Wheat is being purchased at a higher rate than the MSP despite the export ban
The wheat crisis that started earlier this year, is on despite the Centre and states’ efforts, with governments not being able to procure wheat to improve food security. The Centre could procure 18.8 million tonnes (MT) of wheat till June 19, 2022. Punjab had the highest procurement of 9.64 MT, compared to the 13.22 MT that it procured last year. This is the lowest purchase in the past 10 years.
Haryana could only procure 4.2 MT of wheat, compared to 8.5 MT last. Uttar Pradesh recorded the least amount of wheat purchase. It purchased 0.33 MT of wheat this year, compared to 5.6 MT last year.
Madhya Pradesh procured 4.6 MT this year, comparedto 12.8 MT last year. Rajasthan procured just 9,000 tonnes of wheat this year, compared to 2.34 MT last year.
The drastic decline in the government purchase of wheat has been attributed to three main factors. First, traders purchased wheat from farmers at rates higher than the Minimum Support Price (MSP), due to the increase in global wheat prices following Russia's invasion of Ukraine.
Second, the intense heat in March and April this year has had an impact on wheat production. And third, the large revenues of the previous year caused a steady shift towards increased mustard cultivation this time, at the cost of wheat.
The UP government took several steps after the state procured low volumes of wheat. But none of them succeeded. The state government also instituted a mobile purchase procedure, informing farmers that officials would visit their villages to buy wheat if they so desired.
However, farmers did not express any interest. The UP government has once again postponed the deadline and will now procure wheat till June 30, 2022.
There is no clear information available about who is buying wheat in Uttar Pradesh. This is because local Arhtiyas (middlemen) contact farmers and offer them prices over the MSP. Moreover, payment is made as soon as the wheat is picked up, whereas a farmer is paid within five to ten days after selling the wheat at a government centre.
Bhartiya Kisan Union (Apolitical) spokesperson Dharmendra Malik said traders started buying wheat from farmers at a higher price after the Russian invasion of Ukraine. However, the government banned all exports later.
Due to this, traders stopped buying from the farmers and the price fell below the MSP. Following this, traders started buying wheat again at a higher price, which eventually made farmers to stop selling their wheat to the government.
The administration is still unsure of the expected extent of the decline in wheat output. In February 2022, the government had released the second advance estimate, wherein the country’s production estimate was at 111.3 million tonnes.
However, just 5.6 percent of production was predicted to fall short in the advance estimate analysed in May, although experts predicted a production loss of 15-20 per cent. Malik added that the government needed to be open and honest about its production estimates.
On June 10, 2022, a statement came from the Union Ministry of Food and Public Distribution, initially admitted that despite all governmental efforts, the arrival of wheat for government procurement remained low.
However, the statement soon patted the government on the back, stating that wheat farmers across the country had benefited from higher market rates, as most farmers sold their produce to private traders at a higher market rate than the MSP. This, according to the government, is the main goal of its programme for farmers’ welfare.
The ministry stated, “It was discovered that farmers made more money selling their crop in the open market than they did under MSP this season, with an average selling price of Rs 2,150 per quintal.
“In a similar vein, on an anticipated 44.4 MT purchase, farmers would have made an average of roughly Rs 95,460 crore at Rs 2,150 per quintal, whereas the MSP would have made just Rs 89,466 crore at the cost of Rs 2,015 per quintal. Therefore, the wheat farmers would have earned a total of Rs 5,994 crore more than the MSP,” it added.
Food security, however, is at risk since government procurement has not been done. Initially, the government had planned to buy 44.4 MT of wheat during this Rabi season. But with farmers selling their wheat to merchants and the extreme heat in March, wheat production reduced.
As a result, the government changed its plan. The procurement target during the current marketing season was amended to 19.5 MT in the first week of May. Roughly 18.8 MT of wheat have been purchased so far, falling short of this objective as well.
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