There needs to be a serious relook at the way the government currently provides Minimum Support Price (MSP) to the farmers, and the government should reduce intervention in agriculture, Ramesh Chand, member Niti Aayog, said.
Speaking at the ICRIER-NSE conference on 'Getting agriculture markets right', Chand said the current MSP system has inherent costs and it needs to be formed in a way such that efficiency increases.
"Latest statistics show that the cost of giving MSP is 35 percent," he said. This means that the government incurs expenditure of Rs 35 on just facilitating Rs 100 worth of MSP payments to farmers.
Chand batted for deferred deficiency price payments (DPP) as an alternative to the existing procurement based MSP structure.
He said that Madhya Pradesh had experimented with the system earlier while Haryana is currently in the process of rolling it out for certain commodities. However, he warned the DPP system cannot be stopped after purchasing a fixed amount of crops as is often the case currently.
Based on figures available from 2019-20, he said the total estimated cost under the DPP system was Rs 80,000 crore.
Chand, however, said that giving MSP remains a justified means at the moment due to the continuing presence of market failures, volatility of prices and sudden supply gluts.
The Niti Aayog member also reportedly stressed that the sectors within the vast agriculture economy that have shown the most growth were the ones which had the least amount of government intervention.
Among non-MSP sectors he pointed out that fisheries, livestock and dairy and horticulture are currently seeing a much faster growth in their size. "As a result I believe that going forward there would be two categories - sarkari crops and bajari crops," he stressed.
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