Editorial

Sowing hopes

| Updated on September 17, 2018 Published on September 17, 2018

The AASHA scheme promises better returns on crops, but implementation is the key

With the decades-old minimum support price (MSP) system failing to address the crisis at the farm gate, the three schemes that are a part of AASHA – the Price Support Scheme (PSS) itself, the Price Deficiency Payment Scheme (PDPS) and the Pilot of Private Procurement and Stockist Scheme (PPPS) – point to an innovative, MSP-plus approach to the problem of non-remunerative prices. Under the PDPS, the Centre makes a promise to pay oilseed farmers the difference between the MSP and market price. The advantage of this scheme is that the Centre can keep the farmer satisfied without having to go through the hassle of physical procurement, storage and disposal. Freed of these logistical hassles, the geographical reach and coverage of PDPS is likely to be superior. The PSS, or expanded MSP, will allow the FCI to procure pulses, oilseeds and copra from States that display interest. The PPPS is a new idea. Through this scheme, the Centre will persuade States to bring in private players to procure at MSP. It promises a maximum of 15 per cent of MSP as a service charge to the private player to compensate for the loss.

In all these schemes however, the key will be the implementation; failure to create a system of checks and balances can derail them. For instance, the experience of Madhya Pradesh which implemented the PDPS under the Bhavantar Bhugtan Yojana last year, shows that it can be easily manipulated. Ground level checks reveal that traders connive with each other and depress prices at mandis. They force farmers to sell at lower prices and pocket the compensation from the government. Many small and marginal farmers who are unable to sell their produce under the Bhavantar scheme, face a double whammy of lowered price and no compensation. The PSS would be easier to implement, with nodal agencies doing the procurement. However, the Centre might be hard put to provide funds. With the additional ₹16,550 crore guarantee for raising working capital from banks now being made available, the total credit guarantee given to institutions under PSS is already ₹45,550 crore. But if all States apply to NAFED/FCI for procurement of oilseeds or pulses, the agencies will fall short of funds.

The PPPS may work, but private procurers may be wary of the Centre’s delayed payments. To ensure that AASHA works, the Centre first needs to break the trader cartels at mandis. One way to ensure this is to widen competition by inter-linking mandis. e-NAM promises to do so, but, States need to be proactive in undertaking regulatory reforms. With respect to PSS, the Centre needs to figure out how to handle procurement and disposal efficiently. If NAFED and FCI are to forever sell at a loss and be left short of funds, the PSS option will run aground. The PPPS looks the most promising, but for private players to show enthusiasm, the government should extend support through policy measures, which includes liberalised trade and exports.

Published on September 17, 2018
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