Scheme to implement new MSP formula gets government nod

The News

  • The Union Cabinet announced a new scheme for implementing crop MSPs (minimum support price) according to a new formula which is likely to give farmers at least 50 per cent return over their estimated production costs.
  • The Cabinet has sanctioned Rs 15,053 crore to implement Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA) scheme in the next two financial years.



  • In the budget this year, the government had announced that it will put in place a fool-proof mechanism to ensure minimum support price (MSP) to farmers.
  • It had asked think-tank Niti Aayog to suggest a mechanism in consultation with the union agriculture ministry and states.
  • The agriculture ministry’s proposal on new procurement policy ‘Annadata Maulya Sanrakshana Yojana’ was taken up for discussion in the cabinet, and the same has been approved.


What is MSP?

  • Minimum Support Price is the price at which government purchases crops from the farmers, whatever may be the price for the crops.
  • Minimum Support Price is an important part of India’s agricultural price policy as it helps to incentivize the framers and thus ensures adequate food grains production in the country.
  • It gives sufficient remuneration to the farmers, provides food grains supply to buffer stocks and supports the food security program through PDS and other programs.
  • Under the MSP policy, the government fixes the rates for 23 notified crops grown in kharif and rabi seasons.
  • The Food Corporation of India (FCI), the government’s nodal agency for procurement and distribution of foodgrains, procures wheat and rice at MSP for supply through ration shops and welfare schemes.
  • The centre also implements Market Intervention Scheme (MIS) for procurement of those commodities, which are perishable in nature and are not covered under the MSP policy.


Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA)

  • The Scheme is aimed at ensuring remunerative prices to the farmers for their produce as announced in the Union Budget for 2018.
  • This is an unprecedented step taken by Govt. of India to protect the farmers’ income which is expected to go a long way towards the welfare of farmers.
  • Government has already increased the MSP of kharif crops by following the principle of 1.5 times the cost of production.
  • It is expected that the increase in MSP will be translated to farmer’s income by way of robust procurement mechanism in coordination with the State Governments.
  • Under the PM-AASHA, states will be allowed to choose from three schemes to undertake procurement when prices of commodities fall below the MSP level:
    • Price Support Scheme (PSS) (existing)
    • Price Deficiency Payment Scheme (PDPS) (newly designed)
    • Private Procurement Stockist Scheme (PPSS) (pilot scheme)


Price Support Scheme (PSS)

  • Under PSS, the central nodal agencies will physically procure the pulses, oilseeds and copra, with the state government playing a “proactive role”.
  • Besides NAFED, the Food Cooperation of India will take up PSS operations in states and districts. The cost of, and losses due to procurement, will be borne by the Centre.


Private Procurement Stockist Scheme (PPSS)

  • It has been decided that for oilseeds, states have the option to roll out Private Procurement Stockist Scheme (PPSS) on pilot basis in selected district/APMC(s) of district involving the participation of private stockiest.
  • The pilot district/selected APMC(s) of district will cover one or more crop of oilseeds for which MSP is notified.
  • Since this is akin to PSS, in that in involves physical procurement of the notified commodity, it shall substitute PSS/PDPS in the pilot districts.
  • The private agency will procure the crop at MSP in notified markets during the notified period from the registered farmers in consonance with the PPSS guidelines, whenever the prices in the market fall below the notified MSP.
  • The service charges, maximum of up to 15 per cent of notified MSP, will be payable.


Price Deficiency Payment Scheme (PDPS)

  • ‘Price Deficiency Payment (PDP)’ has been framed on the lines of Madhya Pradesh government’s Bhavantar Bhugtan Yojana (BBY) to protect oilseeds farmers only.
  • It is proposed to cover all oilseeds for which MSP is notified.
  • Under the scheme, the direct payment of the shortfall between the MSP and the selling or modal price for the crop will be sent to the registered bank accounts of pre-registered farmers who sell their produce in the notified market yard through a transparent auction process.
  • PDPS will not involve any physical procurement of crops as farmers.
  • Though the scheme has been approved, the states have the freedom to continue with PSS if they do not want to implement PDPS.



  • The existing schemes of the Department of Food and Public Distribution to procure paddy, wheat and nutri-cereals or coarse grains, and procurement of jute and cotton by the Ministry of Textile will be continued for providing MSP to farmers.
  • India imports around 14-15 million tonnes of edible oils annually, which is around 70 per cent of the domestic demand.


Pro-farmer initiatives of the Government: 

  • The Government is committed to realizing the vision of doubling farmers’ income by 2022. The emphasis is on enhancing productivity, reducing cost of cultivation and strengthening post-harvesting management, including market structure.
  • Several market reforms have been initiated.  These include Model Agricultural Produce and Livestock Marketing Act, 2017 and Model Contract Farming and Services Act, 2018.  Many States have taken steps to adopt these through legislation.
  • Efforts are on for a new market architecture, so as to ensure that farmers get remunerative prices on their produce. These include setting up of Gramin Agricultural Markets (GrAMs) so as to promote 22,000 number of retail markets in close proximity of farm gate; competitive and transparent wholesale trade at APMC through eNAM and a robust and pro-farmer export policy.
  • Besides, several other pro-farmers’ initiatives such as implementation of Pradhan Mantri Fasal Bima Yojana, Pradhan Mantri Krishi Sinchai Yojana, Paramparagat Krishi Vikas Yojana and distribution of Soil Health Cards have been undertaken.
  • The commitment for farmer welfare is also reflected by unprecedented decision of announcing minimum support price based on the formula of 1.5 times the cost of cultivation.

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