Deficiency Pricing Payment is one way to give MSP to farmers – NITI member.
Ramesh Chand, a member of NITI Aayog, said that the minimum support price (MSP) scheme for crops needs to be kept going. He also said that it is time to debate and talk about what should be the ‘means’ to ensure that farmers will get their guaranteed returns since procurement cannot be the answer.
Chand said at a conference called ‘Getting agriculture markets right,’ which was put on by the National Stock Exchange and ICRIER, ‘If you ensure MSP through procurement, it is definitely a distortion because it costs a lot.’ The most recent estimate is that the government needs to spend ₹35 to give a farmer an MSP benefit of ₹100. It used to cost ₹40, but now it costs less. Even so, it’s very high.’
Markets that work poorly
He also said that the MSP is sometimes needed and right, especially when prices change a lot and there are too many goods on the market. ‘How we give MSP to farmers is what matters to me. MSP has to be there as long as markets aren’t efficient and competitive. But MSP can be given in other ways than through procurement,’ Chand said.
As a solution, he said that Deficiency Pricing Payment (DPP) is one way to give MSP to farmers, but once it starts, it can’t be stopped. Launched in 2018 for oilseeds, the Price Deficiency Payment Scheme (PDPS) says, ‘The farmer would be paid the difference between the MSP and the monthly modal price/actual sale price, up to 25% of the MSP.’
He used Madhya Pradesh as an example, where it was tried out for the first time in the country. He said that the Chief Minister had to give up on the plan because experts were against it and the Finance Ministry was not ready to pay the State government.
Haryana started Deficiency Pricing Payment
Chand said, ‘Now that Haryana has started the DPP with some crops, it’s likely that it will spread to other States.’ Ashok Gulati, a well-known food policy expert, agreed with Chand. He said that every country, whether in Europe or the US, uses this model to help their farmers.
Chand said he gave a detailed presentation on this to Prime Minister Narendra Modi, which shows that the government is working hard on this because farmer groups want MSP to be legally guaranteed.
He has also said that the difference between the mandi price and the MSP is between 12 and 15%, and that the government sets the prices based on data from each district. Based on the price for 2019, it was thought that ₹80,000 crore would be needed to cover MSP for all 23 crops.
In its Kharif 2022-23 report, the Commission for Agricultural Costs and Prices (CACP) said that the government should look into the possibility of launching a modified version of PDPS. This version would allow only oilseed farmers to receive up to 25% of MSP if mandi rates fell below the benchmark rate.
S Sivakumar, who is in charge of ITC’s agri and IT businesses, said that as people get richer and their eating habits change, the production system needs to be able to respond to changes in demand. ‘We are in the process of switching from a supply chain that is driven by production to one that is driven by demand,’ he said.