1. Budget 2018: Arun Jaitley’s MSP-based deficiency payments scheme could cost at least Rs 80,000 crore

Budget 2018: Arun Jaitley’s MSP-based deficiency payments scheme could cost at least Rs 80,000 crore

The budget’s promise of MSP-based deficiency payments, should the government not be able to procure all crops at the MSP, could cost around Rs 80,000 crore based on conservative estimates.

By: | Updated: February 7, 2018 8:45 PM
arun jaitley deficiency payments, what are deficiency payment schemes, what is msp based deficiency scheme FM Arun Jaitley. (PTI)

The budget’s promise of MSP-based deficiency payments, should the government not be able to procure all crops at the MSP, could cost around Rs 80,000 crore based on conservative estimates. It will also trap the farm sector in massive bureaucracy and corruption as farmers will need to be registered to get these sops and some babu will need to clear the payments. The estimates are based on current MSPs, not on the hikes that will need to be made if the new MSPs – also a budget promise – are based on 1.5 times the A2+FL costs which are lower than the C2 costs the MS Swaminathan report had recommended – though the budget did not specify which cost will be used, chances are the lower A2+FL will be used. In the case of paddy, for instance, MSPs will need to be raised by around 11%, 18% in the case of cotton, 41% for jowar etc using even this lower cost as the base.

A simple exercise has been done, assuming that all production will be eligible for the deficiency payments – fruits and vegetables have not been included in the calculations.

In the case of wheat and rice, where a substantial procurement takes place, only that portion of the crop that is not procured has been used for the exercise. Of the 105-110 million tonnes of both kharif and rabi rice, only 60 million tonnes has been assumed in the calculations for deficiency payments. Similarly, of the 95-100 million tonnes of wheat, only 40 million – roughly that grown in states like UP and Rajasthan – is assumed to be eligible.

The main calculation assumes a 20% shortage in the market price over the current MSP – a 10% assumption halves the deficiency payment to Rs 40,000 crore. In Madhya Pradesh, where the scheme is being implemented by the state, the price deficiency is even higher thanks to likely manipulation by traders.

Know how Arun Jaitley’s Budget 2018 will impact your tax liability with this Income Tax Calculator

In the case of urad for example, the ruling price is 43% lower than the MSP; the ruling market price in Madhya Pradesh is even lower, but the scheme uses an average price for a few states. The fact that just 32% of urad production in the state is registered under the scheme suggests corruption is quite high – otherwise, given the benefits to be got, everyone should have registered.

Under normal MSP-based procurements, only a certain proportion of the crop is available for sale to the government procuring agencies. But, in this case, since a deficiency payment is being made, all farmers should line up and bring all their crop to get the payment – the amount for personal consumption can be bought back at the lower prices. The entire crop coming into the market will depress prices further and raise the deficiency payments. A higher MSP will also make several crops – like cotton – less export-competitive and this will also depress prices if the crops come into the domestic market.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

  1. Doc Jayant Telang
    Mar 16, 2018 at 5:25 am
    ata congress khush ki ajunahi nasati andolane ani lokana tras
    1. Ganesh Kamat
      Feb 26, 2018 at 10:02 pm
      1. Joy Ailemen
        Feb 21, 2018 at 11:07 pm
        MY TESTIMONY ABOUT A GREAT SPELLCASTER CALLED (DR ALEKO) Your love spell has huge powers! I cant believe what's happening to me! It's been only 3 weeks since you did that spell and Victor is already after me. Since the last week-end he phoned at least 5 times. I believe he seems to realize his mistakes. It's absolutely happening as you said!! Thank you! Your work is helping me so much… Without you I would feel so lonely and miserable... Thank you sir! here is the Doctor contact incase you are passing through problem ( Alekospellcaster009 or whatsapp him 1-442-243-3652)
        1. Jame Alex
          Feb 11, 2018 at 1:07 pm
          This is to inform the general public Male or Female who are healthy and 100 serious in ing their should urgently contact miot International hospital. As we have a lot of patients who are here for , A is bought to $900,000 00 USD, My name is Doctor Alex Abraham, i am a Nephrologist in India miot International hospital Surgical Hospital. Our hospital specialized in Surgery/ and other organ treatment, we also deal with ing and ation of s with a living and healthy . We are located in India. If you are interested in please don’t hesitate to contact us via Email: miotinternationhospital12 Mobil: 919206125593. Doctor Alex Abraham .
          1. Sastry Vemoory
            Feb 8, 2018 at 10:23 am
            All the costs resulting from the procurement by the Government to make good the deficiency in the market price vis a vis the MSP besides the huge costs of intermediation as well as the corruption on the part of Govt. officils can be avoided if the farmers are enabled and facilitated to their produce directly to the bulk consumers like (a) Restaurants, Hospitals, Hostels, Temples serving meals to devotees,(b) Associations of Residents of Colonies and Multi-storeyed buildings, © Associations of PDS beneficiaries,(d) Agri-processing Units like ITC, (e) Supermarkets which directly to ultimate consumers. Pending supplies to consumers as above, the produce can remain stored in Warehouses (to be located in or near each village in buildings lying vacant due to owners having relocated to urban centres and no er or tenant forthcoming), whose receipts may be pledged to Banks (to avail finance for farmers to become
            1. Load More Comments

            Go to Top