election factor, of course. The Congress, which is the principal challenger to the BJP in Madhya Pradesh, the second largest state in terms of wheat production and procurement, has promised a wheat MSP of 2,600 per quintal in the state.

A worker sifts wheat before filling in sacks. (Reuters file photo)

That said, there is good reason to look beyond the election angle and analyse the latest MSP announcements. Data from the Centre for Monitoring Indian Economy shows the wholesale price of wheat was 2,700 per quintal on October 18. The RMS 2024-25 Price Policy Report released by the Commission for Agricultural Cost and Prices says that wheat procurement in both 2022-23 and 2023-24 has been lower than expected because of higher market prices. The government could live with low procurement for a couple of years because it had accumulated food stocks. With the liquidation of accumulated excess stocks, this option does not exist now. When seen in this backdrop, the relatively modest increase in wheat MSPs could very well be a move to ensure adequate procurement. One will have to wait to see whether this works.

To be sure, market prices being significantly higher than MSP is more the exception than the norm in India. For Indian agriculture to come out of its systemic viability crisis, both the economic and political discourse need to move beyond MSPs.

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