Agriculture

Exclusive: Niti Aayog estimates new MSP mechanism cost between Rs 30,000-40,000 crore

Updated : May 18, 2018 06:36 PM IST

The new MSP mechanism cost will be in addition to the the food subsidy budgeted at Rs 1,60,000 crore for FY19.

Finance Ministry expresses concern on fiscal impact, asks agricultural ministry and NITI to rework the numbers.

The finance ministry has raised the red flag on NITI Aayog’s estimates for the new minimum support price (MSP) mechanism, asking the agriculture ministry and NITI to go back to the drawing board and rework the numbers, government officials have told CNBC-TV18.

Govt officials say, NITI Aayog in its estimates has pegged the Market Assurance Scheme's annual cost at Rs 40,000 crore.

As for the Bhaavantaar Yogana model of Madhya Pradesh, the annual cost for countrywide coverage is estimated below Rs 25,000 crore.

The new MSP mechanism cost will be in addition to the the food subsidy budgeted at Rs 1,60,000 crore for FY19.

Govt officials say half the states may opt for the Market Assurance Scheme, while the rest may prefer Madhya Pradesh's Bhaavantar model - also called the Price Deficiency Payment Scheme.

Under such circumstances the annual cost to the exchequer may be around Rs 30,000 crore.

Centre and states are looking at both options presently, although the centre’s clear preference is for the Price Deficiency Payment Scheme as the fiscal impact is lower, government officials explained.

While it’s unclear which crops will be covered under these two options, pulses will be a big focus under the new MSP mechanism.

While jute, cotton and bajra may not find the same weightage, wheat and rice will not required to be covered under the new MSP mechanism, as the MSP on these crops are already at one and a half times the cost of production.

Arun Jaitly in his Budget said MSP of most of the Rabi crops is at one and a half times the cost of production, and in principle the government will introduce the same for “rest of the crops”.

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Exclusive: Niti Aayog estimates new MSP mechanism cost between Rs 30,000-40,000 crore

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