Cabinet Committee clears new procurement policy

Farmers growing oilseeds, pulses and copra will get the MSPs they are promised every year

The Centre has announced a ₹15,053 crore scheme to ensure that farmers growing oilseeds, pulses and copra actually get the minimum support prices (MSP) they are promised for their crops every year.

The umbrella policy — Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA) — was approved by the Cabinet Committee on Economic Affairs on Wednesday.

According to an official statement, it clubs together an existing procurement scheme with newly introduced options — meant for oilseeds only — of additional procurement by private traders or a cash payment scheme.

Credit guarantee

Apart from the ₹15,053 crore to be spent over a two-year period to implement the scheme, the Cabinet approved an additional government credit guarantee of ₹16,550 crore for agencies undertaking procurement. “The government is working with a holistic approach… Increasing MSP is not adequate and it is more important that farmers get the full benefit of the announced MSP,” said the statement.

MSP hiked by 50%

The government announces minimum support prices for 23 crops every year. This year, these rates were set at 50% higher than the farmers’ production costs, including labour cost. The rates are meant to give remunerative prices to the farmers.

About one-third of the harvest of the two major foodgrains, rice and wheat, are procured by the Centre at the MSP for sale in ration shops. However, most of the 21 other crops are sold at market prices, often below the MSP, as the government’s procurement operations are temporary.

Over the last two years, the government has increased the procurement of pulses and oilseeds at MSP under the Price Support Scheme.

In 2017-18, the National Agricultural Cooperative Marketing Federation of India said it bought 31.9 lakh tonnes of pulses and oilseeds at the MSP, benefiting 20 lakh farmers. But the total production of pulses was estimated at 240 lakh tonnes, while oilseed production was 300 lakh tonnes.

Copra, pulses will still get price support

Under the new PM-AASHA scheme, the existing Price Support Scheme (PSS) will continue for pulses and copra, with Central agencies — including the NAFED and the Food Corporation of India — physically procuring the produce whenever the market rates fall below MSP, up to a maximum limit of 25% of the total harvest. The Centre will bear the costs, according to the existing guidelines. However, for oilseeds alone, the States will be allowed to choose between the PSS or two new schemes, the statement said.

The Price Deficiency Payment Scheme is modelled on the Bhavantar experiment in Madhya Pradesh last year, where there is no physical procurement at all. Instead, farmers will sell their produce in the market, and the government will directly pay them the difference between the MSP and the average market rate. The cash payment will be deposited in their bank accounts. When this scheme was proposed by the NITI Aayog to the States in April 2018, a 60:40 split in costs between the Centre and the States was suggested; it is unclear how the burden will now be shared.

The other option is a pilot scheme where selected private procurement agencies will procure the commodity at the MSP, instead of the government. Maximum service charges up to 15% of the notified MSP will be payable, said the statement.

Expers sceptical

While Agriculture Minister Radha Mohan Singh called the policy an important step to double farmers’ income by 2022, experts remained sceptical about its implementation. “NAFED has a stock of more than 4 million tonnes [of pulses and oilseeds] because of the last two years’ procurement, but their distribution policy is non-existent. When market prices are 30% lower than the MSP, who is going to bear the loss,” asked Ashok Gulati, an agricultural economist with the ICRIER and former chairman of the Commission for Agricultural Costs and Prices, which sets the MSP.

He had co-authored a research paper on Madhya Pradesh’s Bhavantar scheme, which showed that it could not reach more than 22% of the produce, and led to corruption as trader cartels depressed market rates during the implementation of the scheme. He felt that involving private agencies would also be a non-starter, if market prices fell below the 15% compensation limit.

Agriculture and food policy expert Devinder Sharma said that earlier experiments with private procurement — such as the ITC e-choupal scheme — had collapsed once demand fell. He felt that the 25% limit on procurement was a sign the government was not serious about farmers’ welfare. “We have half-heartedly come out in the name of farmers…What will the remaining 75% do?”

“What is done in the name of farmers is actually the government’s way of solving its own problems of a high edible oil import bill,” said Swaraj India president Yogendra Yadav, explaining the policy’s focus on oilseeds. He felt the policy was “too little, too late,” given that kharif harvesting had already begun, and two-thirds of the country — mostly the eastern States — do not even have any infrastructure for procurement. “If the government was serious about ensuring MSP, it would focus on building that infrastructure. Otherwise, all this is just on paper,” he said.

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