Cabinet okays new procurement mechanism for crops, hikes ethanol rates

Ahead of the kharif harvest season, the Centre on Wednesday announced its much-awaited procurement mechanism for non-wheat and rice crops at an increased Minimum Support Price (MSP) and also fixed a new higher price for ethanol produced from intermediary molasses and sugarcane juice.

For the procurement mechanism, an allocation of over Rs 150 billion was made spread over the next two financial years of which Rs 62 billion will be spent this year.

That apart, procurement agencies like Nafed will also get an additional bank guarantee of over Rs 160 billion in addition to the existing Rs 290 billion.

Called the Pradhan Mantri Annadaata Aay Sanrakshan Abhiyan (PM-AASHA) loosely translated as Prime Minister’s Farmers Income Guarantee Campaign, the scheme will comprise three combinations of the existing Price Support Scheme (PSS), Price Deficiency Payment Scheme (PDPS) – modelled on the lines of Madhya Pradesh’s Bhawantar Bhugtan Yojana or similar such experiments and private procurement and stockist scheme on a pilot basis.

States will be free to choose a combination of any of the three schemes, but no two schemes can run concurrently for the same crop.

Sources said that under the price deficit scheme, modelled on the lines of Bhawantar Bhugtan Yojana of Madhya Pradesh, the financing would be done for a portion of the surplus production, while under private procurement and stockist scheme, interested parties could be paid an incentive of 15 per cent of the MSP.

On ethanol, the CCEA raised the procurement price of ethanol derived from 100 per cent sugarcane juice to Rs 59.13 per litre from the current rate of Rs 47.13, an increase of 25 per cent, while the price for ethanol produced from B-heavy molasses (also called as intermediary molasses) was hiked to Rs 52.43 a litre from the current Rs 47.13.

However, the price of ethanol produced from C-heavy molasses was reduced marginally to Rs 43.46 from Rs 43.70. Ethanol prices was last raised in June 2018.

However, a farmers' organization criticized the MSP procurement announcements saying that there was nothing new in the announcement and much of the components were already known to the public. “There is nothing new in the decision, just repackaging of old programmes. As far as involving private players is concerned, the whole problem is that mandis don’t pay MSP and funding pattern isn’t very clear,” said Avik Saha, of Jai Kisan Andolan.

He said much of the kharif urad crop had already started arriving in the market and prices were ruling almost 40 per cent below the MSP. Saha added that the situation was the same in case of bajra.

The government, however, appears to be confident that the new proposal will help improve farmers' income.

"The PM-AASHA is aimed at ensuring remunerative prices to the farmers for their produce as announced in the Union Budget for 2018. This is a historic decision," Agriculture Minister Radha Mohan Singh told reporters after the Cabinet meeting.

The government mentioned that the PDPS is on the lines of Madhya Pradesh government's Bhavantar Bhugtan Yojana (BBY), but will protect oilseeds farmers only.

Under the PDPS, the government will pay growers the difference between the MSP and monthly average price of oilseeds quoted in wholesale market.

The price difference will be paid to pre-registered farmers selling the produce in the notified market yard through a transparent auction process. "This scheme does not involve any physical procurement of crops and the central government will give support for the PDPS as per the norms," the statement said.

Besides this, the states have been given an option to rope in private players for oilseeds procurement on a pilot basis in eight districts.

Under the new policy, the states will also have an option to choose the existing Price Support Scheme (PSS), under which central agencies procure commodities covered under the MSP policy when prices fall below the MSP.

"The states can choose either PSS or PDPS or PPSS to ensure MSP to farmers," Singh said adding that this is an unprecedented step taken by the government to protect the farmers' income which is expected to go a long way towards the welfare of farmers.

The other existing procurement schemes being implemented for procurement of paddy, wheat and nutri-cereals/coarse grains as well as commercial crops such as cotton and jute will be continued for providing MSP to farmers.

Singh further said that the government is committed to realising the vision of doubling farmers' income by 2022.

"The emphasis is on enhancing productivity, reducing cost of cultivation and strengthening post-harvesting management, including market structure. Several market reforms have been initiated by the government," he added.

Under the MSP policy, the government fixes the rates for 23 notified crops grown in kharif and rabi seasons. 
a) Cabinet launched PM-ASHAA to ensure MSP for non-wheat and rice crops.

b) PM-ASHAA has three components - existing Price Support Scheme, Price Deficiency Payment Scheme modelled on the lines of MP’s Bhawantar Bhugtan Yojana and private procurement and stockist scheme as pilot.

c) States will be free to choose any of the schemes or a combination depending on the crop, but PDPS will be limited only to oilseeds.

d) In the private scheme, players would be eligible for 15 per cent of MSP and carriage and handling charge.

e) Farm groups say nothing new in the announcements and all the schemes are already running for the last several years.