Context: Most of the commodities for which the government fixes minimum support prices (MSPs) are being traded at 10 to 30 per cent below these rates in the ongoing rabi marketing season.

Reasons for price meltdown:

• consistent surplus production in the last couple of years
• subdued global commodity prices
• unfavourable domestic and external trade policies concerning agri-commodities
• offloading previously procured stocks
• permitting imports while the domestic crops are still being marketed

Performance of PM-AASHA:

The government’s flagship price support scheme, PM-AASHA (Annadata Aay Sanrakshan Abhiyan), has remained virtually a non-starter.

Issues with PM-AASHA:

• Physical procurement of stocks at MSPs, price deficiency payment of the kind tried out in Madhya Pradesh, and a few other states, and the participation of private trade in the procurement and management of farm produce on a fixed-commission basis.
• The system of open-ended procurement of staple cereals, notably rice and wheat, has been in operation for decades and has served well to run the world’s largest public distribution system but at a huge cost to  the exchequer.
• It has, however, remained confined primarily to  parts of a handful of states  where the procurement infrastructure exists.
• The price deficiency payment system, too, has failed to  deliver the results because of a cumbersome registration procedure; mandatory sale through the regulated mandis dominated by  manipulative  middlemen; and capping total purchases at 25 per cent of production.
• The third option of roping in private traders in price support operations has found no takers chiefly because the proposed commission of 15 per cent of the MSP for the operation involving buying, bagging, transporting, storing and disposing of the stocks is too meagre for the task.

Measures needed:

• An export window as an outlet for surplus stocks. This can be created by modifying import-export tariffs with an eye on boosting agri-exports.
• The farmers need to be incentivised to diversify their production by growing high-value crops, which could yield better returns without the government’s intervention.
• The overarching objective of the policy regime has to  be  to  strike a balance between the farmers’  interests and inflation management.