Bridging The Market-MSP Gulf: Novel NITI Aayog Proposal To Compensate Farmers Under Consideration By Centre

The NDA government is considering including NITI Aayog’s area-based income compensation (ABIC) scheme in the interim budget which pays farmers the difference between the market price and the government-mandated minimum support price (MSP), reports Business Standard (BS).

The scheme is believed to be an affordable way for the government to relieve farm distress and is also the least ‘market-distortionary’ among the alternatives.

“This method of payment will take care of productivity variations as well as price variations across the mandis and will be the least market-distortionary,” said a NITI Aayog official to BS.

The compensation to the farmer will be determined on a per acre basis by using district-level data on surplus grains and prices in the harvest season. The scheme can also be applied retrospectively on past losses using daily price data recorded on the agmarket.nic.in portal which collates information from over 3,000 mandis across the country.

“Through this model, farmers can even be compensated for the losses suffered by them in the past and it will have the lowest financial burden on the central exchequer,” said another official.

Interim Budget To Focus On Farmers

It was reported in December 2018 that the government was considering a Rs 60,000- crore package in the interim budget to provide income support to farmers. Discussions on a proposal to club all farm input subsidies including fertiliser costs and pay it as cash to farmers are also under way.

Also Read: How Replicating The Amul Model Across India Can Ease Farm Distress