NITI Aayog wants ‘Price Benefit System’ to replace MSP for farm products

NITI Aayog has suggested a 'Price Benefit System' to replace the current practice of minimum support prices offered to select agriculture products, which, it says distorts the production and productivity of the farm sector.

In its Three-year Action Agenda document released on Thursday, the government think- tank also outlined various measures like improved technology and better marketing infrastructure for doubling of farmers' income.

Niti Aayog also backed use of genetically modified (GM) seeds in India saying concerns of the technology being monopolised by MNCs can be addressed through allowing locally developed varieties.

"Genetically modified (GM) seeds have emerged as a powerful new technology promising high productivity, improved quality and lower use of fertilisers, weedicides and pesticides in the last one to two decades," Niti Aayog said.

Indian farmers have adopted the GM seeds by growing BT cotton, the only crop allowed for commercial cultivation. "There is some concern that GM seeds can be monopolised by multinationals, which may then exploit our farmers. But this concern is readily addressed by limiting GM seeds to those varieties discovered by our own institutions and companies," the document says.

On the minimum support price (MSP) system, Niti Aayog said the MSP has distorted cropping patterns, with excessive focus on the cultivation of wheat, rice and sugarcane in the procurement states and neglect of other crops such as pulses, oilseed and coarse grains.

The MSP has led to depletion of water resources, soil degradation and deterioration in water quality in some states, especially in the north-western region. It has discriminated against eastern states where procurement at the MSP is minimal or non-existent.

"One measure that can help remove distortion in the MSP system to some degree is the system of 'Price Deficiency Payment'," it said While MSP should be continued for need-based procurement, Niti Aayog said that under the deficiency payments system, a subsidy would be provided on other targeted crop if rates fall below an MSP-linked threshold.

"This approach would not require procurement and thereby preventing the accumulation of unwanted stocks. More importantly, it would spread price incentives to producers in all the regions and all the crops considered important for providing price support," the document said.

Each farmer would have to register crop and acreage sown with the nearest APMC mandi. If the market price then falls below the floor price, the farmer would be entitled to the difference up to a maximum of, say, 10 per cent of the MSP-linked price that could be paid via Direct Benefit Transfer (DBT) into an Aadhaar-linked bank account, Niti Aayog said.

"This system would keep the quantum of the subsidy in some check and also meet the restrictions on the subsidy imposed by the World Trade Organization (WTO). The system can initially be piloted in one or two crops in a few districts," it said.