Between themselves, the Centre and states (chiefly Madhya Pradesh) have so far paid the minimum support prices (MSPs) for less than 4.5% of the kharif 2018 crop of pulses and oilseeds, which is estimated at 314 lakh tonnes. The low level of MSP operations indicates that PM-AASHA, the newly buttressed price support scheme for agricultural produce, hasn’t yet made any material difference to the mandi prices.

Government officials, however, say that whether the market interventions by the designated agencies actually occurred or not, their greater capability to influence the market under PM-AASHA itself seems to push up the mandi prices. Procurement by the agriculture cooperative Nafed, the principal agency for MSP operations of pulses and oilseeds at the central level, has so far been of the order of just 2 lakh tonnes, half the level during the corresponding period in the last kharif season. This apart, under its price-deficiency payment scheme Bhavantar, which doesn’t involve physical procurement of crops, the Madhya Pradesh government has ensured MSP benefit for about 12 lakh tonnes of kharif crop, mostly soybean.

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“The progress of procurement is slow as nearly half of the current arrivals in mandis don’t match FAQ (fair and average quality) standards and hence are not procured by us. Now that festivals are over, the purchases will likely pick up,” Sanjeev Kumar Chadha, managing director, Nafed, told FE. While 70-80% of the crop is believed to be ‘marketable surplus’, Nafed’s procurement, which has risen in a big way in the last three-four years from nominal levels earlier, would not exceed 25% of the production, he added. (In 2105, India faced a big shortage and retail prices of lentils skyrocketed. The government’s immediate repose was to create a buffer stock for pulses but it also announced huge MSP increases in the following years in order to ramp up production). Chadha, however, said that Nafed’s enhanced capability
to undertake the MSP purchases itself has improved the market sentiments.

“Of late, prices of some crops like tur and soybean have started rising and may reach MSP levels soon. There has been concerns over rabi pulses after initial reports showed lower acreage so private traders have ramped up purchase of pulses of late,” he said. However, mandi prices of major pulses are still ruling below MSPs. Market price of moong is now around Rs 5,500-6,000 per quintal against its MSP of Rs 6,975 per quintal, while that of urad is around Rs 4,600 per quintal versus its MSP of Rs 5,600 a quintal. Moong prices were much lower in October and early November. Tur prices have reached near its MSP level of Rs 3,399 a quintal compared with about Rs 3,050 last month

Rather than a larger procurement obligation on the government, an ideal situation would be one where private traders themselves pay remunerative prices to farmers, Chadha said, adding that the high import tariffs on pulses (landed costs of imports are higher than MSPs for most items) and the strong presence of Nafed could help achieve the objective of boosting farmers’ confidence.

Nafed, he said, has ample liquidity to undertake the MSP operations. While the government guarantee for its bank loans for this fiscal was enhanced by the Cabinet in mid-September by Rs 16,550 crore to Rs 45,500 crore, the cooperative has another Rs 8,850 crore at its disposal which are proceeds from the sale of oilseeds and pulses from its stocks since April 1, 2018. It still has the highest-ever stock level of 40 lakh tonne of oilseeds and pulses.

“Private traders know that Nafed is not selling the pulses at its warehouses immediately, so they have started buying these crops resulting in upward movement of prices,” Chadha said. A part of the Nafed’s pulses stocks are disbursed through the PDS system, with a subsidy of Rs 15 per kg and this has had the beneficial effect of increasing the protein content in diet of low-income population.

“Bringing a certain level of stability to the pulses market is our objective and that is happening. This would make farmers more confident and lead to India’s self-sufficiency in pulses production.” The direct impact of PM-AASHA on budget is limited to the obligation to finance Nafed’s losses from MSP operations — which conventionally used to be 20-25% of the procurement budget — and servicing cost of the cooperative’s loans. While the ministry of agriculture has initially budgeted for just Rs 200 crore for the price support schemes, the Cabinet provided for budgetary provision of over Rs 15,000 crore for PM-AASHA implementation for crop year 2018-19 (July-June).

For as many as 14 crops in kharif 2018, the government had earlier announced MSP hikes in the range of 4-52% in sync with the policy to keep MSPs at 1.5 times the cost. Nafed is paid service charge of 1.5%; it also has earnings from various other businesses. Some Rs 400 crore has been raise through these means so far this year. It is currently selling 2016 stock of tur crop in open market while keeping the newer crop for subsidised sales through PDS shops.

Only a few states like MP, Karnataka, Maharsahtra undertake pulses procurement in a major way. In the last couple of seasons, including the Nafed support, the overall government purchases of some crops reached 40-50% of the production in these states.