Portfolio

New compensation scheme for oilseed farmers: The devil is in the detail

Rajalakshmi Nirmal BL Research Bureau | Updated on September 12, 2018 Published on September 12, 2018

Hope The success of the government’s scheme for oilseed farmers depends on how efficient States will be in implementing it   -  THE HINDU

The Price Deficiency Payment scheme must target marginal farmers, check price manipulation by traders

The Centre has made a new promise. This time its not on procurement, but to make good the difference between the market price and MSP to oilseed farmers. It has also said that States can rope in private players to procure oilseeds at MSP, and that they would be compensated through an incentive. The incentive could be in the form of bearing the administrative cost (up to 15 per cent of MSP) for procurement or relaxing the regulations, including the stock control order.

The announcement follows recommendations of the NITI Aayog earlier this year where it suggested ‘Price Deficiency Payment’ for implementation of Minimum Support Price (MSP) in crops where procurement is poor.

The move will cheer oilseed farmers, as this crop has been neglected in Central procurement until now.

The 2018-19 Price Policy report of CACP says that in kharif 2017-18, the National Agricultural Cooperative Marketing Federation of India (Nafed) procured only 948 tonnes of groundnut and 6,539 tonnes of sunflower, which is minuscule compared to the production.

However, only when finer details of the scheme — the cap on the quantum of produce of each State that will derive benefit under the PDP scheme, and, the level to which a farmer will be compensated — are known, can we judge how good the scheme is for farmers. When NITI Aayog proposed the PDP scheme in March, it said that there will be a cap on the maximum compensation that will be given. It said: “if the sale price is below a modal price (average price in three states in the same crop) then the farmers may be compensated to the extent of the difference between MSP and actual price subject to a ceiling which may not exceed 25 per cent of the MSP”. The government has also announced that in pulses and copra, in addition to Nafed, Food Cooperation of India (FCI) will take up Price Support Scheme operations in States and the procurement expenditure will be borne by the Central Government.

The M.P. experience

A Business Line study done on the Bhavantar Bhugtan Yojana of Madhya Pradesh (which works in the same lines as Price Deficiency payment) soon after its launch in October last year, showed that there were many drawbacks.

First, market price across crops — urad, tur as also maize — corrected in M.P. and turned sharply lower when compared to the neighbouring Uttar Pradesh, signalling that cartels were in action. The paper heard from sources in the market that traders forced farmers to take lower prices from them as the government is anyway going to compensate.

Also, since not all farmers, especially the small and marginal ones, are able to register for the scheme, they take a double blow as prices post the Bhavantar Bhugtan Yojana have dropped in other States due to the trader cartel rigging the price and they are unable to get the compensation given by the State.

Recently, in a paper titled ‘Supporting Indian Farmers: Price Support or Direct Income/Investment Support?’ co-authored by the agri-economist Ashok Gulati, it was clearly indicated that the price deficiency payment (PDP) scheme may end up helping traders and lower level mandi functionaries more than the farmers, despite best intentions of the Government.

Implementation, the key

The success of the government’s scheme for oilseed farmers depends on how efficient the States will be in the implementation — how smooth the process of registration of farmers will be and if it facilitates easy registration for small and marginal farmers with less paper work and how it will check rich farmers from exploiting the system.

It also depends on how effective the States will be in checking the manipulative practices of the traders.

Published on September 12, 2018

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Sincerely,

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.