The Hindu Business Line : Wheat bonus may cost Centre over Rs 1,500 cr

New Delhi March 16 The Rs 100 per quintal bonus declared for the wheat crop to be marketed during 2007-08 (April-June) — over and above the minimum support price (MSP) of Rs 750 per quintal — would cost the Centre upwards of Rs 1,500 crore.

This assumes a procurement of 15 million tonnes (mt), a target likely to be achieved.

Total cost

While the effective procurement price would be Rs 850 per quintal, the total economic cost may well exceed Rs 1,300 per quintal.

For 2006-07, the pooled cost of wheat (MSP plus bonus/adjusted import cost) came to Rs 761.87 per quintal.

To this were the various procurement incidentals (taxes, gunny bags, mandi labour, administrative charges and other overheads), adding to Rs 170.46 per quintal and taking the overall acquisition cost of Rs 932.33.

Distribution costs

On top of these were distribution costs of Rs 300.25 per quintal, inclusive of an average freight of Rs 104.49.

Thus, the total economic cost of wheat for the Centre during 2006-07 worked out to Rs 1,232.58 per quintal.

This time, since the basic pooled cost itself would be Rs 850 per quintal, the total economic cost will be Rs 1,350-1,400 per quintal.

In other words, the wheat being supplied at Rs 4.50 per kg to below-poverty-line families would actually cost the Centre around Rs 13.50 a kg.

Even for private players, the overheads above the Rs 850 per quintal price would be no less than Rs 130 per quintal.

Transportation

And if transport of Rs 15-20 is added, wheat would cost around 1,000 per quintal at the gate even for flour mills in the North.

"It could be a little lower if the wheat is sourced from Uttar Pradesh or Madhya , where the incidence of purchase tax and other levies is not as high as in Punjab and Haryana," a Delhi-based miller said.

The situation is worse for mills in the South, given that transporting wheat from Punjab or UP would range from Rs 150 to Rs 175 per quintal.

The effective cost to millers there will then be Rs 1,100-1,200 per quintal.

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