Crowding out the market

That government policies can have distortionary effects on commodity markets is a well-established fact. But nowhere is this starker today than in wheat, where the government itself has become the ‘market’. Government agencies have procured almost 38 million tonnes (mt) out of this year's total production of 90 mt. If despite that, wheat is still selling at around Rs 1,150 a quintal in most mandis of Uttar Pradesh — as against the Centre’s minimum support price (MSP) of Rs 1,285 — it indicates two things.

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