The Madhya Pradesh government has decided to discontinue its price-deficiency support scheme Bhavantar Bhugtan Yojana (BBY) for three key crops as prices have plunged below their respective MSPs. (Reuters)

The Madhya Pradesh government has decided to discontinue its price-deficiency support scheme Bhavantar Bhugtan Yojana (BBY) for three key crops as prices have plunged below their respective MSPs. Mandi rates for chana and masur are now more than a quarter below their respective MSPs jacking up the potential cost of the scheme. The state is knocking on the Centre’s doors for a bailout. The state’s decision, barely a week before the start of the rabi procurement season, amounts to a U-turn; it was only in early February that an extension of the scheme, launched in October last year for kharif crops, was announced.

The withdrawal exposes the unviability of such price support measures, being announced by a clutch of states, even as the Centre is formulating their pan-India alternatives.

Over 12 lakh MP farmers have already registered themselves under the BBY for the current rabi season. Given that the chana output eligible for price support under BBY is around 8 million tonne and the gap between the prevailing market rates and the MSP is around Rs 11,000/tonne, BBY would have cost over Rs 8,800 crore for chana alone. In a letter to the Union agriculture ministry dated March 23, the state’s principal secretary Rajesh Rajora has requested the Centre to buy 26.9 lakh tonne of gram (chana), 3.30 lakh tonne of lentil (masur) and 4.80 lakh tonne of mustard at their respective MSPs. Nafed undertakes the procurement of these crops on behalf of the Centre, but practically the exercise is carried out only on the request of the state concerned and the procurement is capped at 40% of the production.

Under BBY, Madhya Pradesh had paid Rs 1,570 crore to farmers in kharif 2017. The crops are not procured under the scheme; instead, when the prices fall below the MSPs, the state government pays the farmer the difference between the support price and the average of market rates over a fixed period. The state government had paid Rs 1,570 Crore to farmers in kharif 2017 under BBY. Onion, garlic, wheat, gram, lentil and mustard were to be the rabi crops to benefit from BBY as per the February decision. Sources said onion and garlic would continue to be under BBY during the current rabi season. MP’s move comes at a time the Centre is expected to come out with three schemes, which are meant to ensure that farmers get at least the MSPs for their crops. Niti Aayog has finalised these schemes: a Market Assistance Scheme (MAS), as proposed by agriculture ministry, one on the lines of MP’s BBY and a third scheme involving private companies who will be offered tax and other incentives.

Confirming the discontinuation of Bavantar for the three crops, Rajora told FE: “We were expecting the Centre to announce the three schemes this rabi season which seems unlikely now. So we requested the Centre to ask its agencies like Nafed to buy these crops so that farmers get the benefit of MSP in time.” The state has told the Centre that gram prices are now ruling in the mandis Rs 1000-1100 per quintal lower than the MSP of Rs 4400/quintal. Similarly, lentil prices are now Rs 1000-1200/quintal below the MSP of Rs 4250/quintal and mustard is cheaper by Rs 400-600/quintal than its MSP of Rs 4000/quintal in key mandis.

If the Centre agrees to buy these three crops at MSPs and sell it at current market prices, the designated agencies would incur a loss of Rs 3,220 crore loss, excluding 30-35% operational costs, officials have estimated. In the 2018-19 budget, the state government has allocated Rs 1,000 crore for BBY.

FE had estimated that the cost to the exchequer could be an annual Rs 80,000 crore or thereabouts if all volumes of farm produce — except fruits and vegetables — that are not procured by the government at the respective MSPs are to be given price support as promised by finance minister Arun Jaitley in the latest budget. Indeed, these are estimates based on current MSPs; if the MSP is 1.5 times the A2+FL cost for all the crops as proposed in the Budget, then the cost to the exchequer to keep the Budget promise of price support to farmers would be even higher. Sources in union agriculture ministry said that the Centre may buy a total 28 lakh tonne of gram, lentil and mustard and not 35 lakh tonne, which is 50% of production of these crops, as sought by Madhya Pradesh. “Under the price support schene, the Centre can buy a maximum of 40% of production of a state,” an agriculture ministry official said.

Asked about Nafed’s preparedness of procuring these crops, Rajora said the Central agency utilises the services of state agency Markfed to buy crops at MSP. The state had earlier planned to implement BBY between April 10-May 31, so the procurement could be during this period. Farmers registered under BBY would be eligible to sell their crops at MSPs, he said. So far 12 lakh farmers are registered under BBY and the registration would continue until March 31, he said. Asked about the funds required to buy these crops, Rajora said Nafed might require about 12,000 crore for this purpose; its cash credit limit is about Rs 20,000 crore. The state has estimated production of gram at 53.85 lakh tonne, lentil at 6.79 lakh tonne and mustard at 9.76 lakh tonne in rabi season of 2017-18 crop year (July-June).

By: Prabhudatta Mishra