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DPDS to be implemented in Telangana –Cotton farmers
Highlights
In a landmark change in the way it administers minimum support prices (MSPs) for crops, the Central government is set to begin direct transfer of cash into farmers accounts, instead of physical procurement of cotton from whole sale markets.
In a landmark change in the way it administers minimum support prices (MSPs) for crops, the Central government is set to begin direct transfer of cash into farmers accounts, instead of physical procurement of cotton from whole sale markets.
Normally, it intervenes through Cotton Corporation of India (CCI) arm, when the market price falls below the MSP. Under MSP operations, CCI has so far this year produced a little over 100,000 bales (170 kg each), largely in a few districts of Telangana and Andhra Pradesh. Last year it had procured a record 8.6 million bales, nearly a fourth of overall cotton output.
With world cotton consumption slowing down and the demand for a higher minimum support price (MSP) for cotton emanating from some states, the Centre is planning to introduce direct benefit transfer scheme for cotton farmers as well.
To avail the benefit, the Cotton farmers in the Telangana State are also demanding the Central government to test the Direct Payment Deficiency System (DPDS) scheme, where the price of the produce has remained below the minimum support price (MSP).
The new system allows the government to pay farmers when price of cotton falls below the Minimum Support Price announced at the start of the season and envisages direct compensation of the loss to the farmers.
The differential amount between the rate at which the farmer has disposed of his produce in the agriculture market yard is credited to the bank account of the farmers. This system does away with the governmental intervention through the MSP operations of the Cotton Corporation of India, thereby saving precious money.
The DPDS is more relevant to the cotton farmers of the State, who are incurring heavy losses due to the price ruling below the MSP and the CCI too making deductions citing various reasons.
The DPDS system helps the farmers to overcome losses. For instance, if the cotton price falls to Rs. 3750 a quintal and the MSP is Rs.4100 per quintal, the government will pay only Rs.350 a quintal. Earlier the government used to buy the cotton by paying the MSP price of Rs.4100, which used to create artificial short supply in market. The government also incurs huge cost on interest and storage of cotton procured.
Under this system, farmers will sell at the price determined at the Agriculture Produce Market Committee (APMC). If the selling price, fixed as the previous day’s closing prices at the respect APMC is below the MSP, then the government will be considered as the day’s market price under the scheme.
Farmer have to submit a copy of APMC receipt as proof for selling below MSP, his land records and estimated yield of his farm as record to avail the benefit under the Direct Payment Deficiency System. On giving these in at local mandal offices and government inspectors, the difference between actual price and MSP is to be transferred to farmers account directly, within two weeks.
Actually, the system has introduced in China, as China Cotton Reserve Corporation incurred huge losses due to MSP operations and introduced Direct Benefit Transfer System form the last cotton season. This system has enabled the Chinese spinning sector to source cotton at market prices.
On the lines of China, for the first time as a pilot project under the Direct Payment Deficiency System (DPDS) for paying MSP guarantee for the cotton farmers has been initiated at Hinganghat taluka of Maharashtra.
Telangana is also ideal for implementing the scheme as the market yard sticks to computerized operations and the farmers in its catchment area have bank accounts and possess all the documents like identity cards needed for the purpose.
The DPDS will be more beneficial to farmers from the far flung tribal areas if it can be implemented in the interior areas. Moreover, the tribal farmers in the State are an exploited lot as they are paid much less below the MSP even in market yards.
If the scheme is implemented in Telangana since the beginning of the season, the cotton farmers in the State would have benefited by nearly Rs. 300 crore as about 150 lakh quintals of the produce was sold at an average price of Rs. 3,900 per quintal.
The differential amount of Rs. 210 per quintal would have gone directly to the farmers’ bank account. But cost saving is not only motive of this system but it will also help the industry to maintain consistency in supplies and avoid distortions in trade.
Moreover, MSP operations exercised by the CCI not only resulted in price volatility but also proved a burden to the Centre and State due to high interest cost, carrying cost and there is currently a lot of expense on procurement, handling, transportation, warehousing and sales of procured cotton by CCI. Instead of it, the government can compensates the loss incurred by the procurement agencies and instead of passing through all such channels, direct transfer would bring efficiency and transparency in MSP operations. It will also save a lot of expenses incurred by the government in the process.
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