Govtmay spend ~200-250 bn on MSP procurement
States will be free to adopt one or more of the models suggested
The central government is looking at annual spending of at least ~200-250 billion initially with the states in ensuring farmers get the benefit of a Minimum Support Price (MSP).
This would be either through direct procurement or a system of Price Deficiency Payment (PDPS) on the lines of Madhya Pradesh’s (MP’s) Bhavantar Bhugtan Yojana. A note is being prepared for a Cabinet decision on details of the sharing of the money required, say officials, who add the Centre will not impose any one model.
States would choose whether to go for direct procurement, termed a Market Assurance Scheme (MAS), a PDPS or even procurement by private agencies on behalf of the government.
“The (annual) financial burden was earlier estimated to be ~110-120 billion, but after detailed discussion with a host of stakeholders, including states, this looks inadequate. In any case, finances will never be a constraint for implementing the programme,” a senior official said.
He said the high-powered panel of ministers on the subject, under Home Minister Rajnath Singh (with representatives from all major ministries involved) had looked into the options.
“Though the Budget hasn’t made specific provision for a scheme, the finances can be arranged through a supplementary demand for grants later during the year,” the official added. NITI Aayog had suggested three models for procurement of farm products under the MSP mechanism. The Centre prefers not to impose any one. In fact, a concept note from the Aayog some weeks earlier also seems to favour no single model for all states. It speaks of either adopting one model or a combination of more than one.
Under direct procurement or MAS, explains a note from the Aayog, the Centre would compensate varying amounts to a state of the loss in procurement and allied operations. If this is up to 25 per cent of the MSP value of a crop, the compensation will be shared between Centre and state in a 60:40 ratio. It will be 50:50 if the loss is 30-40 per cent.
When the price loss is up to 15 per cent, the total expenditure works out to around ~400 billion. If up to 25 per cent of the MSP value around ~540 billion. The calculations are based on assumptions regarding the products and the proportion sold in the market.
A second way is PDPS, loosely based on the MP model. This is expected to cost the exchequer around ~225 billion if there is 15 per cent loss in value and will rise to ~363 billion if the loss is up to 25 per cent. Again on assumptions regarding what is bought. However, not many states seem to favour this model. The private procurement model in which players independent of the government machinery are invited to participate in the purchases is a third way. All states seem interested but mostly as a supplement to the other two ideas; independently, in some case, the Aayog note added. The state which implements this should get compensated and the private entity gets some concessions and relaxations.