NITI to finalise MSP mechanism by month-end

The central government expects, by the end of this month, to formalise a mechanism for states to ensure farmers get adequate price for their produce.

A meeting was held at the Niti Aayog with representatives of state governments on this. Earlier, the finance minister had in his Union Budget said the Aayog would work on a ‘fool-proof’ mechanism in this regard, to ensure a price 1.5 times more than farmers’ cost of production.

Officials said state representatives and senior officials from the ministries of agriculture, food, the prime minister’s office and the Aayog primarily discussed three ways. One of these was the Centre’s own Market Assurance Scheme. In this, states do all the procurement; the central government compensates up to a portion of the Minimum Support Price (MSP) it sets.

Also discussed was the Madhya Pradesh government’s Bhawaawantar Bhugtaan Yojana or Price Deficiency Procurement Scheme. Here, if the sale price is below a ‘modal price’ which is calculated, farmers are compensated on the difference between the MSP and this one, subject to a ceiling of not more than 25 per cent of the MSP. No compensation is due if the modal price in a neighbouring state is above the MSP.

The third way discussed at the meeting was procurement by private entrepreneurs at the MSP. The government would provide policy and tax incentives, perhaps also a commission, to be decided on the basis of transparent criteria. The private player would be nominated through a transparent bidding process by the state government concerned.

The ministry of agriculture suggested states adopt more than one procurement model. And, all three need not be considered for the same crop.

The private procurement model found support among participants, revealed an official statement.