As the Centre contemplates various measures, including adopting MP's Price Deficiency Payment scheme, to give freedom to states to intervene in agriculture markets in the event of a price fall, data show that the government has spent over Rs 71 billion on the existing market schemes till the middle of December, which is among the highest in the past six years.
At present, the Centre runs two programmes – the Market Intervention Scheme (MIS) and the Price Support Scheme (PSS) – to assist states to procure agriculture commodities in the event of a price fall.
The PSS is mostly for procuring oilseeds and pulses, while the MIS helps states procure perishable items like onions and potatoes.
The central government bears 50 per cent expenditure under both the programmes, while the states contribute the rest. Apart from this, a Price Stabilisation Fund (PSF) is also operated by the Centre through the ministry of consumer affairs under which states are compensated for intervening in agriculture markets in the event of a price fall.
In FY18, data show that till December 18, the central government spent around Rs 13.87 billion from its kitty to help states procure over 920,000 tonnes of onions, potatoes, red chillies, and garlic under MIS. This was the highest ever amount of funds allocated by the government under the scheme in the past six years starting from 2011-12.
Similarly, under the PSS, under which just oilseeds and pulses are procured, the Centre, along with the states, procured 1.2 million tonnes of oilseeds and pulses, spending around Rs 57.43 billion so far as its share. This, too, was by far the highest amount of funds spent on the scheme since 2012-13.
Through the PSS, around 0.70 million tonnes of oilseeds have been procured so far while 0.50 million tonnes of pulses have been bought from farmers.
However, a big drawback and complaint against both these programmes is that as a share of the funds is borne by the central government, requests from states take time to process, which defies the entire concept of giving remunerative price to farmers.
Also, many times, the quantity that has to be procured is capped, which does not help farmers.
Therefore, a programme that would give states necessary freedom to procure, store, and distribute agriculture commodities in the event of a price fall could be devised and the Centre would just share a portion of the financial burden.
The market assurance scheme, which is being discussed, tries to do that. Under the scheme, the Centre would bear an expenditure that would be capped at 30 per cent of the procurement cost of the price fall below MSP.
Whether the new scheme would be in addition to MIS, PSS, and PSF or subsume all of them remains to be seen.