CREDIT SEMINAR

ON
AN ANALYSIS OF PRICE DEFICIENCY PAYMENT
SYSTEM WITH SPECIAL REFERENCE TO
BHAVANTAR BHUGTAN YOJANA IN MADHYA
PRADESH”

Dr. Rajendra Prasad Central Agricultural

University Pusa
Samastipur (Bihar)

Satyam Nema (1803201012)

Reg.No. – M/AE/277/2018-19
M.Sc. IInd Yr (Agricultural
Economics)
The Niti Aayog, has recently released a three-year action agenda for the Centre suggesting the 'Price Deficiency
Payment' (PDP) system among other reforms.

What is Price Deficiency Payment system ?

•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 payments system will be introduced.

•However, notably there may be a cap on the extent to which the Centre will bridge the gap between MSP and market
price.

How to avail the Price Deficiency Payment?

To avail this scheme,

* A farmer would have to register with the nearest APMC mandi and report the total area sown, to avail this benefit.

* The subsidy would be paid via Direct Benefit Transfer (DBT) into the farmer’s Aadhaar-linked bank account.
Objectives of the Scheme:
• To regulate and make the efficient process of Minimum Support Price
procurement at the procurement centers.
• To discard long queues of farmers in the market for selling their produce.
• To avoid any kind of malpractice.
• To enable better planning, monitoring, and management of purchase,
transportation, storage of crops and payments.
What are the benefits?

•Subsidy Bill - The government has been accumulating large food grain 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 actually reduce the need for the government to procure food crops, transport and store them, and then dispose of them
under PDS.

•Resultantly, as Niti Aayog 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 nations' concern on India’s procurement subsidies being trade-distorting.

•MSP - The MSP system has many flaws in execution which include:
1.limited geographical coverage.
2.actual procurement being restricted to a few crops such as paddy and wheat despite announcements for 20-plus crops.
3.skewed cropping pattern in favour of rice and wheat as a result of this.
4.soil degradation and susceptibility of crops to pest as a result of this monoculture, leading to higher usage of chemical fertilisers and
pesticides.

•The PDP system is expected to address these shortfalls and negative results of MSP scheme.

•As, it could be more effective than MSPs in ensuring that cropping patterns in India respond to consumer needs and that farmers
actually benefit from price support.
Schemes launched by state governments

Mukhya Mantri Bhavantar Bhugtan Yojana

The first is the Bhavantar Bhugtan Yojana (BBY), essentially a price deficiency payment (PDP) scheme, being undertaken by the
government of Madhya Pradesh. BBY applies to eight kharif crops — soybean, maize, urid, arhar, moong, groundnut, til, ramtil.

Bhavantar Bharpai Yojana

The Haryana Government launched country’s first ‘Bhavantar Bharpai’ a scheme which would come into effect in January through
which the state government would compensate farmers for price deficit for agricultural produce in which tomato, onion, potato and
cauliflower have been included. It is applicable only to farmers growing vegetables.

Karnataka begins Price Deficiency Payment system for onion

Karnataka is the first State implementing the new system in a full-fledged manner for perishable commodity like onion, said
Karnataka Agricultural Price Commission chairman T.N. Prakash Kammaradi. As per the KAPC’s recommendations, the Karnataka
government issued a notification on November 27 announcing the scheme for onion in the markets of Gadag, Bagalkot,
Dharwad, and Belagavi districts from November 28 to December 12. Under the new system, the government has fixed the
support price level for onion at ₹700 a quintal and the Price Deficiency Payment level at ₹200. This means that farmers get cash
benefit of ₹200 if the onion price rules around ₹500 in the market. As the maximum benefit level is fixed at ₹200. The scheme is
expected to cost ₹50 crore to ₹75 crore, which would be used from a revolving fund.
 Bhavantar Bhugtan Yojana
To hedge the price risks in Agriculture and to compensate the farmers’ distress due to sales at below Minimum Support Prices

(MSP), the scheme, named Bhavantar Bhugtan Yojana (Price Deficit Financing Scheme), will initially extend to eight crops,

mostly oilseeds and pulses, where government procurement is typically low unlike rice and wheat.

