The focus on wheat and paddy also meant that a limited number of states were chief beneficiaries and a wider net promises to ensure that enhanced benefits under the MSP are available for more farm households throughout India. The cost plus 50% of input expenses formula could increase farm incomes by 24%, according to a Niti Aayog report.
Though procurement of pulses, oilseeds and cotton is done under a ‘price support scheme’ (PSS), the procurement method has so far failed to deliver relief for farmers. At present, farmers get lower than MSP prices for a majority of the 23 notified crops including widely cultivated crops like groundnut, soyabean, ragi, maize, bajra and jowar.
The decision is important as the government is ready to open the purse strings in the run-up to the 2019 Lok Sabha elections where it will face a more united opposition and will need to defend its tallies in major agricultural states in north and west India.
After initially focussing on policies such as e-NAM (a national electronic trading portal), neem coated urea and soil health cards, the Modi government has turned to more populist schemes as gaps in the agriculture chain like lack of cold storage and food processing led to stagnation.
The government is having to tackle both — a problem of debt in some states and one of plenty in others — as farm communities mobilise and seek loan waivers as well as higher procurement prices.
Since implementation of MSP for all 23 crops requires coordinated efforts and cost sharing between states and the Centre, the government is now all set to come out with an institutional mechanism for proper implementation of the support price system across the country.
It is learnt that the government is ready with the mechanism and is likely to discuss it in the Cabinet on Wednesday. Many states have already been consulted on three proposals to this effect.
These proposals include market assurance scheme (MAS) which involves decentralised procurement and disposal by state agencies. The second proposal is the price deficiency payment scheme (PDPS) — like the one operational in Madhya Pradesh (Bhavantar) — while the third is about involving empanelled private agencies for procurement at MSP.
With most states favouring the MAS, sources in the agriculture ministry said this would be a key option before the states. The states will, however, be free to opt for the PDPS and involve private agencies for procurement. The MAS will, in fact, replace the PSS and cover all the crops.
Under MAS, state agencies will procure farmers’ produce and state governments will ensure direct payment of MSP into Aadhaar-linked farmers’ accounts. The Centre will bear the cost of expenditure to some point (maximum 15%) and there will be some sharing between the Centre and states beyond that point.
“It is for the cabinet to take a call on the extent of support for loss and the overall cost sharing,” said an official.
The states in favour of MAS include Bihar, Gujarat, Haryana, Jharkhand, Karnataka, Rajasthan, Uttarakhand and Tamil Nadu among others. On the other hand, Madhya Pradesh is likely to go for the ongoing PDPS (Bhavantar). Other states including Odisha, Telangana and Chhattisgarh have also given their nod for PDPS.