In order to address the gaps in the procurement system and the Minimum Support Price (MSP) scheme, the Union Cabinet, in September 2018, approved a new umbrella scheme ‘Pradhan Mantri Annadata Aay SanraksHan Abhiyan’ (PM-AASHA), a robust mechanism, to give a major boost to pro-farmer initiatives of the government. This scheme is meant to ensure minimum support price (MSP) for agricultural produce and compensate losses of farmers, to increase the overall income of farmers. It will revolutionise the procurement system and enable farmers across states to realise the minimum support price (MSP) in fuller measure, as only a tiny percentage of farmers are benefiting from MSP.
Data on the scheme available from the agriculture ministry, reported in December 2019, show that less than 3 per cent of the season’s sanctioned amount of oilseeds and pulses had been procured by early December (arrivals began in October and are to continue till February). Of the 37.59 lakh metric tonnes that had been sanctioned under PM-AASHA, a meager 1.08 lakh tonnes had been procured. worryingly, procurement had not even begun in 3 states (Odisha, Madhya Pradesh (5 lakh tonnes sanctioned), and Uttar Pradesh (1.18 lakh tonnes sanctioned) out of the 11 that had opted for the scheme this season in which the main crops covered are moong, arhar, urad, soyabean, and groundnut.
In Maharashtra, which has the highest sanctioned procurement, where over 10 lakh tonnes of soyabean and 58,000 tonnes of moong and urad were sanctioned, only 1,709 tonnes had been procured (only 14 tonnes of soyabean). Rajasthan has had the highest procurement so far (51,000 tonnes out of 9.6 lakh tonnes).
What is PM-AASHA?
The historic scheme is a mix of sub-schemes which involve direct procurement from farmers, paying them for losses incurred when market prices are lower than the announced MSP, and Pilot of private procurement and stockist scheme.
The government is only applying this to 25 per cent of the agricultural yield; the remaining will have to be sold in the open market.
The three schemes that are part of PM-AASHA are:
(1) the Price Support Scheme (PSS)
(2) the Price Deficiency Payment Scheme (PDPS)
(3) the Pilot of Private Procurement and Stockist Scheme (PPPS)
PSS The Price Support Scheme (PSS) would provide assured price for farmers and prevent them from making distress sale during bumper harvest. State governments would decide the type and quantity of the crop to be procured when wholesale prices fall below MSP and also procure 25 per cent of the marketable surplus of farmers for eligible crops. Under the PSS, physical procurement of pulses, oilseeds, and copra will be done by central nodal agencies.
Besides, NAFED and Food Corporation of India (FCI) would also take up procurement of crops under PSS, the expenditure and losses of which would be borne by the Centre.
In 2018, the Maharashtra government procured around 4.5 lakh tonnes of tur under PSS, when its farmers were getting only ` 4,200–4,400 per quintal against the MSP of ` 5,450.
PDPS Formulated on the lines of the Bhawantar Bhugtan Yojana (BBY) launched by the Madhya Pradesh government, the Price Deficiency Payment Scheme (PDPS) promises to hedge price risks and compensate farmers for distress sale at prices below MSP. Farmers who sell their crops in recognised mandis within the notified period can benefit from it. This scheme proposes to cover all oilseeds for which MSP is notified. The scheme would entail the direct payment of the difference between MSP and the modal price of market to farmers in their bank accounts, thereby doing away with any physical procurement of crops by the state agencies.
PDPS would benefit the farmers as well as the government. While assuring MSP for farmers, it will reduce the accumulation of unwanted food grains and oilseeds stocks, thereby reducing the fiscal costs of procurement and storage substantially.
PPSS Under the Pilot of Private Procurement and Stockist Scheme (PPSS), the private players will be involved in the procurement operation. They can obtain oilseeds at the state-mandated MSP for which they would be paid a service charge not exceeding 15 per cent of the notified support price. While some private players are already engaged in procurement of wheat, this initiative is expected to increase the outreach of MSP operations among all crop growers so as to increase farmers’ incomes.
Need for this Scheme The current MSP procurement system is weak in terms of the geography and the crops it covers. The data released by NAFED for 2018–19 shows that lack of coordination of state governments with procuring agencies has resulted in poor procurement of kharif and rabi pulses and oilseeds in many states. State governments must work in harmony with the procuring agencies to bring about a paradigm shift in farmers’ income.
The Centre has announced a hike in MSPs for several kharif crops and promises to pay farmers the cost of production (as determined by CACP) plus a 50 per cent ‘profit’ while procuring. However, this works well only for paddy, wheat, and select cash crops where there is direct procurement by the industry. The government-driven procurement is almost nil in crops such as oilseeds, thereby defeating the purpose of MSPs. Also, the prices of key agricultural commodities have fallen below their MSP.
An increase in MSP will not result in proportional benefits for farmers unless procurement is strengthened by adopting different means.
AASHA offers an innovative, MSP-plus approach to the problem of non-remunerative prices. With better prices across crops, the new scheme may ensure crop diversification and reduce the stress on soil and water.
The Challenges
PSS The PSS would be easier to implement, with nodal agencies doing the procurement. But providing funds would be difficult for the Centre and burdensome for the state governments. The Centre would need to plan out how to handle procurement and disposal efficiently.
PDPS It is a researched fact that traders often collaborate with each other and depress the prices at mandis, thus forcing farmers to sell at lower prices. The traders then pocket the compensation from the government. So, the key here would be to have an effective system of checks and balances in place.
PPSS The PPPS may work, but private procurers may be wary of the Centre’s delayed payments. To ensure that AASHA works, the Centre first needs to break the trader lobbies at mandis. This could be done by widening the competition by interlinking mandis. Though e-NAM promises to do so, states need to undertake regulatory reforms more proactively.
Public-private partnership exists in storage; it can be extended to procurement operations as well as through FCI or other organisations like Hindustan Lever that undertake exports and domestic trading of agri-commodities and are also involved in buying basic cereals to meet their requirements.