CACP proposes scheme for crop pricing to directly benefit farmers


The Commission for Agricultural Costs and Prices (CACP), the body which recommends minimum support prices (MSP) for crops, has advised the government to launch a scheme for commercial crops in which farmers are directly paid if the market price falls below a particular level.

The proposed scheme, similar to the one launched in Madhya Pradesh two years ago, would support farmers without distorting the market.

CACP chairman Vijay Paul Sharma told ET that the scheme can work well when all the major producing states participate simultaneously and the procurement window is at least for six months.


“Every state should implement this scheme simultaneously so that beneficiaries are farmers only and not traders or middlemen who buy produce from other state at lower price and get the benefit in the state where the scheme is being implemented. This will also suppress prices,” he said.

He said that government should let farmers sell their produce to traders and compensate them only when market price is less than MSP.

“This will also help government save money, especially when crop size is small and the market price rules above floor price. In that case, government doesn’t have to give any money,” he said.

He said that in order to facilitate more orderly marketing of crops and stagger market arrivals beyond the procurement season, farmers should be encouraged and incentivised to store their produce in accredited warehouses and provided loans against warehouse receipt to meet cash flow needs without having to sell their produce when market prices are typically at harvest-time lows. This arrangement will allow the farmers to delay the sale of the produce until more favourable market conditions emerge.

“In fact, such farmers should be entitled to receive the benefit of PDPS, if market prices in later months are below MSP. In case market prices are higher than MSP, the producers can choose to sell in the open market and take advantage of high prices,” he said.

The government already has PDPS scheme of PM-AASHA under which direct payment of the difference between the MSP and the selling price is made to pre-registered farmers selling their produce in the notified market yard through a transparent auction process. The scheme does not involve any physical procurement of crops.

A similar scheme Bhavantar Bhugtan Yojana was launched on pilot basis by the Madhya Pradesh government in kharif 2017 season but failed to succeed due to several shortcomings. One of the criticisms of the Bhavantar Bhugtan Yojana was that cartelisation between farmers and traders led to distortions in the market and prices were artificially depressed.

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