Govt Saves Over Rs 76,000 crore as Wheat Procurement Falls by 57%

After wheat procurement fell short of target this year, the Centre saved more than Rs 76,000 crore, which the Finance Ministry can use to meet other demands, such as additional fertilizer subsidy burden or likely extension of the free foodgrain scheme for the entire year.

Wheat procurement for the 2022-23 season (April-March) reached 187.93 lakh tonnes (lt), down 56.6 percent from 433.44 lt in 2021-22, according to the most recent FCI data. Before the season began, the government set the procurement target for this year at 444 lt, and the expenses could have totaled Rs 1,03,193.37 crore Rs 89,466 crore for payments to farmers at the minimum support price (MSP) and Rs 13,727.37 crore for procurement incidentals.

In addition, if the entire targetted quantity was purchased, an additional Rs 29,054.96 crore would be required for distribution costs, bringing the total expenditure to Rs 1.32 lakh crore. Distribution costs will be reduced by Rs 16,756.85 crore as a result of lower purchases. Though some recovery from grain sales could have been made, it is insignificant in comparison to the government's actual expenses.

According to an estimate, the Food Ministry will have to spend Rs 55,976.83 crore for the 187.93 lt of already purchased wheat- Rs 43,678.72 crore for acquisition costs and Rs 12,298.11 crore for distribution costs, based on 2020-21 estimates on the share of procurement incidentals and distribution cost in the economic cost. However, if the FCI's estimated distribution and procurement incidentals for this year are added to the MSP cost, the total spending on wheat procurement to distribution will be Rs 26,228.3/tonne, saving approximately Rs 67,000 crore.

According to FCI, procurement incidentals include mandi/statutory charges, commission to Arthiya & Societies, gunny cost, milling charges and driage allowance, mandi labour, forwarding charges, internal movement, storage charges, interest, previous year arrears, and administrative charges to State/agencies. Distribution costs, which accounted for 21.97% of total economic costs in 2020-21, include freight, handling and storage fees, interest, administrative overheads, and shortages.

For 2022-23, Food Corporation of India forecasts procurement incidentals at 13.1% of economic cost and distribution costs at 10.4%. Furthermore, official sources stated that because the all-India weighted average mandi price of wheat was 50/quintal higher than the MSP of Rs 2,015/quintal during the main procurement period of April-June, farmers benefited by approximately Rs. 1,300 crore, based on the non-procured quantity against the target.

"There is definitely a saving, which could be used to partially fund unforeseen expenditure after the Budget is presented," said DK Pant, Chief Economist at India Ratings and Research. However, it should be viewed holistically, as the wheat stock on July 1 was the lowest in 15 years, at 28.5 million tonnes (mt). In 2008, wheat stockpiles totaled 24.91 million tonnes.

The government has budgeted Rs. 80,850.67 crore for the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) for the months of April to September, and a similar amount will be needed if the scheme is extended for the remaining six months (October to March) of the current fiscal. Similarly, the government has stated that fertiliser subsidies may exceed Rs 2 lakh crore, as opposed to Rs 1.05 lakh crore budgeted for FY23.