Undoing stock limits, DBT more important than MSP: Economic Survey
NEW DELHI: The government should undertake path-breaking reforms such as abolition of stock limits for traders and adopting direct cash transfer to farmers instead of minimum support prices for crops other than wheat and rice, the latest survey of the economy said.
“The stock limits imposed under Essential Commodities Act, 1955 end up curtailing demand for farm produce and so price. There is need to lift all restrictions on permit/licensing requirements, stock limits and movement restrictions along with the laws on which they are based,” the survey issued on Friday said.
While the current system is in place, stock limits should be relaxed when sowing season begins, so demand for farmers’ produce increases.
Two months after procurement season, the stock limit should be gradually halved to help consumers without hurting farmers, it said.
“In contrast, requests for enhancing stock limits come when procurement process has commenced or is completed. However, the ideal situation relates to doing away with the stock holding limits,” it said.
The survey also noted that at times farmers were not gaining from minimum support price (MSP) mechanism in which state agencies purchase output at a remunerative price.
“This year, despite significantly higher MSP for pulses and scaling up of pulses procurement to build a buffer stock close to 2 million, there were reports of sales below MSP in several markets during the procurement season,” it said, adding that there were similar reports about wheat also.
“To make farming remunerative, delivery of inputs should be made cost effective through direct benefit transfer mode (DBT). After debating this, support in the form of MSP for crops other than rice and wheat needs to be shifted to DBT format,” the survey said. “There is a case for expanding the cash transfer.”