The government of Madhya Pradesh launched this scheme to help the small-scale farmers of the state. Mukhya Mantri Bhavantar

Bhugtan Yojana (MBBY) is a price deficit finance scheme for farmers. Under this scheme, the MP government provides

Compensation to the farmers whenever the produce falls below the Minimum Support Prices (MSP).

Benefits of MBBY:
* The government will provide compensation to the farmers if the product falls below the MSP.
* Farmers will be benefited for both Rabi and Kharif crops.
* It will provide stability to farmers.

Model Price is the price at which the farmers sell their produce in Mandis. The model price can be calculated by taking the
average price of a commodity grown in MP and the other two states where the crop is grown.

Minimum Support Price (MSP) is the price at which state government purchases produce from the farmers.
 Mukhya Mantri Bhavantar Bhugtan Yojana
Compensation for Kharif Crops:
As stated under the MBBY scheme, the farmers will be given remuneration of an amount that is the difference between
the MSP and model price. To avail, the benefits of the scheme farmers are required to register for MBBY scheme and
sell their crops at registered agricultural markets. The government will procure the produce from farmers.

Compensation for Rabi Crops:

Under MBBY, the Government does not buy Rabi crops from farmers. Instead of that, when prices fall below the
minimum support price (MSP) for these crops, Government pays the remuneration as the difference between the
minimum support price and the model rate. It can be computed by taking the average of selling price in mandis in three
states over a fixed period.

Crops under MBBY:

Sl.No Kharif Crops Rabi Crops

Moong Wheat
Urid Gram
Arhar Lentil
Soybean Mustard
Peanut / Groundnut Garlic
Maize Onion
Ramtil –
Til seed / Sesame Seed –
Documents Required for Registration:
•Residence Certificate
•Aadhar Card
•Bank Account Book Account Number, Branch Name, IFSC Code etc)
•Land Documents/Measurement of Land under cultivation

How to Register Offline?

•Collect the forms from the Panchayat Offices, an office of the District Collector, Block Offices etc.
•All necessary details like Name, Address, Phone Number, Age, and other personal details are to be filled in the form.
•The bank details like Account Number, IFSC Code, MICR Code, Branch name etc are also to be filled carefully.
•The application form should also contain details of cultivation done along with the measurement of land used for cultivation.

Bhavantar Yojana Portal Registration

•Visit the official website of MP e-Uparjan i.e. http://mpeuparjan.nic.in/mpeuparjan/Home.aspx

•Click on “wheat 2018-19 Farmer Registration Application Link” under the Wheat Section as shown in the figure below:
•The Wheat Procurement Monitoring System 2018-19 will be shown
•ON this page select “Get Information related to wheat farmer registration”
•Enter Kisan Code and Captcha and click on “Register”.
•Fill all the details in the Application Form correctly i.e. Bank Details and Land Details.
•Finally, click on the “Secure” button to complete the registration process.
Farmers have to then take print out of this form and show it at the time of purchase.
Follow all the above steps for rest of the crops.
For further assistance, you can directly call at the Helpline Number: 0755-2550495
Crops Maize Urid Moong Arhar Soybean Groundnut Sesamum Nigerseed
Production (Lakh 49.1 17.71 1.6 8 69.4 3.46 2 0.25
MT)
Registered 13.89 8.1 0.09 1.38 38.91 0.87 0.38 0.02
Production (lakh
MT)
Registered market 5.45 5.69 0.02 NA 12.84 0.14 0.001 0.001
arrivals (Lakh MT)
Mandi Prices in MP 1090 2582 3594 - 2594 - - -
(Rs/ quintal)
No. of registered 2.99 6.15 0.14 1.13 10.59 0.43 0.42 0.04
farmers (Lakhs)
Total cropped area 13.17 17.89 2.28 6.47 50.1 2.18 4.24 0.61
(Lakh ha)
Registered area 4.41 11.98 0.13 1.17 24.86 0.46 0.38 0.04
(Lakh ha)
Compensation 154 1297 3 NA 471 11 0 0
actually paid (Rs
crore)
Compensation that 1388 4037 216 NA 2547 283 0 0
would have been
paid if entire
produce was to be
covered under BBY
(Rs crore)
Total compensation 8470 Crore
that could have been Crop wise details for the BBY scheme kharif 2017-18
paid for all crops
 Maize Urad Moong Arhar Soybean Groundnut Sesamum Nigerseed

