New Policies on Procurement and MSP Approved by Cabinet

On Wednesday, the cabinet headed by Prime Minister Narendra Modi asked Niti Aayog to develop a full proof mechanism in consultation with Union Agriculture Ministry and states regarding the new procurement policies which will allow states to string along private companies for procurement on pilot basis.

Concurrently the cabinet also maintained that the under this new policy, oilseeds farmers will be compensated if the prices fall from minimum support price (MSP).

Under the New procurement policy ‘Annadata Maulya Samrakshana Yojana’ approved by the cabinet, state governments are allowed to choose multiple schemes to protect farmers when prices fall below the MSP.

A new scheme ‘Price Deficiency Payment (PDP)’ has been framed on the lines of Madhya Pradesh government’s Bhavantar Bhugtan Yojana (BBY) to protect oilseeds farmers only.

Under the PDP, the government will pay to farmers the difference between the MSP and monthly average price of oilseeds quoted in wholesale market. This would be implemented for up to 25 per cent of the oilseeds production in a state.

Both PDP and private players’ participation will be exclusively for oilseeds because the government wants to bring down the country’s import dependence on cooking oils.

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 Food Corporation of India (FCI), the government’s nodal agency for procurement and distribution of food grains, already procures wheat and rice at MSP for supply through ration shops and welfare schemes.

The Centre also implements Market Intervention Scheme (MIS) for procurement of those commodities, which are perishable in nature and are not covered under the MSP policy.

Under the MSP policy, the government fixes the rates for 23 notified crops grown in kharif and rabi seasons.

India imports around 14-15 million tons of edible oils annually, which is around 70 per cent of the domestic demand.