Cabinet decision: Scheme to implement new MSP formula gets government nod

Cabinet decision: Scheme to implement new MSP formula gets government nod

It is estimated to give farmers at least 50% return over their production costs.

Union Ministers Dharmendra Pradhan, Piyush Goyal and Radha Mohan Singh on Wednesday. (Photo: Renuka Puri)

THE UNION Cabinet on Wednesday announced a new scheme for implementing crop MSPs (minimum support price) according to a new formula which is likely to give farmers at least 50 per cent return over their estimated production costs.

The Cabinet has sanctioned Rs 15,053 crore to implement the scheme — Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA) — in the next two financial years, of which Rs 6,250 crore will be spent this year. That apart, the credit line for procurement agencies has been enhanced by providing additional government guarantee of Rs 16,550 crore, taking the total to Rs 45,550 crore. “The PM-AASHA is aimed at ensuring remunerative prices to the farmers for their produce as announced in the Union Budget for 2018. This is a historic decision,” Agriculture Minister Radha Mohan Singh told reporters after the Cabinet meeting. He said they hoped this will benefit farmers “for a long time”.

Under the PM-AASHA, states will be allowed to choose from three schemes — existing Price Support Scheme (PSS), newly designed Price Deficiency Payment Scheme (PDPS) and the pilot Private Procurement Stockist Scheme (PPSS) — to undertake procurement when prices of commodities fall below the MSP level. The scheme is expected to ensure that farmers get the MSP fixed by the Centre for crops grown this kharif season, to be marketed from next month.

Under the pilot PPSS, Singh said, states can rope in private players in the procurement of crops at MSP. Based on the outcome, the role of private participation in the procurement process may be increased in future. “It has been decided that for oilseeds, states have the option to roll out PPSS on pilot basis in selected districts or Agricultural Produce Market Committees (APMCs) of districts for participation of private stockists,” said a press statement. The selected district or APMC will cover one or more crops of oilseeds that have a notified MSP. The private agency will procure the crop at MSP in “notified markets during the notified period from the registered farmers in consonance with the PPSS guidelines, whenever the prices in the market fall below the notified MSP,” said the statement. It said service charges — maximum of up to 15 per cent of notified MSP — will be payable.


Under PSS, the central nodal agencies will physically procure the pulses, oilseeds and copra, with the state government playing a “proactive role”. Besides NAFED, the Food Cooperation of India will take up PSS operations in states and districts. The cost of, and losses due to procurement, will be borne by the Centre.

Providing details of the PDPS or “bhavantar” scheme, the press statement said that “it is proposed to cover all oilseeds for which MSP is notified”. Under the scheme, the direct payment of the shortfall between the MSP and the selling or modal price for the crop will be sent to the registered bank accounts of pre-registered farmers who sell their produce in the notified market yard through a transparent auction process. PDPS will not involve any physical procurement of crops as farmers. Singh said that though the scheme has been approved, the states have the freedom to continue with PSS if they do not want to implement PDPS. While the UPA government spent Rs 3,500 crore on procurement in 2010-2014, the NDA government has spent Rs 34,000 crore in 2014-2018, said Singh.

The existing schemes of the Department of Food and Public Distribution to procure paddy, wheat and nutri-cereals or coarse grains, and procurement of jute and cotton by the Ministry of Textile will be continued for providing MSP to farmers.