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Minimum Support Price (MSP) for different agricultural crops

  • In light of the Finance Minister’s budget announcement that NITI Aayog will develop and put in place a fool-proof mechanism.
  • NITI Aayog will develop a mechanism for implementation of Minimum Support Price (MSP) for different agricultural crops.
  • In our country, MSP for 24 agricultural commodities of Kharif and Rabi season are announced by the Government based on the recommendations of the Commission for Agriculture Cost and Prices (CACP).
  • However, procurement by Central and State Agencies is limited to rice and wheat and some amount of coarse cereals.
  • The Government also procures limited quantity of oil seed and pulses through NAFED, SFAC and some other agencies.
  • The market intervention scheme (MIS) is implemented in case of the prices falling below the threshold level in perishable crops.

Three concepts were discussed at the meeting.

  • The first option related to Market Assurance Scheme, which proposes procurement by States and compensation of losses upto certain extent of MSP after the procurement and price realization out of sale of the procured produce.
  • Second option related to price deficiency procurement scheme. Under this scheme, if the sale price is below a modal price then the farmers may be
    compensated to the difference between MSP and actual price subject to a ceiling which may not exceed 25% of the MSP. No compensation would be due if modal price in neighboring States is above the MSP.
  • Third option related to Private Procurement and Stockist Scheme, which relates to procurement by private entrepreneurs at MSP and Government providing some policy and tax incentives and a commission to such private entities which may be decided on the basis of transparent criteria and bidding for the empanelment of private players by the State Government to do the procurement operations.

The States overwhelmingly welcomed efforts of NITI Aayog and the Ministry of Agriculture for providing a cafeteria of options. Third option of private procurement and stockist scheme offered great promise as it reduces the fiscal implications for the government, involves private entities as partners in agriculture marketing and improves the competition in the market.

The Governments liabilities for storage and post procurement management and disposal are also avoided. However, all the three options may not be implemented for the same crop.