Pawar: Higher goal

New Delhi, Oct. 26: Agriculture minister Sharad Pawar will ask his cabinet colleagues to agree to a Rs 100-a-quintal increase in the price the government pays to buy wheat from farmers.

If his colleagues agree, he is also likely to announce a Rs-50 bonus on top of the price hike, taking the asking price for the winter wheat, which is about to be sowed, to Rs 800 a quintal, against a price of Rs 700 a quintal suggested by the Agricultural Prices Commission and last year's purchase price of Rs 650.

Pawar will also ask for the flexibility to raise prices mid-way, if he feels the state is unable to buy as much wheat as it wants from farmers.

After barely raising wheat purchase prices for a long time, the government has decided to pull out all stops after a harrowing year that saw prices spiral to over Rs 1,000, nearly 40 per cent more than average in 2005.

The government is the single largest buyer of grain in the country for the nation’s public distribution system. It also buys the grain to build a buffer that is distributed when grain is scarce or prices are too high. The purchase price of the government sets the market trend and traders peg their rates against the purchase price.

The abnormal rise in prices this year was due to farmers growing less wheat and traders cornering most of the grain, leaving little for the buffer stock.

As on April 1, against a norm of keeping 4 million tonne (mt) of wheat, the government had just 1.8 mt.

The country’s wheat output in the last crop year was 69.48 mt, against a target of 75.5 mt. The government managed to procure just 9.2 mt in the current marketing year, against an earlier target of 16.2 mt, forcing it to import wheat at a higher price of about Rs 850-1,100 a quintal.

The main reason, officials say, for lower procurement was the government price being lower than the price offered by private traders such as Cargill.

While the price hike will ensure stable wheat stocks for the government, it is also expected to ensure significant political mileage for the ruling Congress party.

The Congress will be fighting to retain its hold over Punjab and to wrest seats in Uttar Pradesh — the two states which along with Haryana are the wheat bowl of India.

Some two years back, the government had started the trend of freezing grain procurement prices to cut down on subsidies and reduce buffer stocks.

The political logic behind the controversial move was that the BJP, which was the leading party at the Centre at the head of the NDA coalition, wanted to win the support of the farmers in the agricultural districts of Punjab, Haryana and Western Uttar Pradesh.