Committee on MSP Proposals and Key Developments in Agriculture
- September 20, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
Committee on MSP Proposals and Key Developments in Agriculture
Sub: Eco
Sec: Agri
- Ongoing Work on Legalised MSP:
- Union Agriculture Minister highlighted that while there is no commitment yet on the demand for a legalised Minimum Support Price (MSP), a committee is actively working on the issue.
- The committee, led by former Agriculture Secretary Sanjay Agrawal, has held 23 meetings so far, with the final report expected soon.
- Government’s Record Procurement:
- Mr. Chouhan emphasized that Modi government has procured higher quantities of foodgrains and pulses than any previous government, ensuring remunerative prices for farmers.
- Committee’s Formation:
- The MSP committee was formed in 2022 after widespread farmer protests against the three now-repealed farm laws.
- Convergence of Schemes:
- The Centre has merged the Price Support Scheme (PSS) and Price Stabilisation Fund (PSF) under the PM-AASHA scheme, aimed at better serving both farmers and consumers.
- Increased Procurement Guarantee:
- The government has enhanced its procurement guarantee to ₹45,000 crore for pulses, oilseeds, and copra at MSP.
- From the 2024-25 season, procurement under PSS will cover 25% of national production, allowing States to purchase more of these crops at MSP.
- Price Support Scheme (PSS):
- Objective: To ensure farmers get remunerative prices for their produce, preventing distress sales in case of a price drop below the Minimum Support Price (MSP).
- Procurement at MSP: Under PSS, government agencies directly procure crops at MSP from farmers, helping them secure guaranteed income even when market prices fall.
- Operation: Implemented through nodal agencies like the National Agricultural Cooperative Marketing Federation of India (NAFED).
- Price Stabilisation Fund (PSF):
- Objective: To moderate price volatility of essential commodities like pulses, onions, and potatoes.
- Buffer Stock: PSF helps create and maintain a buffer stock of these commodities, which can be released in the market to stabilize prices when they rise abnormally.
- Procurement and Distribution: Funded by the government to buy and distribute commodities at regulated prices during times of scarcity or price hikes.
- Key Feature: It is aimed at protecting both consumers from high prices and farmers from price crashes by managing supply shocks.
Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA)
The Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA) is a comprehensive umbrella scheme aimed at ensuring remunerative prices to farmers for their agricultural produce. It provides flexibility to states, allowing them to choose one of its three key components for implementation.
Key Components of PM-AASHA:
- Price Support Scheme (PSS):
- Objective: Under this scheme, the physical procurement of pulses, oilseeds, and copra is carried out by Central Nodal Agencies with the support of state governments.
- Implementation:
- Agencies like the National Agricultural Cooperative Marketing Federation of India (NAFED) and the Food Corporation of India (FCI) will handle the procurement.
- The procurement costs and any potential losses incurred are borne by the Central Government as per the set norms.
- Price Deficiency Payment Scheme (PDPS):
- Objective: This scheme aims to cover all oilseeds for which Minimum Support Price (MSP) is notified.
- Implementation:
- Farmers receive a direct payment of the difference between the MSP and the selling/modal price of the produce they sell in a notified market yard.
- The process involves a transparent auction, and payments are made directly to the registered bank accounts of pre-registered farmers.
- No physical procurement of crops occurs under this scheme; only the difference between MSP and the selling price is paid.
- Pilot of Private Procurement and Stockist Scheme (PPSS):
- Objective: In addition to PDPS for oilseeds, states can opt for PPSS on a pilot basis, involving the participation of private stockists for procurement.
- Implementation:
- This is tested in selected districts or Agricultural Produce Market Committees (APMCs) for one or more oilseeds.
- Private players can participate in the procurement process, but only one scheme (either PSS or PDPS) can be operational in a state for any particular commodity.
National Agricultural Cooperative Marketing Federation of India (NAFED) –
NAFED is an apex marketing cooperative organization under the Ministry of Agriculture, Government of India, established to promote, develop, and organize the marketing, processing, and storage of agricultural, horticultural, and forest produce.
