Farm Reform: No 'acche din' yet for Madhya Pradesh small farmers after price deficiency payment scheme

For the price compensation scheme to work, government must rein in trade cartels and fix prices right

In a move to appease the farming community after the Mandsaur incident, the Madhya Pradesh government introduced the Price Deficiency Payment scheme on a pilot basis in October under the name ‘Mukhyamantri Bhavantar Bhugtan Yojana’.

Under Price Deficiency Payment (PDP), a brainchild of the NITI Aayog, farmers who sell their crops at a price below the MSP (minimum support price) are to be compensated for the difference.

The Mukhyamantri Bhavantar Bhugtan Yojana was launched on October 16 with regard to eight crops, including soyabean, groundnut, sesame, maize, moong, urad (black gram) and arhar (tur).

The State government claims that 20 lakh farmers have registered for the scheme.

A BusinessLine study of the scheme found that in pulses and maize, prices in key markets in MP are sharply lower than in other States. This has put MP farmers at a disadvantage. This writer sounded out small farmers from the State to take stock of the situation, and not many seemed to have a clue of the ruling prices in other States.

How the scheme works

The compensation to be paid to farmers under the scheme is based on average yield of the crop in the district and the ‘modal’ price fixed by the State government based on mandi prices in MP and prices in two other States where the same crop is grown. For soyabean it is Maharashtra and Rajasthan; for maize, Karnataka and Maharashtra; for urad, Rajasthan and Uttar Pradesh.

The modal price is announced every 15/30 days for crops sold in the preceding weeks. For the farmers who sold the crop between October 16 and 31, the modal price was announced in the first week of November and for crops sold between November 1 and November 30, it was announced in the first week of December.

The modal price for soyabean sold in November was ₹2,640/quintal. This meant the State would compensate for the difference between MSP of ₹3,050 and modal price of ₹2,640, which is ₹410/quintal — the maximum benefit any soyabean farmer will receive under the scheme. Farmers who sold their crop for a price higher than the modal price are paid the difference between the sale price and MSP. Say, a farmer sold his soyabean at ₹2,700/quintal, he will be paid ₹350/quintal (₹3,050 minus ₹2,700).

The State compensates farmers based on their land holding and the average yield in the crop in the specific district. Farmers who produce over and above the average yield don’t get compensated for that excess output and they have to take the market price for it.

Realities from the field

Traditionally, akin to the situation in most States across the country, in MP too, procurement in oil seeds and pulses has been minuscule. Only wheat and maize see some government procurement at MSP in MP, points out a NITI Aayog report.

With the Mukhyamantri Bhavantar Bhugtan Yojana, almost half of all farmers in the eight crops including tur, urad, maize, soyabean and moong have been drawing the benefit. So, has the farmer truly gained from the scheme?



In Sagar district of MP, where there is large-scale sowing of soyabean, not many small farmers knew about Bhavantar Bhugtan Yojana. Naveen Bolumalla, who is with SRIJAN, an NGO in the district that works with soyabean farmers, says, “Small farmers here don’t know about the scheme, they are still selling only to commission agents in the village.”

This same feedback was received from a few other districts of the State – Agar Malwa, Chindwara, Tikamgarh. This begs the question: how many of the 20 lakh-odd farmers registered under the scheme as claimed by the State are small farmers in need of the government’s support? In Chindwara district, a maize belt, farmers complain about the government keeping mum on steep price correction.

“After the new scheme came into being, the government is not procuring from us, so glut has increased in the market… traders are quoting very low prices and government is not interfering,” said Rajkumar, a farmer who had sown maize on his 12-acre land in the last season.”

BusinessLine found that prices in MP, especially in urad, tur as also maize, were sharply lower than the market prices in UP.

In arhar, (tur), prices in Kanpur, UP, last week were about ₹3,500/quintal compared to ₹3,000/quintal in Indore, MP. In urad (black gram), prices were about 30 per cent lower – ₹3,700/quintal in Kanpur versus ₹2,700/quintal in Indore. In maize, the price difference was about 8-10 per cent. In Davangere, a large maize market in Karnataka, prices were at ₹1,190-1,200/quintal while in Indore, they ruled at ₹1,088-1,100/quintal.

This is probably an indication of cartels in action.

A person from Sagar district, who spoke to us on condition of anonymity, said: “In Bilhara mandi (Jaisinagar) you may hardly see 20 traders in urad, and many of them are members of the same family and even before the auction opens, they decide a price… Since the government is anyway compensating farmers, it has become easy now for traders to ask farmers to take money from the government.”

The larger problem

In small mandis, cartels can’t be checked but if in large mandis, as the one in Indore, prices are so much lower than other States, it signals a larger problem.

Farmers of the State are at a disadvantage now because of the sharp price correction. In urad, where the price is lower by almost 30 per cent, the modal price may not necessarily reflect the fall in prices entirely. Hence farmers under the scheme will still be short-changed. In fact, for the 50 per cent of farmers in the State who are not registered with the scheme, it is an even deadlier blow.

But why didn’t all farmers go for this compensation scheme? BusinessLine connected to a few farmers in Tikamgarh, a large urad growing region in MP.

The son of a woman farmer said, “Many are small and marginal farmers here with just 2/3 acres of land and they give away produce to the mediator (agent) in the village. The mandi is too far away and they can’t pay for the transportation …”

Price Deficiency Payment is a great idea. But if the government is not able to check trade cartels and fix the reference price properly, it is not going to help farmers.

In the long term, no price support scheme can work in its entirety, indicate experts. It is only farmers’ direct connect to consumers and freeing of exports that can help.

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