Eye on rural distress, Centre and states look at MP crop price scheme

Deficit financing, not procurement, if rates below Minimum Support Price

Written by Ravish Tiwari , Harish Damodaran | New Delhi | Updated: January 1, 2018 5:01 pm
Madhya Pradesh, Farmers Protest, Mininum Support Price, MSP, Mandsaur protest, Farmers distress, Indian Express Madhya Pradesh CM Shivraj Singh Chouhan.

Rattled by the rural-agrarian distress across regions where the party is in power, BJP governments at the Centre and states are seeking a viable mechanism to address the problem of depressed domestic agricultural commodity prices ahead of the 2018 Budget. One of the models being seriously looked at is the Bhavantar Bhugtan Yojana launched by the BJP government in Madhya Pradesh.

The scheme was launched by Chief Minister Shivraj Singh Chouhan in October in the wake of simmering discontent among farmers in the state that led to protests in Mandsaur in June. These protests were followed by a farmers’ agitation in BJP-ruled Rajasthan. The BJP also suffered setbacks in Gujarat’s rural areas during the assembly elections, mainly due to agrarian distress.

“Despite hiking the floor prices of food grains and pulses, the domestic prices of several crops are below the MSP (Minimum Support Price). The central government is seriously examining options to ensure the advantage of higher MSP flows to the farmers,” said highly placed sources in the central government. “Using procurement as a relief mechanism (which is available to major crops like wheat and paddy) for farmers will require a new policy as the FCI-type central procurement is not possible for most crops,” said sources.

“The government is contemplating various schemes where state governments can be incentivised to step in when prices plunge below MSP… In that context, the government is looking at the experimental measure of Bhavantar Bhugtan Yojana in Madhya Pradesh,” said sources.

Madhya Pradesh government sources said the Bhavantar Bhugtan Yojana and its funding mechanism were discussed when Chouhan met with Prime Minister Narendra Modi last Wednesday. Chouhan is learnt to be seeking a 50:50 sharing of the financial burden for the scheme, similar to the Pradhan Mantri Fasal Bima Yojana. Last Thursday, NITI Aayog member Ramesh Chand visited Madhya Pradesh to witness the “working” of the scheme.

When contacted by The Indian Express, Chand said, “This is my second visit for this purpose since the scheme has been launched. The problem of agricultural commodity prices slipping below the MSP is a serious problem, and we need to find a solution. It could be a workable model. I will recommend it to states and the Centre for consideration.”

Apart from the Centre, many states have shown interest in replicating the Bhavantar Bhugtan Yojana. They include not just the BJP-ruled states of Maharashtra, UP, Chhattisgarh, Rajasthan and Haryana, but also Karnataka, Odisha and Telangana. Officials of UP, Chhattisgarh and Maharashtra have already visited Madhya Pradesh to gather information about the scheme’s rollout and efficacy.

Under the scheme, farmers are paid the difference between the government’s MSP for a crop and its corresponding Modal Rate (MR) during a particular month of sale. The price difference, assuming that MR will be lower, is credited directly into Aadhaar-seeded bank accounts of farmers.

Under the scheme, the MR is based on the average market prices for the month, according to data from the Union Agriculture Ministry’s agmarketnet portal and taken for the mandis of MP as well as two other states where the crop is grown. The price difference between MSP and MR is paid on the actual quantity sold by a farmer in a mandi and backed by three documents: anubandh patra (sale agreement with trader), tol parchchi (weighment slip) and bhugtan patra (payment letter signed by both parties).

In Madhya Pradesh, the scheme currently covers eight kharif crops: soyabean, urad (black gram), moong (green gram), tur/arhar (pigeon-pea), groundnut, til (sesame seed), ramtil (niger seed) and maize. Since the launch of the scheme, the MP government has received about 22 lakh registrations for the notified crops in the current season from 18.5 lakh farmers, of whom around 15 lakh are likely to receive payments. The scheme is likely to cost the state government around Rs 2,300 crore in the form of payments to farmers in the 2017-18 Kharif marketing season alone. The Madhya Pradesh government is now planning to extend the scheme to rabi crops that will be harvested in 2018, when assembly polls are to be held in the state.

“We will pay roughly Rs 2,000 crore for crops marketed from October 16 to January 31. Another Rs 300 crore would be for arhar, which would be sold from February to April. The plan is to extend it next to four crops planted in this rabi season — chana (chickpea), masur (lentil), mustard and onion — for which a decision is expected in the next 5-7 days,” Rajesh Rajora, Principal Secretary (farmer welfare and agriculture development), Madhya Pradesh, told The Indian Express.

Given the massive response from farmers in the kharif season, the state government is also looking for a viable financing mechanism, including financial support from the Centre. “We have already paid out Rs 134 crore against crops sold during October, while the Rs 705 crore disbursements for November will be made in the coming week. The payments for December would take place once we arrive at the modal rates based on average mandi prices for the crops during the month,” said Rajora.

The scheme appears to be a better alternative to government procurement of non-PDS crops at MSP in case of a price slump, which faces challenges of storage and liquidation. In this context, Rs 2,300 crore of Bhavantar payments — over Rs 15,000 per farmer on an average — would cover 25 lakh tonnes (lt) of kharif farm produce in Madhya Pradesh.

“This is more than the 11.79 lt of kharif oilseeds and pulses being targeted for MSP procurement under the Centre’s price support scheme. In our scheme, we are not procuring a single grain, thereby saving handling and storage costs. And yet, more farmers are benefiting and the money is going straight into their accounts,” said Rajora.

In October, Madhya Pradesh set the MRs at Rs 2,580 per quintal for soyabean (against an MSP of 3,050), Rs 3,000 for urad (Rs 5,400), Rs 4,120 for moong (Rs 5,575), Rs 3,720 for groundnut (Rs 4,450) and Rs 1,190 for maize (Rs 1,425). In November, the MRs were revised to Rs 2,640 for soyabean, Rs 3,070 for urad, Rs 4,120 for moong, Rs 3,570 for groundnut and Rs 1,100 for maize. In the case of til and ramtil, farmers were not given any price difference, as the market prices were above the MSP.

What is Bhavantar Bhugtan Yojana?

  • The Bhavantar Bhugtan Yojana is a price deficiency payment scheme, under which the government pays farmers the difference between the official minimum support price (MSP) for crops and their average market rates — the ‘modal’ or most quoted rate for a crop in mandis. The modal rate (MR) is calculated using price data from the Union Agriculture Ministry’s agmarketnet portal and taken for the mandis of MP as well as two other states where the said crop is grown


  • For instance, in the case of soyabean, where the Centre has declared an MSP of Rs 3,050 per quintal for the current kharif marketing season, the MR during October was Rs 2,580 per quintal. Farmers in MP were entitled to the price difference of Rs 470 per quintal, payable on the actual quantity sold by them in mandis. Thus, a farmer who sold 35 quintals of soyabean in October harvested from 5 acres would have got Rs 16,450 credited to his bank account.


  • Farmers have to register with the scheme’s portal before the sowing season and provide details of Aadhaar, bank account, landholding, cropping acreage, mandi centre, etc. Proof of sales has to be backed by three documents: anubandh patra (sale agreement with trader), tol parchchi (weighment slip) and bhugtan patra (payment letter signed by both parties).

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