PM holds meeting on new agri-procurement models to ensure MSP

Prime Minister Narendra Modi today discussed about the financial implication of the proposed procurement mechanism to ensure that farmers get MSP if market prices fall below the government's benchmark rate.

In his Budget 2018 speech, then finance minister Arun Jaitley had announced that think-tank Niti Aayog in consultation with central and state governments will put in place a fool-proof mechanism to ensure farmers get benefit of the minimum support price (MSP).

According to sources, senior officials of Niti Aayog made a presentation before the Prime Minister on the proposed procurement mechanism and its financial implication.

Niti Aayog has proposed that the states should be given the option of three models -- Market Assurance Scheme (MAS), Price Deficiency Procurement Scheme (PDPS) and Private Procurement and Stockists Scheme.

Sources said that the Centre may to have bear Rs 12,000-15,000 crore annually to compensate farmers in case prices fall below the MSP in all crops except rice and wheat which are already being procured by state-run Food Corporation of India (FCI).

The government wants to finalise these schemes and announce them before the harvesting of kharif crops that begins from October onwards, the sources added.

The government had announced in the Budget that MSP of 14 notified kharif crops will be fixed at least 1.5 times higher than the production cost.

As FCI procures only wheat and rice for distribution through public distribution system (PDS), the government wants to put in place a new mechanism to ensure that the hike in MSP reaches to farmers in other crops as well.

According to the Niti Aayog's proposal, MAS will be implemented by state governments which will enter the market depending on the local conditions and procure through their own state agencies or any other private agency authorised by states.

States will be responsible for procurement and liquidation of the procured commodity. The Centre will compensate the operational loss.

On the other hand, the Price Deficiency Procurement Scheme has been designed similar to the Bhavantar Bhugtan Yojana launched by the Madhya Pradesh government.

Under this scheme, if the sale price is below the model price, then the farmers would be compensated to the difference between the MSP and actual price, subject to certain conditions and ceiling.

Niti Aayog has also proposed engagement of the private sector in MSP-linked procurement through a transparent e-market platform.

States would be allowed to empanel private firms via transparent bidding for purchase of farm produce when prices fall below the MSP. The private firms would be given tax incentives and a commission, the sources added.