It plays a vital role in:
- Facilitating and coordinating agricultural trade (inter-state, import, export, wholesale, and retail).
- Distributing agricultural machinery and inputs.
- Supporting the marketing and trading activities of cooperative institutions and associated partners in agricultural commodities.
Revamped PM-AASHA: No Role for Private Sector in MSP-Based Purchases
Elimination of Private Sector Involvement:
- The Agriculture Ministry has removed private sector participation in the procurement of crops at Minimum Support Prices (MSP) by discontinuing the Private Procurement and Stockist Scheme (PPPS) under the revamped PM-AASHA (Annadata Aay Sanrakshan Abhiyan) scheme.
- Introduction of Bhavantar Model for Vegetables:
- States are now allowed to implement the Bhavantar model, initially used in Madhya Pradesh for soybean, for vegetable procurement. This model compensates farmers up to 15% of the difference between market prices and the government-set price.
- PM-AASHA Scheme Update:
- Under the revamped PM-AASHA, States can use the Price Deficiency Payment Scheme (PDPS) for vegetables, in addition to oilseeds and pulses.
- The PPPS was removed as no State showed interest, preferring alternatives like PDPS and PSS.
- State-Level Market Intervention:
- For vegetables, where there is no MSP, States can declare a market intervention price. If mandi prices fall below this threshold, States will purchase at the government-declared rates.
- Issues with PPPS:
- The PPPS pilot was launched in 2018 for oilseed procurement at 8 locations but failed due to lack of State participation and insufficient government support.
- 15% reimbursement of MSP, including a 1% administrative cost, was provided by the Centre to private agencies, but the scheme didn’t take off due to lack of crop disposal mechanisms.
- Market Support for Farmers:
- The revamped PM-AASHA ensures that up to 15% of the price gap between market prices and government rates will be paid to vegetable farmers, just as it is for oilseeds, to protect them from price fluctuations.
Bhavantar Bhugtan Yojana (BBY)
The Bhavantar Bhugtan Yojana (BBY), launched in October 2017 by the Madhya Pradesh government, is a price-deficiency payment scheme designed to compensate farmers when market prices for certain crops fall below the Minimum Support Price (MSP). This scheme aims to protect farmers from price crashes, offering a buffer against the volatility of agricultural markets without the need for physical procurement of crops, unlike the traditional approach for crops like wheat and rice.
- Initial Focus:
- The scheme initially covered eight crops, primarily oilseeds and pulses, where government procurement is typically lower compared to wheat and rice.
- These crops include soybean, groundnut, sesame, urad, moong, tur, masoor, and maize.
- Compensation Mechanism:
- Farmers are compensated when the selling price (SP) of their produce falls below the MSP.
- The actual compensation is based on the modal price, which reflects the average market price of the crop both within and outside the state.
- Compensation Calculation:
- If a farmer’s selling price (SP) is below MSP but above the modal price, the difference between the MSP and SP is paid to the farmer.
- If the SP is lower than both MSP and the modal price, compensation is capped at the difference between MSP and the modal price.
Example:
- For soybean, if the MSP is ₹3,050 per quintal and the modal price is ₹2,700 per quintal:
- If a farmer sells at ₹2,800 per quintal, they receive ₹250 for every quintal sold.
- If the selling price is ₹2,600 per quintal, the government will transfer ₹350 (difference between MSP and modal price), capped at that amount.
- Farmer Registration:
- Farmers must register their crops at village-level cooperative societies and provide their Aadhaar numbers and bank account details.
- Compensation is provided only for sales made during a specified window at the mandi (market) where they are registered.
- Direct Benefit Transfer:
- The compensation amount is directly transferred to the farmers’ bank accounts through Direct Benefit Transfer (DBT).
- Cost Efficiency:
- The scheme does not involve the physical procurement of crops, which reduces procurement costs and the potential for leakages in the system, saves storage and distribution costs typically associated with government procurement.