Despite Multiple Flaws, Centre Is Rushing the Bhavantar Scheme for Farmers

The Price Deficiency Payment Scheme will likely exclude small and marginal farmers, disincentivise efficient farmers and does not have inadequate registration of farmers.

The Narendra Modi government announced three new schemes for farmers under one umbrella scheme named PM-AASHA, aimed at ensuring minimum guarantee prices for the farm produce.

These three schemes – Price support scheme (PSS), Pilot of Private Procurement & Stockist Scheme (PPPS) and Price Deficiency Payment Scheme (PDPS) – involves two ways of payments to farmers. The first two involve physical procurement of commodities by government and private agencies respectively, but the third scheme does not involve any physical procurement. As per a government press release, it appears that these schemes are predominantly aimed at oil seed crops and also pushed the burden of implementing two of the three schemes into state governments’ hands, with only a funding support from the Centre.

While the first two schemes are nothing but re-framed versions of MSP procurement, the price deficiency scheme is relatively new and is currently being tested in Madhya Pradesh under the name Bhavantar Bhugtan Yojana. It appears that the government is hastily expanding it without analysing its impact on farmers’ income and society as a whole.

Under the scheme, a farmer has to register the different crops he has planted (in acres) with the appropriate agency i.e. the mandi, which is supposed to be verified by a revenue official. The potential revenue of an individual farmer is calculated by multiplying the district average yield [of past few years] by the MSP announced by the government. In other words, for an individual farmer, the potential income would be the product of registered acres, district average yield and MSP.

As per the scheme, the government would compensate the farmer if the actual income is lesser than potential income, with a rider that caps maximum payout to the difference in potential income as calculated above and the income calculated using the modal price of the crop during the particular season.

There are multiple flaws in the scheme.

Inadequate registration of farmers

While it may be necessary to register individual farmers so that payments can be made directly to them, implementing the scheme in haste without covering a major chunk of farming community would put it at risk of failure. The scheme implemented in Madhya Pradesh does not cover all farmers growing notified crops. It was implemented even when only a few farmers were registered. A clear distinction is being made on the trading floor of the mandi, between registered and unregistered farmers. This helped traders in paying less to registered farmers as they are entitled to payment from the government.

This ability to identify has put the trading community at an advantage. This practice of paying some farmers less cannot be called unethical, let alone illegal, as in any business, using of information for advantage is normal practice.

District average crop yield

The scheme considers district average yield for calculating the potential income of a farmer, rather than individual farmer yields. By doing so, the government is clearly disincentivising efficient farmers whose crop yields are generally higher than district average. Moreover, these district average figures are highly unreliable as they are based on sample crop cutting experiments as conducted by the agricultural department rather than actual figures.

Paying less if a certain farmer receives higher than modal price

It is a usual practice in mandi that a trader would be willing to pay a higher price to a certain farmer who brings better quality crop in larger quantity, as this can be mixed with other lots to prepare a larger lot for customers. As per the scheme, if this price is higher than modal price and lower than MSP, he will be paid less by the government. This is a clear disincentive for farmers who are good at marketing crops and adopting good cropping practices.

Exclusion of farmers selling outside mandi system

In India, large number of farmers are small and marginal. Their small land holdings allow them to produce only small quantities of crops. Taking these crops to mandis for sale is not viable for them, so they prefer to sell at the village-level. A scheme that caters only to farmers selling in mandi system clearly puts these small and marginal at a disadvantage. In fact, if selling in APMC mandi is compulsory, how will it be implemented in Bihar, where the APMC Act was abolished?

Moreover, it was reported that if any farmer is carrying farm produce of other farmers to the mandis for sale under the scheme, they were refused payments in the guise that their total sales exceed their calculated potential production, causing them to receive lesser payments. The question that arises here is, if the intention is to extend the benefits of the scheme to “all” farmers, why the refusal of payment to anyone carrying another farmer’s produce?

Application of the scheme to 25% of marketable surplus

Some news reports have indicated that the scheme will be applicable to only 25% of the marketable surplus. This is going to be one of the major issues in the implementation process because it is impossible to select or choose the farmers supplying that particular 25%. If a first-come-first-serve basis is adopted, it will meet the same fate as the MSP procurement system. There were ample incidents in the past where the FCI abruptly ended wheat, paddy procurement mid-season, citing reasons such as enough grain procured for PDS purposes or lack of storage space, which is a clear denial of minimum guarantee prices for many deserving farmers.

Sudhakar Gummula is an agri-business consultant.