India likely to announce Rs 100 billion scheme to ensure MSP to oilseeds growers

With growing import dependence on cooking oils, the Indian government is likely to announce a Rs 10,000 crore (Rs.100 billion) scheme under which oilseeds farmers will be compensated if the rates fall below the minimum support price.

The agriculture ministry has prepared a cabinet note proposing a new mechanism ‘Price Deficiency Payment’ on the lines of Madhya Pradesh government’s Bhavantar Bhugtan Yojana (BBY) to protect oilseeds farmers, the sources said.

Under the proposed scheme, the government will pay to farmers the difference between the MSP and monthly average price of oilseeds quoted in major wholesale markets.

India imports around 14-15 million tonnes of edible oils annually, which is around 70 per cent of the domestic demand.

In the budget this year, the government had announced that it will put in place a fool-proof mechanism to ensure MSP to farmers. It had asked think-tank to suggest mechanism in consultation with the union agriculture ministry and states.

“Based on the recommendations, the ministry has moved a cabinet note proposing implementation of the Price Deficiency Payment (PDP) scheme only for oilseeds,” sources in the ministry said.

However, the states will have an option to choose either a PDP or the existing Price Support Scheme (PSS). The new scheme will be implemented for up to 25 per cent of the oilseeds production of the state.

Under the PSS, the central agencies procure commodities covered under the MSP policy when prices fall below the MSP.

While there have been lots of criticisms about the efficacy of the Madhya Pradesh Bhavantar Bhugtan Yojna, clearly this new announcement is keeping in mind the impending general elections next year.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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