69.4
49.1

17.71

3.46
1.6

0.25
2
PRODUCTION (LAKH MT)
 REGISTERED PRODUCTION (LAKH MT)

40

35

30

25

20 38.91

15

10

13.89
5 8.1

0.09 1.38 0.87 0.38

0
0.02
Maize Urad Moong Arhar Soybean Groundnut Sesamum Nigerseed
Maize Urad Moong Arhar Soybean Groundnut Sesamum Nigerseed

12.84

0.001 Nigerseed
0.001 Sesamum
0.14 Groundnut
5.69 Soybean
5.45 0 Arhar
0.02 Moong
Urad
Maize

Registered
market arrivals
(Lakh MT)
 Maize Urad Moong Arhar Soybean Groundnut Sesamum Nigerseed

10.59
6.15
2.99

1.13

0.43

0.42
0.14

0.04
NO. OF REGISTERED FARMERS (LAKHS)
 Total cropped area (Lakh ha)

4% 1%
2% 14%
Maize
Urad
Moong
Arhar
18%
Soybean
Groundnut
Sesamum
52% 2% Nigerseed
7%
 COMPENSATION THAT WOULD HAVE BEEN PAID IF ENTIRE PRODUCE WAS TO BE
COVERED UNDER BBY (RS CRORE)

Nigerseed 0

Sesamum 0

Groundnut 283

Soybean 2547

Arhar 0

Moong 216

Urad 4037

Maize 1388

0 500 1000 1500 2000 2500 3000 3500 4000 4500

 Compensation actually paid (Rs crore)

1297

471

154
3 0 11 0 0
MAIZE URAD MOONG ARHAR SOYBEAN GROUNDNUT SESAMUM NIGERSEED
Compensation that would have been paid if entire produce was to be covered under BBY (Rs crore)

4037

2547

1388

216 283
0 0 0

MAIZE URAD MOONG ARHAR SOYBEAN GROUNDNUT SESAMUM NIGERSEED

Total compensation that could have been paid for all crops – 8470 Crore
 Steps to calculate the BBY compensation
STEP-A- Calculate projected MSPs for 2018-19

1. We calculate projected A2+FL cost by increasing the current A2+FL cost by 5%. The Kharif A2+FL costs are for marketing
season 2018-19 and Rabi A2+FL costs are for marketing season 2019-20.These are compiled from Rabi and Kharif reports
published by CACP
2. We then raise the projected A2+FL costs by 50% to get the projected MSPs for 2019-20
3. We deduct the projected MSPs from the past MSPs and for the crops for which the difference is negative,
a. For wheat we raise the present MSP by 5% to get the projected MSP as we feel that if paddy MSP is raised for kharif crops in
2018 as mentioned above, the same for wheat for Rabi 2019-20 will also have to be raised by at least 5%
b. For other crops, we keep the MSP same

STEP -B- Calculate net availability

1. We first compute marketed surplus for 2018-19 for all the commodities. Marketed Surplus has been computed using Marketed
Surplus Ratio for TE-2014-15 since that is the last year of data availability. Data on Marketed Surplus Ratio has been compiled
from Agricultural Statistics At a Glance, published by Department of Agriculture, Cooperation and Farmers Welfare, Govt. of
India.
2. For rice and wheat, we deduct procurement for 2018-19
3. We deduct basmati rice production and export. The deducted basmati production has been assumed to be 85 lakh tonnes. 6
4. For wheat, net availability = production – procurement
5. For other commodities, net availability = marketed surplus
6. Net availability of Rice is converted to paddy by the following formula- (100/67*net availability of rice).
7. Net availability of cotton is converted to kapas using the formula- (100/33*net availability of cotton)
STEP -C- Calculate compensation for three scenarios

1. First scenario is when the prices are 10 percent below MSP.

2. Second scenario is when prices are 20 percent below MSP.
3. Third scenario is when prices are 30 percent below MSP.
4. We compute the difference between the prices computed in the previous steps with that of the projected MSP.
5. The difference in the three prices is multiplied by net availability computed in STEP- B.
6. The sum of the total compensation for all crops is equal to PDP compensation.

