PM-Aasha: Modi govt’s flagship scheme will cost Rs 3.84 lakh cr, says study

Updated: June 18, 2019 7:05:37 AM

According to the IEG study, given the high cost of a comprehensive PM Aasha, “a carefully designed price deficiency payment system with partial procurement and dovetailing with e-NAM” is the way forward.

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By Prabhudatta Mishra

The government would have to spend as high as Rs 3.84 lakh crore annually if it were to implement its flagship PM-Aasha scheme in right earnest, according to a study by Delhi-based Institute of Economic Growth, commissioned by the Union agriculture ministry. When the government rolled out the scheme in September 2018, it promised farmers 50% returns over cost of production either through procurement (by government agencies) or price deficiency support where the crop is purchased by private parties. However, during kharif 2018, which followed the roll-out of PM-Aasha, the procurement of pulses and oilseeds by Nafed remained at 6% of total output, lower than in kharif 2017 when the procurement was 8.5%.

According to the IEG study, given the high cost of a comprehensive PM Aasha, “a carefully designed price deficiency payment system with partial procurement and dovetailing with e-NAM” is the way forward. The food subsidy budget for FY20, as estimated by the interim budget, is Rs 1.84 lakh crore; this includes the difference between the economic costs of the crop and the issue price, which in case of rice, wheat and coarse cereals are the NFSA prices at which they are sold via PDS shops.

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In FY18, the government enhanced the guarantee given to Nafed to Rs 29,000 crore for procurement of pulses and oil seeds, and under PM-Aasha, it pledged to provide an additional guarantee of Rs 16,550 crore. On the fiscal costs involved in implementing the PM-Aasha, the IEG study said over Rs 2.87 lakh crore will be required by the FCI, Nafed and other agencies involved in procurement if they buy 30% of the marketable surplus of rice, wheat, coarse cereals, pulses, oilseeds and cotton. It further said, if the remaining 70% of the marketable surplus is covered by PDPS, the cost to the exchequer will be Rs 96,597 crore, assuming mandi prices at 20% below MSPs.

The costs would come down to Rs 48,298 crore if mandi rates remain 10% below MSPs and might flare up to Rs 1,44,895 crore at 30% lower than benchmark rates. In recent years under the NDA government, procurement of pulses and oilseeds, which has been conventionally very low, has seen a spike. While this trend was evident in the last three years, the launch of the much-touted PM-Aasha scheme hasn’t led to any further material change in the level of procurement.

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