Budget 2018: Centre ready to take a hit over crop minimum support price

The Union Budget 2018-19 is likely to give freedom to states to intervene in agriculture markets so that prices don’t crash sharply, but the Centre may have to bear up to 40 per cent of the losses suffered by states due to the Minimum Support Price (MSP) of a crop.

The proposal is being seen as a move to address the continuing rural distress.

The scheme could cover all commodities for which the Centre fixes MSP, except wheat and rice. There won’t be any cap on the quantity to be purchased by the states.

Perishables like onion, potato and tomatoes won’t come under the purview of the programme either, for the time being, it is learnt.

The Central share would include compensation for losses suffered by states on procurement of crops, their storage, sale, interest cost and other ancillary expenses.

For instance, chana’s MSP for the 2017-18 rabi season has been fixed at Rs 4,400 per quintal. If a state suffers a loss while procuring, storing and distributing it, the Centre will compensate it at the rate of Rs 1,760 per quintal. The remaining will have to be borne by the state government itself.

The big advantage of the proposed scheme, which is being called ‘Market Assurance Scheme’ (MAS), is that it will give operational freedom to states to intervene in agriculture markets to purchase directly from farmers as soon as prices start falling instead of waiting for a formal approval from the Central government. In fact, that has been the case with existing price support programmes like Market Intervention Scheme (MIS) and Price Support Scheme (PSS) as well.

In both MIS and PSS, the Centre too shares 50 per cent of the losses suffered by the states, but a formal approval is needed from it before a state can start purchasing.