Calculate Projected
Steps to MSPs for 2019-20

Calculate the Calculate Net

availability
BBY
Compensation Calculate Compensation
for three scenarios
 MSP projections for 2018-19
Projected MSP
if A2+FL<MSP
(5% rise over
Projected MSP current MSP for
Projected A2+FL (50 % higher wheat,
A2+FL (2018-19) MSP(2018-19) (5 % high) than projected col [5]-col [3] unchanged for Projected MSP Projected MSP- % increase in
MSP projection (Rs/q) Rs/q (Rs/q) A2+FL) (Rs/q) (Rs/q) others) (Rs/q) (Rs/q) old MSP (Rs/q) MSP
Paddy Common 1117 1550 1172 1759 209 0 1759 209 14
Paddy Grade A 1117 1590 1172 1759 169 0 1759 169 11
Wheat 817 1735 857 1286 -449 1822 1822 87 5
Jowar Hybrid 1556 1700 1633 2450 750 0 2450 751 44
Jowar Maldandi 1556 1725 1633 2450 725 0 2450 726 42
Bajra 949 1425 996 1494 69 0 1494 70 5
Maize 1044 1425 1096 1644 219 0 1644 219 15
Ragi 1861 1900 1954 2931 1031 0 2931 1031 54
Arhar 3318 5450 3483 5225 -225 5450 5450 0 0
Moong 4286 5575 4500 6750 1175 0 6750 1175 21
Urad 3265 5400 3428 5142 -258 5400 5400 0 0
Groundnut 3159 4450 3316 4975 525 0 4975 525 12
Soybean 2121 3050 2227 3340 290 0 3340 291 10
Sunflower 3481 4100 3655 5482 1382 0 5482 1383 34
Cotton Medium
Staple 3276 4020 3439 5159 1139 0 5169 1140 28

Cotton Long Staple 3276 4320 3439 5159 839 0 5169 840 19
Barley 845 1410 887 1330 -80 1410 1410 0 0
Gram 2461 4400 2584 3876 -524 4400 4400 0 0
Lentil 2366 4250 2484 3726 -524 4250 4250 0 0
Rapeseed
&Mustard 2123 4000 2229 3343 -657 4000 4000 0 0
Safflower 3125 4100 3281 4921 821 0 4922 822 20
Sesamum 4067 5300 4270 6405 1105 0 6406 1106 21
Nigerseed 3912 4050 4107 6161 2111 0 6161 2111 52
Sugarcane 145 255 152 228 -27 255 255 0 0
 Net Availability of Commodities

Production 2017-18 Marketed Surplus Marketed Surplus Procurement (lakh Basmati Production Net Availability (lakh
Crops (lakh tonnes) Ratio (MSR) (lakh tonnes) tonnes) (lakh tonnes) tonnes)
Rice 1110 82.6 917 283 85 549
Wheat 917 74.8 726 308 0 418
Jowar 47 65.3 30 0 0 30
Bajra 93 72.1 67 0 0 67
Maize 271 86.5 235 0 0 235
Barley 20 75.2 15 0 0 15
Ragi 20 40.4 8 0 0 8
Gram 111 88.1 98 0 0 98
Lentil 8 91.1 7 0 0 7
Arhar 40 86.5 35 0 0 35
Urad 32 81.3 26 0 0 26
Moong 17 89.5 16 0 0 16

Groundnut 82 93.5 77 0 0 77
Sesamum 7 91.9 7 0 0 7
Nigerseed 1 92 1 0 0 1
Soybean 114 87.2 99 0 0 99
Sunflower 2 84.6 2 0 0 2

