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Cabinet Committee Clears New Procurement Policy

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.

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.

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.

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