Will PM-AASHA benefit farmers?

For the first time in the history of Indian agriculture, a new scheme, Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA), has been introduced by the Centre to plug the holes in the procurement system and address the gaps in the Minimum Support Price (MSP) scheme. Given the tiny percentage of farmers benefiting from MSP, it is expected to revolutionise the procurement system.

The new 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 historic scheme appears to be a robust mechanism that would enable farmers across States to realise MSP in fuller measure.

Benefits of the schemes

The Price Support Scheme (PSS) promises to provide assured price for farmers and protect them from making distress sale during bumper harvest. The scheme proposes to strengthen physical procurement of pulses, oilseeds and copra. State governments will be entrusted with the responsibility of deciding the type and quantity of the crop to be procured when wholesale prices fall below MSP. Besides, the State governments will also procure 25 per cent of the marketable surplus of farmers for eligible crops.

The Maharashtra government at the beginning of 2018, reportedly 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. Under the new scheme, the Centre will compensate the States for any losses capped at 30 per cent of procurement cost.

Another scheme, Price Deficiency Payment Scheme (PDPS), has been formulated on the lines of Madhya Pradesh government’s Bhawantar Bhugtan Yojana (BBY). It promises to hedge price risks wherein farmers will be compensated for distress sale at prices below MSP.

This scheme proposes to cover all oilseeds for which MSP is notified. Under this, the direct payment of the difference between MSP and the modal price of market will be made to farmers. This scheme does not involve any physical procurement of crops by the State agencies as farmers are paid the difference between MSP and modal price on disposal in the notified market.

PDPS will create a win-win situation for both farmers and the government. While assuring MSP for farmers, it will reduce the accumulation of unwanted foodgrains and oilseeds stocks and the fiscal costs of procurement and storage will also reduce significantly.

Under the Private Procurement Stockist Scheme (PPSS), the government is mulling to allow the entry of private players in the procurement of oilseeds on a pilot basis. The private players can procure 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 got a fresh impetus as it is expected to increase the outreach of MSP operations among all crop growers, which is essential to increase farmers’ income.

When we have public-private partnership in storage, there is absolutely no reason why it cannot be extended to procurement operations. If the ultimate objective is to deliver MSP to all farmers, how does it matter if procurement is done through FCI or ITC or Hindustan Unilever, which not only undertake exports and domestic trading of agri-commodities on their account but are also engaged in buying wheat mainly to meet their branded atta requirements.

The crux of the issue is that unless procurement is strengthened by various means, any hike in MSP will not proportionately benefit farmers. When markets have failed miserably to pull out farmers from the perpetual indebtedness over the years, the launch of PM-AASHA can be seen as the dawn of new market architecture.

While the pace of procurement increased in recent years, the data released by NAFED for 2018-19 indicates lack of coordination of State governments with procuring agencies has resulted in poor procurement of kharif and rabi pulses and oilseeds in many growing States. Unless State governments work in harmony with the procuring agencies, all concerted efforts that are being taken towards making a robust and efficient procurement mechanism will fail to bring about a paradigm shift in farmers’ income.

The writers are former Member (Official), Commission for Agricultural Costs and Prices, New Delhi, and Senior Assistant Professor in Economics, Department of Social Sciences, Vellore Institute of Technology, respectively.