MSP based deficiency payment scheme: Madhya Pradesh example shows plan will cost Centre plenty

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New Delhi | Updated: February 12, 2018 5:50:02 AM

The Centre is yet to work out the modalities of its MSP-based deficiency payments scheme, but if Madhya Pradesh’s just-concluded Bhaavantar Bhugtaan Yojana (BBY) is anything to go by, the scheme will be a costly one.

madhya pradesh, arun jaitley, msp based scheme, deficiency payment scheme, madhya pradesh lesson, msadhya pradesh budget, budget 2018While MP has traditionally had lower prices than other states for most crops, after the implementation of the scheme in September 2017, the price difference has risen. (PTI)

The Centre is yet to work out the modalities of its MSP-based deficiency payments scheme, but if Madhya Pradesh’s just-concluded Bhaavantar Bhugtaan Yojana (BBY) is anything to go by, the scheme will be a costly one. Market arrivals of crops trying to avail the scheme have shot up by four times in the case of urad — as compared to the previous year where there was no such scheme — and 50% each in the case of maize and soyabean. Compared to 2016-17 when 3.6 lakh tonne of maize came to the market for sale, it was 5.5 lakh tonne in 2017-18, numbers for urad rose from 1.5 lakh tonnes to 6.3 lakh tonne and from 12.6 lakh tonne to 18.8 lakh tonne for soyabean. The Madhya Pradesh government has spent close to around `2,000 crore for the scheme this year. Since only a small number of farmers are still registered for it, the numbers will increase next year.

Around a third of urad production was registered for the scheme in Madhya Pradesh, less than a fifth in the case of soybean, a tenth for maize, and a twentieth for groundnut. While MP has traditionally had lower prices than other states for most crops, after the implementation of the scheme in September 2017, the price difference has risen.

Urad prices in MP were 93% of those in Rajasthan in FY17 but this fell to 77% in FY18, and from 65% to 57% when a comparison is made with Uttar Pradesh. Prices of maize were 91% of those prevailing in Karnataka in 2016-17 and this fell to 88% in 2017-18. Prices of maize were 6% higher in comparison with those in Maharashtra in 2016-17 but were 4% lower in 2017-18.

To ensure traders in Madhya Pradesh are not able to manipulate markets too much, the state has taken prices prevalent in two other states as well to calculate a reference price.

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