Stressing that there is a need for the continuation of the minimum support price (MSP) scheme for crops, NITI Aayog member Ramesh Chand has said it is time to debate and discuss what should be the “means” to ensure the guaranteed returns to farmers since procurement cannot be the answer.

Addressing a conference on “Getting agriculture markets right”, organised jointly by National Stock Exchange and ICRIER, Chand said: “If you ensure MSP through procurement, certainly it is distortionary as it involves huge costs. The latest estimate is that to give ₹100 as MSP benefit to a farmer, the government needs to spend ₹35. Earlier it was ₹40 and now it has been reduced. Still it is very high.”

Inefficient markets

He also said in some cases, the MSP is justified and needed, particularly when there is volatility in prices and a glut in the market. “I feel what matters is how we give MSP to farmers... MSP has to be there as long as markets are not competitive and efficient. But MSP can be given through means other than procurement,” Chand said.

Offering the solution, he said Deficiency Pricing Payment (DPP) is one such means of giving MSP to farmers, but it cannot be stopped once implemented. The price deficiency payment scheme (PDPS) scheme, launched in 2018 for oilseeds, says, “the farmer would be paid the difference between the MSP and the monthly modal price/actual sale price subject to a maximum of 25 per cent of the MSP value.”

Citing the example of Madhya Pradesh where it was implemented for the first time in the country, he said the Chief Minister had to abandon the scheme after criticism from experts and even the Finance Ministry was not ready to release the payment to the State government.

Haryana launches DPP

“Now Haryana has started the DPP in some crops and probably it will spread to other States,” Chand said. Noted food policy expert Ashok Gulati agreed with Chand, saying whether it is Europe or the US, country after country follows this model to support their farmers.

Chand said he has given a detailed presentation on this to Prime Minister Narendra Modi, which indicates the government is seriously working on this amid demand from farmers’ groups for legal guarantee on MSP.

He has also estimated that the difference between mandi price and MSP was 12-15 per cent for which the government announces the rates based on district-level data. The financial requirement was estimated at ₹80,000 crore based on the 2019 price to ensure MSP for all 23 crops.

The government should explore the possibilities of launching a modified version of PDPS, which allows only oilseeds farmers to receive upto 25 per cent of MSP in case the mandi rates fall below the benchmark rate, the Commission for Agricultural Costs and Prices (CACP) said in its Kharif 2022-23 report.

S Sivakumar, group head of ITC’s agri and IT businesses, said as consumers get richer and dietary habits change, there is a need to translate the demand signals to the production system to respond. “From a production-driven supply chain, we are in the process of transiting to a demand-responsive production system,” he said.

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