Indian Farmers Face Rs 40,000 Crore Loss as Wheat Floods Market, ICRIER Report Highlights

A recent report by the Indian Council for Research on International Economic Relations (ICRIER) has revealed that farmers in India have suffered staggering losses amounting to approximately Rs 40,000 crore due to a government initiative aimed at curbing surging inflation by releasing an excess of wheat into the market.

The ICRIER report has also issued a stark warning that the government's restrictive policies could potentially inflict similar financial setbacks on paddy farmers in the upcoming procurement season.

Revisiting Market Restrictive Policies:

The report strongly advocates the need to reconsider and recalibrate these market-restricting policies. Such policies, which extend beyond wheat to encompass other crops like pulses and onions, have not only impacted farmers but also created a resource transfer from producers to consumers. The report underscores the importance of compensating farmers for this significant shift in resources.

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Wheat Production Statistics:

In the 2022-23 season, India produced a staggering 112 metric tonnes of wheat. During the 2023-24 rabi season, wheat was priced at a minimum support price (MSP) of Rs 2,125 per quintal. In contrast, it commanded a price of Rs 2,673 per quintal in the open market.

Reasons Behind Wheat Farmers' Losses:

The report explains that the losses incurred by wheat farmers can be attributed to the government's implementation of the open market sale scheme (OMSS) in February. Under this initiative, wheat was made available at a substantially reduced cost, starting at Rs 2,350 per quintal and later dropping to Rs 2,150 per quintal. This move was intended to stabilize domestic prices. However, these OMSS prices fell significantly below the actual production cost for farmers, which stood at Rs 2,654 per quintal in the 2022-23 season.

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The Cost of Government Intervention:

Had the government not intervened in the market, farmers could have potentially earned an additional Rs 548 per quintal (the difference between Rs 2,125 and Rs 2,673 per quintal) from their wheat sales. This intervention, however well-intentioned, has resulted in an estimated loss of around Rs 40,000 crore for farmers.

Balancing Act Required:

The ICRIER report underscores the imperative of using trade policies judiciously to manage inflation domestically without compromising farmers' livelihoods. As India grapples with striking the right balance between inflation control and safeguarding the interests of its vast farming community, a holistic and sustainable approach is essential to ensure the well-being of this critical sector and the millions of lives it sustains.

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