The Hindu Business Line : Rs 100 surprise bonus for wheat farmers

New Delhi March 16 The Centre, on Friday, declared an unprecedented Rs 100 per quintal bonus over and above the minimum support price (MSP) of Rs 750 for the 2006-07 wheat crop to be marketed from April 1. Farmers would effectively get Rs 850 per quintal, against Rs 700 for last year's crop, which included an MSP of Rs 650 and a bonus of Rs 50.

The Rs 100 bonus, announced by the Agriculture Minister, Mr Sharad Pawar, in Parliament, has come as a surprise because the original proposal before the Union Cabinet was for a payment between Rs 25 and Rs 75 per quintal. Even after the Cabinet's meeting late Thursday evening — where the issue was deliberated upon in detail — officials were talking of a bonus of not more than Rs 75.

"The extra Rs 25 seems to have been promoted by next month's assembly elections in Uttar Pradesh," sources said. Mr Pawar, on his part, noted that the MSP of wheat had risen from Rs 580 to Rs 630 between 2000-01and 2004-05 (marketing seasons, beginning April). Describing this increase of just Rs 50 in four years as a `short-sighted policy', he said that it had "started showing its impact on production".

The latest bonus would mean that since the present Government has taken over, the effective procurement price has gone up by Rs 220 per quintal. But the same period has also seen a huge depletion in public wheat stocks, which, at 57.29 lakh tonnes (lt) as on January 1, were about 25 lt below the minimum buffer norm for that date.

The Centre had last year declared a bonus of Rs 50 per quintal. However, since the announcement came only on April 21 — by which time most of the wheat had been marketed — procurement by the Government agencies hit a nine-year-low of 92.26 lt.

As a result, the Centre had to contract imports of 55 lt at an average landed cost of $205.31 per tonne, with the last tender clinched at $237.90 or Rs 1,050 per quintal. Despite imports, the April 1 stock of 45 lt would be barely above the buffer norm.

"This time, no one wants to take chances, as imports may not be all that viable, financially or politically. So, the bonus has come well before the start of the marketing season, so that farmers will supply adequate wheat to the Government," the sources added.

Mr Pawar also extended duty-free wheat imports by private players till December 31, 2007, besides announcing import of 30 lt on Government account ``in case of need."

Millers in South India feel they may have to import to meet their needs, though it is too early to think in those terms.

The trade, however, views the bonus as a good move. "It will encourage growers to grow more wheat and overcome the supply problem," a Chennai-based miller said.

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