Centre mulls freedom to states to buy farm commodities in case prices fall

Will bear a loss of up to 30% of MSP in such an eventuality

To compensate farmers for any sudden and unexpected drop in open market prices of commodities, the Central government is contemplating a variety of options, including freedom to states to purchase farm produce other than grains as and when required and also a national price deficit scheme on the lines of one floated by Madhya Pradesh recently.

On the latter (price deficit scheme) though, opinion is divided within the government, with a section feeling that such an initiative is fraught with challenges and could lead to operational difficulties on ground if expanded at the national level.

Sources said senior officials from the Madhya Pradesh government was recently in the capital to apprise the Centre about the scheme and its performance so far.

The market assurance scheme or system (MAS) as being is proposed within the government gives the states all the powers to purchase any commodity whose price have fallen below the Minimum Support Price (MSP) without waiting for any formal approval from the Centre.

The Centre on its part will compensate upto 25-30 per cent of the loss on the value of MSP which in case of north-eastern states can go up to 40 per cent of the MSP value.

Centre mulls variety of options to give farmers assured market in case of price fall

Option of replicating MP's Price Deficit Scheme nationally also being talked of

However, a section within govt feels a national Price Deficit Scheme will be hard to implement

Centre's draft report on 'Doubling Farmers' Income also supported a market assurance system

A 2015 pilot project on Price Deficit Scheme didn't give desirable results

The states on their part would create a corpus of funds to intervene in case of prices fall which could be supplemented as and when they make a profit from the sale of the procured commodity.

"It would give states the necessary flexibility and option to procure a commodity whose prices have fallen below the MSP and dispose it off later when it finds suitable without waiting for a formal nod from the Centre which in any case delays the entire procurement process," a senior official said.

At present, the Centre implements a Price Support Scheme (PSS) for purchasing commodities whose prices have fallen below the MSP.

But, it is only implemented on request from states and is limited upto 25 per cent of production estimate and goes beyond that only with the approval of the Centre.

That apart, for commodities which are outside the MSP regime like horticulture crops, the Centre implements the Market Intervention Scheme (MIS), the cost of which is shared equally between Centre and states.

Apart from that it also operates a price stabilization fund also to help state governments in case of price fall or rise.

But most of these programmes and schemes rely heavily on approval from the Centre which sometimes defeat the entire exercise as by the time, they start purchasing a commodity market dynamics change, making them least beneficial to farmers.

The high-powered panel on doubling farmers' income constituted by the Centre in its draft report had also supported a market assurance system which would give states necessary flexibility and independence to purchase any farm produce whose prices have fallen below the MSP.

Madhya Pradesh's 'Price Deficit Scheme' - the second model which is being discussed - on the other hand seeks to directly compensate farmers when the price of a notified crop falls below the MSP, but the compensation will be capped at a pre-determined modal price.

Called, the Mukhyamantri Bhavantar Bhugtan Yojana (CMs Price Deficit Scheme), the scheme started on a pilot basis covers eight oilseeds and pulses whose production in 2017 is estimated to be around 14.25 million tonnes these include soybean, maize, tuar, moong,urad and groundnut in the state.

The modal price will be the average market prices for a particular commodity over a two-month period in Madhya Pradesh and two other states where the crop is grown and traded. However, the compensation won't exceed the modal price.

Farmers will have to register their crops at village-level cooperative societies along with their Aadhaar and bank account numbers.

Enrolments for the scheme started from 11 September and will be open for a month.

The compensation will be paid to the farmers' bank accounts directly after verification of mandi receipts.

In June this year, several parts of Madhya Pradesh saw large-scale agitation from farmers due to sudden and sharp drop in prices of several commodities particularly onions and pulses.

The agitation turned violent when six farmers were shot in Mandsaur district of the state on June 6.

However, a deficiency price payment scheme is not the first attempt at directly compensating farmers for a price fall and has been attempted several times earlier though the models might have been different.

In 2015, a pilot project of deficiency price payment for cotton growers was started in Hinganghat taluka in Maharashtra, while another attempt was made in Goa as well to directly compensate farmers for a price fall.

NITI Aayog member, Ramesh Chand in a report in 2015 had advocated the idea of deficiency price payment in case of price fall to compensate farmers and also to save the states from the problems of storage and transportation.