New Procurement Policy

Why in news?

Cabinet Committee on Economic Affairs approved the implementation of “Pradhan Mantri Annadata Aay Sanrakshan Abhiyan” (PM-AASHA) recently.

What does the scheme contain?

It clubs together the existing procurement schemes with newly introduced options.
PDPS has been framed on the lines of the Madhya Pradesh government’s Bhavantar Bhugtan Yojana (BBY) to protect oilseed farmers.

Under this, farmers will be compensated to the extent of difference between MSP and market price subject to a ceiling price which may not exceed 25% of the MSP.
Under PPPS, the selected private agency shall procure oilseeds at the MSP from the registered farmers whenever prices in the market fall below the notified MSP.
A maximum service charge of up to 15 per cent of the notified MSP will be payable to the agency as an incentive.
This is similar to PSS in the physical procurement of the notified commodity, it will only substitute PSS in the pilot districts.

What are the challenges?

Under the MSP policy, the government fixes the rates for 23 notified crops grown in kharif and rabi seasons.
MSP was set at 50% higher than the farmers’ production costs this year, including labour cost to give remunerative prices to the farmers.
However, most of the 21 other crops are sold at market prices, often below the MSP, as the government’s procurement operations are temporary.
Though the government has increased the procurement of pulses and oilseeds at MSP under the existing PSS, it was way below the production target.
For example, NAFED procured 31.9 lakh tonnes of pulses and oilseeds at the MSP in 2017-18, though the total production of pulses and oilseeds was estimated at 240 and 300 lakh tonnes respectively.
Also PDP experiment in Madhya Pradesh shows, cartelisation was witnessed, wherein traders forced farmers to take lower prices from them on account of compulsory compensation from the government.
It also ends up helping traders and lower level mandi functionaries more than the farmers, despite best intentions of the government.

What holds the key in successful implementation of the scheme?

Registration of all the farmers, especially small and marginal ones, must be ensured so that they receive their compensation on time.
Proper monitoring of the marketing system should be ensured, as in e-NAM, so that it will check rich farmers from exploiting the system.
It also depends on how effective the states will be in checking the manipulative practices of the traders.

Source: Business Line, The Hindu