Consider the following statements with respect to NITI Aayog’s Price Deficiency Payment (PDPS) System:

1. Under this, farmers will be compensated for the difference between the MSPs for all crops and their actual market prices.
2. The subsidy would be paid via Direct Benefit Transfer (DBT) into the farmer’s Aadhaar-linked bank account.
3. This will reduce the need for the government to procure food crops, transport and store them, and then dispose of them under PDS.

Which of the statements given above are correct?

• NITI Aayog has recently released a three-year action agenda for the Centre suggesting the ‘Price Deficiency Payment’ (PDP) system among other reforms. Under this, farmers will be compensated for the difference between the MSPs for select crops and their actual market prices. For crops such as rice and wheat where MSP is effective now, the same will continue. For other targeted crops, price deficiency paymentsmsystem will be introduced. So, statement 1 is not correct.
• The subsidy would be paid via Direct Benefit Transfer (DBT) into the farmer’s Aadhaar linked bank account. So, statement 2 is correct.
• The government has been accumulating large foodgrain stocks in its godowns over and above the buffer requirement, leading to storage and wastage costs. Under the new system, the government can pay in cash to farmers, the difference between the support and market prices. This will reduce the need for the government to procure food crops, transport and store them, and then dispose of them under PDS. So, statement 3 is correct.

Resultantly, as Niti Ayog proposes, this system can keep India’s bill on food subsidies, and storage and wastage costs under check. It can also address to an extent the world’s concern on India’s procurement subsidies being trade-distorting.

By: Abhishek Sharma