Cabinet clears new procurement policy

Cabinet clears new procurement policy

News:

1. Recently, the Union Cabinet approved a new umbrella Scheme “Pradhan Mantri AnnadataAaySanrakshanAbhiyan’ (PM-AASHA) to guarantee MSP to the farmers.

Important Facts:

2. Minimum Support Price (MSP):

• Minimum Support Price is the price at which government purchases crops from the farmers, to safeguard their interests.
• Every year, under the MSP policy the government fixes the rates for 23 crops grown in Kharif and Rabi season. In 2018, the rates were set at 50% higher than the farmer’s production costs, including that of labour
• The minimum support price (MSP) for agricultural produce is decided by the Commission for Agricultural Costs and Prices (CACP)

3. Background: The decision to launch a new mechanism comes against the backdrop of the Union Budget 2018 where it was assured that the farmers would benefit from MSPs
4. Key Features of PM-AASHA:

The scheme comprises of three sub-schemes viz.

Price Support Scheme (PSS):

• Physical procurement of pulses, oilseeds and Copra will be done by Central Nodal Agencies in collaboration with state governments
• Both National Agricultural Cooperative Marketing Federation of India (NAFED) and Food Cooperation of India (FCI) will take up PSS operations in states.
• As per norms, the central government will bear the procurement expenditure and losses due to procurement.

Price Deficiency Payment Scheme (PDPS):

• Announcement of the scheme follows the recommendations of NITI Aayog where it suggested “Price Deficiency Payment” for implementation of MSP in crops where procurement is poor.
• The scheme will cover all oilseeds for which MSP is notified.
• Direct payment of the difference between the MSP and the selling price will be made to pre-registered farmers selling their produce in the notified market yard and thus it does not involve any physical procurement.
• All payments will be done directly into registered bank accounts of the farmers.

Note: The scheme has been framed on the lines of BhavantarBhugtan Yojana, Madhya Pradesh government’s scheme to protect the interests of oilseed farmers in the state.

Pilot of Private Procurement &Stockist Scheme (PPPS):

• Under this scheme, participation of private sector in procurement operations will be piloted.
• States have the option to roll out the scheme on pilot basis in selected districts/APMCs involving private stockists

5. Significance:

• It is an important step towards achieving the ambitious target of doubling farmers’ income by 2022
• The provision of crop-wise procurement is expected to benefit both farmers and states
• The policy will help in stabilising commodity markets and will also benefit the farmers by providing options to the state governments to compensate farmers when the market prices fall below MSP.
• The involvement of private sector in procurement will help improve the process and infrastructure of procurement in the country.

6. Concerns:

• The NITI Aayog in its 2016 evaluation report highlighted that the procurement infrastructure in India is inadequate. However, recent initiatives have not focused on improving the procurement infrastructure.
• Another important concern is lack of an efficient distribution system. For example, NAFED has a stock of 4 million tonnes of pulses and oil seeds because of previous 2 years procurement. However, their distribution policy is still non-existent.
• Critics have also raised concerns over price manipulation by traders

7. Way Forward:

• Efficient implementation will be the key to the success of PM-AASHA. The government should ensure hassle-free and easy registration of farmers.
• The scheme should target small and marginal farmers so as to improve their economic condition
• The government should effectively check price manipulation by traders.