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Policy on agricultural markets to be framed after taking states’ views, says minister

To follow through on a key budget proposal promising 50% returns for 23 crops and compensation for market losses, the Centre will hold a meeting with all states in the first week of March.

india Updated: Feb 17, 2018 23:20 IST
Zia Haq
Zia Haq
New Delhi, Hindustan Times
Agricultural markets,Farmers,Minimum support price
Prices of key commodities falling below MSPs – a floor price to prevent distress sales – led to a wave of protests last year by farmers in many states, including some large ones ruled by the BJP. (AFP file photo)

The NDA government will frame a policy in consultation with states to “intervene” in agricultural markets whenever prices of farm produce plunge below federally fixed minimum support prices (MSPs), agriculture minister Radha Mohan Singh said on Friday, articulating a plan to alleviate one of the main causes of agrarian distress that could have serious electoral implications for the government.

To follow through on a key budget proposal promising 50% returns for 23 crops and compensation for market losses, the Centre will hold a meeting with all states in the first week of March, Singh said in an interview. Letters have already been sent out to all chief ministers, he added.

Prices of key commodities falling below MSPs – a floor price to prevent distress sales – led to a wave of protests last year by farmers in many states, including some large ones ruled by the BJP.

To fix 50% returns, the Centre will use a “prevailing method” called “A2+FL” to calculate cultivation costs; this includes all out-of-pocket expenses of farmers plus the value of family labour.

Farmer organisations have been demanding the use of a more complete measure called “C2”, which includes imputed costs of capital and rent on land.

NITI Aayog, the government’s policy think-tank, and the agriculture ministry will discuss the details with the states when they meet, Singh said.

“There are two,three models being studied. Essentially the broad policy will be that if prices fall below MSP, then there will definitely be government intervention to ensure that farmers are compensated adequately in accordance with the notified MSP,” Singh said.

A senior government official said on condition of anonymity that the Centre might have to choose multiple mechanisms which run concurrently, depending on what states prefer.

These could include direct procurement (buying of produce) from farmers, payment of the difference between MSP and the prevailing average price, or a direct lump sum payment at the beginning of each sowing season. In each of these, the Centre will jointly fund the operations with states.

The Centre is also considering incentives such as tax breaks for private firms that are willing to buy from farmer, this person added, although he didn’t elaborate on this proposal which will require significant changes in the way private firms are allowed to buy agricultural produce.

“Whether we go for price-deficit payment like Madhya Pradesh or procurement intervention, for each type of intervention, we will have to have a standardized norms,” the government official said.

The central government may have to spend Rs 12,000-15,000 crore on these interventions, he added. Madhya Pradesh already has a scheme to pay farmers’ for their losses, while Telengana makes a direct lump sum payment to farmers.

First Published: Feb 17, 2018 23:15 IST