Govt scales up MSP plan to halt slide in farm prices
NEW DELHI: The government is loosening its purse strings for its politically crucial ‘PM-AASHA’ programme aimed at ensuring farmers earn higher prices, hoping to arrest a worrying trend of agricultural produce selling below federally fixed minimum rates a month after the start of summer-harvest sales.
The prime minister’s office has asked for the programme to be ramped up, as arrivals of farm produce peak in large agricultural markets around the country. The agriculture ministry, accordingly, has ratcheted up efforts to push states, said a ministry official, requesting anonymity. Federally fixed minimum support prices (MSP) have been increased for 24 crops by at least 1.5 times the cost of production in an attempt to address farmer angst, which could be a major issue in coming state elections and next year’s parliamentary polls.
MSPS, which factor in costs of cultivation, are also meant to act as a benchmark rate for private traders to prevent distress sales by farmers. “To facilitate the implementation of the above scheme, the (agriculture) department has nominated nodal officers. The nodal officers will be visiting the allocated states shortly and will meet you and other related officers in person to explain about the scheme,” agriculture secretary Sanjay Agarwal wrote in a letter to chief secretaries of all states. HT has seen a copy of the letter. Under PM-AASHA, an acronym for Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (prime minister’s farmers’ income protection drive), state governments essentially have two options.
They can opt for procurement, a traditional mechanism under which the government buys produce from farmers at minimum support prices, or MSPS, which were recently raised at least 1.5 times.
States also have the option of choosing the more innovative “price deficiency payment” mode involving direct cash payouts to farmers to bridge the gap between actual prices they receive and official MSPS. Most states are going in for procurement over cash payments, which require new processes.
Initial norms set for PM-AASHA, unveiled on September 12, stated that states could buy up to 25% of the total quantity of oilseeds, pulses or coarse cereals produced until prices came up to MSP levels.
Niti Aayog, the national policy agency that devised PM-AASHA, went by the assumption that this would be sufficient to remove any surplus stocks, thereby raising prices for farmers.
States have now been told that they can buy more than 25% of the total production, the official cited above said, adding that an interministerial panel has been tasked with promptly clearing proposals from any state wishing to cross the 25% limit.
The bank guarantee or line of credit for these operations has been increased from ₹29,000 crore to ₹45,500 crore. Prices of commodities have been going down despite record funds allocated towards procurement. During 2010-14, total procurement was to the tune of ₹3,500 crore. From 2014-18, this rose almost 10 times, reaching ₹34,000 crore. During 2010-14, the line of credit was ₹2,500 crore, while during 2014-18, this amount increased to ₹29,000 crore.
Eleven states have sent proposals to the Centre for enhanced procurement under PM-AASHA, the official said. These are Andhra Pradesh, Karnakata, Madhya Pradesh, Uttar Pradesh, Maharashtra, Telangana, Tamil Nadu, Rajasthan, Haryana, Odisha and Gujarat.
According to calculations by the think-tank ICRIER, the government needs to spend at least ₹56,518 crore to plug a gap of 10% between MSP and market prices for 20 crops. If the gap is 20%, procurement should cost at least Rs 1.13 lakh crore. In case the gap is 30%, the spending will need to increase to ₹1.7 lakh core.
“The strategy clearly seems to enhance spending and government procurement, which implies that nobody expects private traders to offer the new higher MSP rates,” said Sachin Kaul of Comtrade Solutions, a trade platform.
Prices of tur or pigeon pea, a widely grown pulse variety, have remained below MSP levels since last year.
On July 1, the average all-india market price for tur was ₹3,694 for a quintal, against an MSP of ₹5,675. On August 1, tur prices inched marginally up to ₹3,712. On September 1, they dipped lower to ₹3,585.