Hard earned

New Delhi, March 30: The Congress-led government plans to increase the procurement prices of wheat and paddy to encourage farmers to grow more of the foodgrains.

Rice and wheat prices have been rising on the back of short supplies at home and higher global prices.

Price stability has become a concern for the government given the series of state polls this year and the general election next year. To political parties, high prices mean less votes for ruling governments.

Top officials said that in wheat the government was likely to offer a bonus of Rs 100 on top of the procurement price of Rs 1,000 per quintal.

A similar bonus is likely for the next paddy crop, they said. The government had earlier raised the procurement prices of both wheat and rice by 20-30 per cent to Rs 1,000 per quintal.

For 2007-08, the Centre has procured 20.85 million tonnes of paddy till March 12.

This is about a million tonne more than the procurement of 19.83 million tonnes at the same time last year. The rice year is from October to September.

However, rice prices have gone up because of stagnant production, at 91-92 million tonnes, creating a situation of excess demand.

Government agencies buy wheat and rice to supply them at subsidised prices through ration shops and create a buffer to guard against food shortage.

Politically, a higher support price can win over the farmers — a major section of the electorate — on whose vote the Congress is banking after announcing a Rs 60,000-crore loan waiver package in the budget.

A higher procurement price generally increases the price of rice and wheat for all classes of buyers.

The officials, however, said the alternative was a supply shortfall that would lead to imports at even higher prices.

Wheat prices in the international market have gone up to $450 a tonne, or more than Rs 2,000 per quintal. Rice prices have shot up even more sharply to over $760 a tonne, or more than Rs 3,000 per quintal.

The country ended its reliance on food imports in the 1970s, on the back of the Green Revolution which resulted in Punjab, Haryana and western Uttar Pradesh becoming the granaries of India.

But in 2006, it imported wheat for the first time in six years following a significant drop in the buffer stock.

Imports occurred last year, as well, at embarrassingly high prices after local supplies ran low and the prices of both wheat and rice shot up by 30 per cent.

“The government does not want any repeats of last year. We have not imported rice in many years now and if we start doing it now it will not only be embarrassing but also, politically, an explosive state of affairs,” the officials said.

In election periods, any move to import foodgrains at prices higher than that paid to farmers could turn into a political issue.

Already, the Opposition has blasted the government over inflation which has almost doubled since the last week of November on the back of higher food and commodity costs.