The price trap: Bhavantar Bhugtan Yojana, Madhya Pradesh's high-wire act

From promised MSPs to manipulated markets, the state's soybean farmers walk a delicate tightrope of risk, loss, and hope

 

Soybean farmers in Madhya Pradesh are increasingly anxious.

 

Market rates for the main kharif crop have dropped by almost ₹400–500 per quintal over the past 10–15 days.

 

This fall, coming just weeks ahead of the new harvest season, is partly blamed on rising imports. But a large section of farmers suspect the decline is linked to the relaunch of the controversial Bhavantar Bhugtan Yojana (BBY), or Price Deficiency Payment scheme.

 

Although the scheme was announced last week for soybeans, farmers allege that traders may have had a whiff of the move.

 

State Chief Minister (CM) Mohan Yadav said the Centre has fixed the minimum support price (MSP) for soybeans for the 2025–26 season at ₹5,328 per quintal. He added that if market prices fall below this level, the state government is committed to compensating farmers so they receive the full MSP benefit.

 

The government has not yet announced formal registration dates, but sources suggest it will likely begin on October 10, with purchases starting in November.

 

Under BBY, if the selling price of an average-quality soybean in the market is below the MSP but above the state’s declared average model price, farmers will be compensated only for the difference between the MSP and the actual selling price. However, if the market price falls below the average model price, compensation will cover the gap between the MSP and the average model price.

 

This mirrors the BBY model first introduced for soybeans in 2017, following widespread farmer protests during the tenure of then-CM Shivraj Singh Chouhan. The scheme drew heavy political criticism, with the Opposition Congress accusing the Bharatiya Janata Party of favouring big business houses and traders. Several commentators later linked the scheme’s flawed implementation to Chouhan’s government losing power in 2018.

 

After multiple alterations, including a “flat” Bhavantar version offering fixed compensation regardless of market fluctuations, the scheme was quietly scrapped.

 

Noted agriculture economist Ashok Gulati, Chair professor at the Indian Council for Research on International Economic Relations (ICRIER), found in a study that only around 23 per cent of farmers benefited from the programme, while the rest suffered as market rates crashed.

 

“BBY is prone to manipulation by traders and mandi-level officials. With a short registration window, it is likely to depress market prices unduly, allowing traders to exploit it. Non-registered farmers, especially smallholders who typically sell at farm-gate level, will be the worst victims: they won’t get compensation yet will face low market prices,” Gulati noted in a working paper for ICRIER, co-authored with Tirtha Chatterjee and Siraj Hussain.

 

C S C Sekhar, professor of economics at the Institute of Economic Growth, University of Delhi, said that the main advantage of deficiency price payments is that they maintain the MSP incentive while avoiding storage and transport costs. The disadvantage, he added, is that, like MSP, the scheme ignores demand-side realities.

 

“MSP is guaranteed irrespective of market demand, which can lead to persistent over-supply and continual government intervention,” Sekhar said. He also called attention to potential issues such as moral hazard and adverse selection.

 

Kedar Sirohi, former agriculture advisor to the Madhya Pradesh government, said that the registration window opening in October and purchases beginning in November give traders and industrialists an early advantage, meaning they have already started manipulating the system.

 

“In Madhya Pradesh, about 85 per cent of small farmers sell their soybeans starting in October for cash for the next crop. They stand to lose the most if prices fall,” Sirohi said. Farmer groups have threatened statewide agitation unless BBY is withdrawn, demanding MSP instead.

 

Abhishek Raghuvanshi, a prominent local farmer, said last year the government purchased roughly 2 million tonnes of soybeans to offset MSP losses but incurred a loss of at least ₹1,000 per quintal in the open market.

 

“This year, the government seems keen to cut losses. Offering BBY compensation of ₹500–600 per quintal is seen as preferable to a ₹1,000 per quintal loss,” Raghuvanshi said.

 

Of strife and soybean: Price, policy, and peril 

·         BBY in Madhya Pradesh was first launched for soybeans in 2017

 

·         It was billed as one of the largest experiments in deficiency price payments

 

·         Farmers claimed traders manipulated the system to artificially lower prices

 

·         The scheme was eventually scrapped after multiple revisions

 

·         Experts warn that price deficiency payments are prone to manipulation unless carefully managed