The commission, headed by former finance secretary KP Geethakrishnan, asked the government to fix MSP, based on the recommendations of expert bodies like the Commission for Agricultural Cost and Prices (CACP) without further changes, official sources said.

The recommendations are part of the first report of the commission, set up by the government to suggest measures to prune its expenditure.

The government is yet to announce MSP for the forthcoming kharif procurement and it is highly unlikely that the it would stick to the suggestions of the commission this season.

The commission has also recommended that present procurement system for rice should be replaced with a levy route system.

It said the levy percentage should be fixed anywhere between 50 and 70 per cent as the miller may choose and the revised levy price with reference to strict quality standards before the coming season.

Ministry of Civil Supplies and Consumer Affairs has already announced that it was likely to implement ERC's recommendation on procuring rice through the levy route system to cut costs and improve storage capacities instead of Custom Milled Rice route system.

It said state governments and private sector should be induced to enter foodgrains trade, including procurement, storage and exports by moderating the increase in MSP effected every year. "State governments and private sector with surplus foodgrains could be allowed to procure, sell and also export upto 3 million tonnes of rice and five million tonnes of wheat every year and also that under no circumstances will the government meddle with this policy for at least 15 years," ERC said.

Currently, all these functions are performed by the Food Corporation of India alone.It said the cost of holding of stocks in excess of the requirement for national food security and PDS due to "very generous MSP based procurement policy" could be reflected in the Budget as producers subsidy rather than consumers.

Government should formulate a procurement price which should include the MSP as well as reasonable level of taxes and other levies imposed by the states instead of MSP, it said, adding that "this would leave the states to decide on what they should retain by way of taxes and levies and what should be passed on to the farmers.

"Moreover, the report said that in those states where the total distribution under public distribution system is in excess of the quantities earmarked for BPL (below poverty line) population and at prices at or below the price at which the sales are to be made to the BPL population, government could provide the subsidy amounts directly to the state governments.

"This move would not only help the state governments in saving money, but would also make the FCI more efficient," the commission said. The report also asked for better targeting of the quantities allocated to the BPL population and a national food security buffer stock of 10 miilion tonnes to be maintained at all times.