PM-AASHA, price deficiency payment scheme: A fact check on its progress

As a legal guarantee for minimum support price (MSP) takes centre-stage after repeal of the farm laws, various options are being floated to meet the demand of protesting farmers.

One of the schemes that has found repeated mentions in various commentaries is the price deficiency payment scheme (PDPS). 

This is something on the lines of the Bhawantar Bhugtan Yojana (BBY) started by the Madhya Pradesh government a few years back. It was to compensate farmers for selling below the MSP without physical procurement of crops.

PDPS is part of the broader bouquet of schemes called Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA) that was launched in September 2018.

The scheme comprises three components (i) price support scheme (PSS), (ii) PDPS and (iii) pilot of private procurement and stockist scheme (PPPS) and is meant for oilseeds, pulses and coarse cereals.

PM-AASHA

Under PM-AASHA, procurement is done on request from the state government and purchases are capped at 25 per cent of the total production of the crop in the state. This can be expanded up to 40 per cent if the commodity is used for PDS or for any other state welfare scheme.

No state could levy any tax such as mandi tax on such procurement. The central expenditure on all the three components of PM-AASHA is limited to 25 per cent of the state’s total production of oilseeds and pul­s­es. The state would have to arra­nge funds from its own resour­ces if it wants to procure or support over and above the mandated 25 per cent.

Even in the case of Bhawantar (PDPS) where farmers got a differential payment between the MSP and a pre-fixed modal rate, the guidelines state that such payout to farmers should not exceed 25 per cent of the MSP value of the crop.

Another important guideline of PM-AASHA is that farmers, whether under PDPS or PSS or private sector pilot, will have to be paid their remuneration within a fixed time period. For example, in the case of PDPS, farmers will have to necessarily be paid (in their respective bank accounts) within one month of their sale of produce in notified mandis. In case of PSS, the purchase price should reach farmers within three days of receipt of their produce.

PM-AASHA progress

The Centre, in a reply in the last session of Parliament, on August 2021, said that based on proposals given by states and union territories (UTs), around 9.2 million tonnes of pulses, oilseeds and copra have been come under PM-AASHA of which 1.7 million tonnes of oilseeds have been covered under the PDPS.

However, of the three components, only the first one, that is PSS, has taken off.

The Commission for Agriculture Costs and Prices (CACP), in a recent report, pointed out that after the implementation of PM-AASHA, PSS has made significant progress in terms of procurement of pulses and oilseeds by NAFED. However, PDPS and PPSS have not made much progress.

The commission recommended that PDPS and PPSS can be strengthened by addressing the procurement issues of oilseeds and pulses as physical procurement of these crops by public agencies is not feasible. This is due to the absence of regular disposal mechanisms and market infrastructure unlike wheat and paddy.

But, how has the experience with PDPS so far been?

The Madhya Pradesh experiment

The Bhawantar Yojana of Madhya Pradesh, started in 2017, which was touted as India’s first large-scale experiment with PDPS — had been riddled with controversies since the very beginning.

In the Madhya Pradesh model, registered farmers were compensated for fall in prices below MSP, but the payout was capped upto a pre-fixed ‘model rate’. This model rate was the average price prevailing in nearby mandis to broad-base the payouts. 

Farmers were required to give their land details, along with crop sown and average yield of a certain number of years was taken as benchmark for the payments. These were verified by the competent authority.

If the actual price realisation was below the model rate, farmers got the difference between the MSP and model rate as compensation. However, if the difference was more than the model rate, the payment would be capped up to the actual difference.

The method of calculation was complicated as well as the process of registration and the multiple paperwork involved.

According to an ICRIER working paper, titled ‘Supporting Indian Farmers: Price Support or Direct Income/Investment Support?’ written by agriculture economist Ashok Gulati along with Tirtha Chatterjee and former agriculture secretary Siraj Hussain in April 2018, out of the total 9.7 million hectares of area under the eight crops in which Bhawantar was applicable in MP in kharif 2017, just around 4.3 million hectares, or around 45 per cent, was registered under the scheme.

“It is clear that a large number of farmers did not register themselves on the portal and they had to sell their produce at prices which were lower than the announced MSPs,” the paper had said.

There were allegations that farmers were conniving with traders to keep prices down to widen the differential between the actual price and MSP, so that the payout could be shared between the two. A report by scroll.in published in June 2018 based on RTI responses revealed that Madhya Pradesh farmers lost almost Rs 200 crore due to manipulation in the scheme, which in some cases was done by traders purchasing the same crop multiple times from a single trader.