The government might constitute a committee of experts, either in the finance ministry or NITI Aayog or jointly to study all existing procurement models to ensure the largest possible number of farmers benefit from the heightened Minimum Support Price (MSP) scheme announced in the Union Budget.
The new MSPs are promised at 1.5 times the production cost. These are expected to be calculated on the basis of what is termed A2+FL — this covers all paid-out expenses in both cash and kind, plus derived value of unpaid family labour. Not on the basis of what is termed C2; this is defined as comprehensive cost, including all paid-out expenses, imputed value of unpaid family labour, beside rentals and interest forgone on owned land and fixed capital.
Thinking within the government is that margins cannot be calculated on expenditure where actual money has not been spent.
The decision on an ideal mechanism to ensure maximum benefit to farmers might be announced ahead of the kharif sowing season in June. And, as announced in Thursday's Budget proposals, cover a larger number of crops.
NITI Aayog will study all existing models. That includes Madhya Pradesh’s recent Bhawaantar Bhugtan Yojana (Price Deficit Scheme). Also, models of direct procurement being run by states. And it will explore the possibility of enabling private entities to procure on behalf of the government.
“We will approach the entire issue with an open mind and are not fixated on any one approach,” NITI Aayog member Ramesh Chand told Business Standard.
In the 2018 rabi season, the MSP of wheat fixed by the Commission for Agricultural Costs and Prices (CACP) is 112.4 per cent more than the A2+FL cost. For gram, 73 per cent more; for mustard, 84 per cent more.
Chand was instrumental in driving the MP scheme. He said the Telangana government's model of direct subsidy payment was not being considered at this juncture, as it was not an income support scheme in the strict sense.
“If you can ensure the maximum number of farmers get the benefit of MSP or are able to sell at a guaranteed price, then too you would be providing income support, as it would lead to higher spending on insurance and other inputs,” said Chand. "MSP itself will ensure farmers get income support."
Basing the MSP on the C2 cost was a formula recommended by the MS Swaminathan panel on the issue.
In The Best Interests Of Farmers
- Centre to look at Madhya Pradesh’s Bhavantar Bhugtan Yojana, along with direct purchase and greater involvement of private sector, to ensure farmers benefit from the Minimum Support Price (MSP) scheme
- MSPs likely to be fixed at 1.5 times the production cost (A2+FL) and not comprehensive cost (C2)
- Work on the procurement model to start as soon as it gets cleared in Parliament
- Telangana’s model of direct subsidy payment is not being considered at this juncture, as it is not an income support scheme in the strict sense