Rapeseed & Mustard 75 91.9 69 0 0 69

Safflower 0.4 67 0 0 0 0.3
Cotton 58 99.5 57 0 0 57
Sugarcane 3532 100 3532 0 0 3532
 Compensation if scheme is scaled at an all India level (Only Considering Marketed Surplus)
Projected
Availabilit MSP MSP ASP1 = ASP2 = ASP3 =
y (lakh (2017-18) (2018-19) Prices Prices Prices Compensa Compensa Compensati Share in
tonnes) TE in in 10% lower 20% lower 30% lower MSP- MSP- MSP- tion on tion on on on total cost
Crops 2016-17 Rs/tonnes Rs/tonnes than MSP than MSP than MSP ASP1 ASP2 ASP3 1(Rs/Cr) 2(Rs/Cr) 3(Rs/Cr) %
Rice 819 15500 17590 15833 14074 12315 1759 3519 5278 14413 28827 43240 25.5
Wheat 418 17350 18220 16396 14574 12752 1822 3644 5465 7617 15235 22852 13.5
Jowar 30 17000 24510 22056 19606 17155 2451 4901 7352 746 1492 2239 1.3
Bajra 67 14250 14950 13452 11957 10463 1495 2989 4484 998 1996 2994 1.8
Maize 235 14250 16440 14799 13154 11510 1644 3289 4933 3858 7716 11574 6.8
Barley 15 14100 14100 12690 11280 9870 1410 2820 4230 211 422 633 0.4
Ragi 8 19000 29310 26380 23449 20518 2931 5862 8793 232 464 697 0.4
Gram 98 44000 44000 39600 35200 30800 4400 8800 13200 4304 8607 12911 7.6
Lentil 7 42500 42500 38250 34000 29750 4250 8500 12750 309 618 927 0.5
Arhar 35 54500 54500 49050 43600 38150 5450 10900 16350 1895 3791 5686 3.4
Urad 26 54000 54000 48600 43200 37800 5400 10800 16200 1419 2838 4256 2.5
Moong 16 55750 67500 60754 54004 47253 6750 13501 20251 1051 2102 3153 1.9

Groundnut 77 44500 49750 44779 39803 34828 4975 9951 14926 3821 7642 11462 6.8
Sesamum 7 53000 64060 57650 51244 44839 6406 12811 19217 422 843 1265 0.7
Nigerseed 1 40500 61610 55453 49291 43130 6161 12323 18484 41 83 124 0.1
Soybean 99 30500 33410 30065 26725 23384 3341 6681 10022 3317 6635 9952 5.9
Sunflower 2 41000 54830 49343 43861 38378 5483 10965 16448 107 213 320 0.2

Rapeseed &
Mustard 69 40000 40000 36000 32000 28000 4000 8000 12000 2773 5546 8319 4.9
Safflower 0.3 41000 49220 44297 39375 34453 4922 9844 14766 14 27 41 0.02
Kapas 174 10200 51600 46437 41278 36118 5160 10319 15479 8970 17939 26909 15.9

