Shortfalls in PM-AASHA

What is the issue?

The new Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA) has failed to live up to the farmers’ expectations.
Click here to know more on the scheme.

What are the shortfalls?

The programme aimed at providing steeply hiked minimum support prices (MSPs) to farmers.

But most of the 14 kharif crops (MSPs raised to 50% above production costs) are currently selling at 10 to 40% below these rates.
The whole plan was finalised just before the beginning of kharif marketing.
This has left little room for states to do the necessary pre-launch groundwork.
Moreover, PM-AASHA has been mandated to be executed through the existing mandis.
Mandis are run by the Agricultural Produce Marketing Committees and are known for their inefficiencies and malpractices.
Models - The three agri-marketing models under the scheme are:

Notably, none of the three marketing models is flawless.
Nor are any of them financially attractive enough for the states.
The first two are already in operation in some states for selected crops.
But their benefits accrue only to a small section of farmers in a limited manner.
The price deficiency model suffers from cumbersome procedures.
The third option of extending price support through private trade is an innovative concept but needs efforts to encourage traders.
However, there was hardly any time to do so prior to the current kharif marketing season.
Nevertheless, this method and the price deficiency payment system are theoretically sound ideas.
It's because they spare the government of the burdensome and cost-intensive tasks of procuring, transporting, storing and finally off-loading the stocks.

Is MSP still relevant?

The farm sector’s economic woes are rooted in outmoded and ill-advised agricultural marketing and pricing policies.
MSP-based procurement was conceived as a stimulant for higher production at the time of perpetual shortages.
But it has outlived its utility and is ill-suited in the present era of surpluses.
It has also distorted the market by delinking production/supplies from demand.
This has further accentuated the commodity surplus and put a further downward pressure on prices.

What is to be done?

The production of commodities must match the combined demand in domestic and export markets.
The objective of income support for farmers has to be attained through cash price adjustments without distorting the market.
There is also the crucial need for incentivising the agri-exports in India.

Source: Business Standard