GOI clarifies crop procurement coverage if states declare bonus above MSP

The authorities of India has mentioned that Bonus introduced by numerous state governments over and above the minimal help value fastened by the central govt for procurement of crops have been placing adversarial influence on procurement from farmers. Sources within the union govt knowledgeable OpIndia about this after the Chhattisgarh Chief Minister Bhupesh Baghel wrote to Prime Minister Narendra Modi, requesting for the central govt to select up the paddy the state authorities has procured below the central pool.
CM Bhupesh Baghel writes to PM
The CM had written a letter to the PM on 30 December, informing the state govt has bought round 47 lakh tonnes of paddy from 12 lakh farmers, out of the entire quantity of 60 lakh tonnes authorized for Chhattisgarh. But, the Food and Public Distribution division of the Govt of India is but to approve the switch of the paddy to the Food Corporation of India below the central pool.
CM Baghel wrote that as they’re unable to switch the inventory to FCI, the warehouses within the state are crammed with paddy, and the inventory could acquired broken if it isn’t lifted quickly, and the distribution of rice may also be delayed. Saying that livelihoods of 21.52 lakh farmers within the state will probably be impacted because of this, the CM requested the PM to approve the procurement of the paddy by FCI from the state govt.
Bonus above MSP will increase subsidy burden
Responding to the letter by the Chhattisgarh CM, sources within the ministry knowledgeable OpIndia that the explanation behind not-approving the procurement below the central pool is the extra bonus introduced by the state govt above the MSP.
State Govts usually declare state bonuses for procurement of crops, which is a financial scheme to incentivise their farmers over and above MSP declared by the Government of India. In some states, the bonuses are crop-specific whereas in one other these are of generic type.
According to the GOI, it’s perceived that declaring a bonus over MSP distorts the market and cultivation patterns at the price of different crops. Since the procurement below the value help scheme (PSS) is open-ended, procuring businesses like FCI are compelled to acquire amount way more than the requirement below the central pool, thereby rising the subsidy burden on the union authorities.
MOU with states restrict buy below central pool if bonus above MSP declared
The GOI has tried to comprise such an inclination, and with a view to have a uniformity in procurement throughout the nation, has devised an MOU to be adopted by DCP (Decentralised Procurement) / Non-DCP States, because the case could also be.
The provisions at Point No. 3 of MOU of DCP States point out that that “In the situation of the state giving bonus/ financial incentive over and above MSP, surplus stock exceeding the State requirement under NFSA/ OWS shall be treated to be outside the Central Pool”.
Similarly, the supply below level quantity 4 of the MOU of non-DCP states mentions that, If the State Government publicizes bonus/ monetary incentive, in direct or oblique type, over and above MSP, FCI is not going to participate within the procurement operations within the State involved; and State Govt. must mobilize sources and care for your entire procurement operations within the State on their very own, together with the preparations to be made for the storage of procured food-grains. With respect to such States, FCI in session with the Department of Food and Public Distribution, will determine the quantum of the rice and price at which the inventory to be taken from the involved State in that Marketing Season and shall prohibit the central pool procurement to that extent. The remainder of the inventory procured by the state shall should be disposed off by the State Govt. involved at its personal danger and value”.
These provisions make it clear that if any state declares Bonus for crop procurement, the FCI is not going to pick-up inventory above the amount specified for the central pool. The steadiness amount must be bought by the state governments on their very own.
MOU provisions carried out for all states which have declared bonus
Accordingly, these provisions are being carried out for the states which have introduced bonuses. For instance, Madhya Pradesh had introduced incentive of Rs 160 per quintal over and above MSP of wheat in Rabi Marketing Season 2019-20 below their very own scheme named “Jan Kishan Samridhi Yojna”. Since the state govt  had declared bonus with out prior consent of GOI, a choice was taken by GOI to limit the entire procurement in central pool to 67.25 LMT which was the entire amount procured two years again, i.e., in RMS 2017-18, the yr wherein no bonus was given.
The identical occurred with Chhattisgarh, which has been persistently declaring bonus/incentive on Paddy over and above MSP since 2016-17. And because of this, the central pool procurement of paddy from the state within the earlier years since 2016-17 has been restricted to 24 Lakh tonnes. This is as per established rule which is relevant to all of the states, as each time the states give incentives or bonus, the central pool procurement will get restricted.
In accordance with the MOU provision, the central govt had restricted the central pool procurement of paddy from the state at 24 lakh tonnes, because the state had introduced an enhanced MSP of Rs 2500 per quintal throughout Kharif Marketing Season (KMS) 2019-20, which is greater than the MSP introduced by GOI. The state govt had sought rest from the MOU provision for delivering the surplus amount to the central pool, however the ministry had declined the request.
As a end result, the state govt had introduced in November that for the KMS 2019-20, paddy will probably be procured on the MSP declared by the GOI, in order that complete procured amount could be delivered to the central pool. But, the state govt subsequently introduced the Rajiv Gandhi Kisan Nyay Yojna, and below this scheme, crop-specific bonus to acreage was offered to farmers for numerous crops like paddy, maize, soybean, pulses, groundnut, seam seed and many others for KMS 2019-20. State Govt has declared an identical incentive scheme for KMS 2020-21 additionally.
States like Kerala, Jharkhand and Tamil Nadu and many others have been additionally declaring bonus/ incentives over and above MSP of paddy.
Bonus Declared By State Governments (Wheat & Paddy)FCI has been of the view that each one kinds of such schemes or incentives should be seen as bonus whether or not in direct or oblique type, as it’s paid over and above MSP with out prior approval of GOI. The Ministry can be of the view that giving bonus/ incentive results in big improve in procurement within the state resulting in surplus inventory in central pool and subsequently any rest in MOU has not been agreed to, normally, on a lot of events.
However, DBT switch to all farmers with out linkage to any crop is the one situation which could be handled as crop impartial and never falling within the class of direct or incentive. But because the Rajiv Gandhi Kisan Nyay Yojna introduced by Chhattisgarh govt is linked to 14 particular crops, it has been thought-about as simply one other type of Bonus, and therefore it has attracted the provisions of the MOU.