Total
Compensatio
on 56,518 1,13,035 1,69,553
Column1 Column2 Column3 Column4 MSP projections for 2019-20 Column5 Column6 Column7 Column8 Column9
MSP projection
A2+FL (2018-19)
Projected
(Rs/q) A2+FL
MSP(2018-19)
(5 % high)
Projected
Rs/q
(Rs/q) MSP (50 % higher than projected A2+FL)
col [5]-col
(Rs/q)
[3] (Rs/q)
Projected MSP ifProjected
A2+FL<MSPMSP
Projected
(5%
(Rs/q)
rise over
MSP-
%current
increase
old MSP
MSin(
Kharif Crops
Paddy Coomon 1172.85 1231.5 1750 1847.25 97.25 1847.25 1847 97 5.54
Paddy Grade A 1172.85 1231.5 1770 1847.25 77.25 1847.25 1847 77 4.35
Jowar Hybrid 1633.8 1715.5 2430 2573.25 143.25 2573.25 2573 143 5.88
Bajra 996.45 1046.27 1950 1569.41 -380.59 1950 1950 0 0
Maize 1096.2 1151.01 1700 1726.52 26.52 1726.52 1727 27 1.59
Ragi 1954.05 2051.75 2897 3077.63 180.63 3077.63 3078 181 6.25
Arhar 3483.9 3658.1 5675 5487.15 -187.85 5675 5675 0 0
Moong 4500.3 4735.32 6975 7102.98 127.98 7102.98 7103 128 1.84
Urad 3428.25 3599.66 5600 5399.5 -200.5 5600 5600 0 0
Cotton Medium Staple
3439.8 3611.79 5150 5417.69 267.69 5417.69 5418 268 5.2
Cotton Long Staple3439.8 3611.79 5450 5417.69 -32.31 5417.69 5418 0 0
Groundnut 3316.95 3482.8 4890 5224.2 334.2 5224.2 5224 334 6.83
Sunflower 3281.25 3445.31 5388 5167.97 -220.03 5388 5388 0 0
Soybean 2227.05 2338.43 3399 3507.65 108.65 3507.65 3508 109 3.21
Sesamum 4270.35 4483.87 6249 6725.81 476.81 6725.81 6726 477 7.63
Nigerseed 4107.6 4312.98 5877 6469.71 592.47 6469.47 6470 593 10.1
Rabi Crops
Wheat 857.85 900.74 1840 1351.11 -488.89 1932 1932 92 5
Barley 887.25 931.61 1440 1397.42 -42.58 1440 1440 0 0
Gram 2584.05 2713.25 4620 4069.88 -550.12 4620 4620 0 0
Lentil 2484.3 2608.52 4475 3912.78 -562.22 4475 4475 0 0
Rapeseed&Mustard2229.15 2340.61 4200 3510.92 -689.08 4200 4200 0 0
Safflower 3281.25 3445.31 4945 5167.97 222.97 5167.97 5168 223 4.51
Other Crop
Sugarcane 152.25 159.86 275 239.79 -35.21 239.79 240 0 0
Data of MSP
from DES
(Directorate of
Economics &
Statistics,
Updated, July
2019
MSP(2019-20)
MSP projections for 2020-21
Projected MSP
if A2+FL<MSP
(5% rise over
Projected MSP current MSP for
Projected A2+FL (50 % higher wheat,
A2+FL (2018-19) (5 % high) MSP(2019-20) than projected col [5]-col [3] unchanged for Projected MSP Projected MSP- % increase in
MSP projection (Rs/q) (Rs/q) Rs/q A2+FL) (Rs/q) (Rs/q) others) (Rs/q) (Rs/q) old MSP (Rs/q) MSP
Kharif Crops
Paddy Coomon 1231.5 1293.08 1815 1939.62 124.62 1939.62 1940 125 6.89
Paddy Grade A 1231.5 1293.08 1835 1969.62 134.62 1969.62 1970 135 7.35
Maize 1151.01 1208.56 1760 1862.84 102.84 1862.84 1863 103 5.85
Ragi 2051.75 2154.34 3150 3231.51 81.51 3231.51 3232 82 2.6
Moong 4735.32 4972.09 7050 7458.14 408.14 7458.14 7458 408 5.79
Cotton Medium
Staple 3611.79 3792.38 5250 5688.57 438.57 5688.57 5689 439 8.36
Cotton Long
Staple 3611.79 3792.38 5550 5988.57 438.57 5988.57 5989 439 8.36
Groundnut 3482.8 3656.94 5090 5485.41 395.41 5485.41 5485 395 7.76
Sesamum 4483.87 4708.06 6485 7062.09 577.09 7062.09 7062 577 8.9
Nigerseed 4312.98 4528.63 5940 6792.95 852.95 6792.95 6793 853 14.36
References
* Gulati Ashok, Chatterjee Tirtha and Hussain Siraj (2018). Supporting Indian Farmers: Price Support or Direct Income/Investment
Support, Working Paper No. 357.

* Narayanan Abhinav and Tomar Shekhar (2018). Price deficiency payments mechanism: Evidence from the Indian agricultural
Market, September.

* Haque T and Josh P K (2018). A Study of Selected Crops in India Price Deficiency Payments and Minimum Support Prices
Vol. 53, Issue No. 20, May.

* Cabinet approves New Umbrella Scheme “Pradhan Mantri Annadata Aay SanraksHan Abhiyan” (PM-AASHA), PM-AASHA will
Provide MSP assurance to farmers, A reflection of Government’s commitment to the “Annadata”, 2018,
Http://www.pib.nic.in/PressReleseDetail.aspx?PRID=1545775

* K. J. Staff, Bhavantar Bhugtan Yojana For MP, 2017, Krishijagaran.com .

* Price Deficiency Payment Schemes, https://byjus.com/free-ias-prep/price-deficiency-payment-system/.

* Price Deficiency Payment, 2017, https://www.iasparliament.com/current-affairs/price-deficiency-payment.

Thank you