Less cash for PM AASHA will not affect procurement: Officials

Launched in 2018, PM-AASHA was seen as a tool to ensure remunerative prices to farmers for crops other than cereals.

The interim budget slashed funds for a price-support scheme for farmers called Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM AASHA), which is used to buy oilseeds and pulses from farmers at federally fixed floor prices. The outlay in the interim budget for 2024-25 for PM AASHA stands at ₹1738 crore, down 21% from ₹2200 crore spent in 2023-24 (revised estimates).

Schemes like PM-AASHA are meant to be activated only when prices of pulses and oilseeds fall below MSP levels(HT FILE/Bachchan Kumar)

Launched in 2018, PM AASHA was seen as a tool to ensure remunerative prices to farmers for crops other than cereals. The Price Deficiency Payment Scheme (PDPS) and pilot projects of the Private Procurement and Stockist Scheme (PPSS) were to be funded out of PM AASHA.

The reduced allocation may imply that government agencies see less need to procure and sell any pulses, oilseeds or cotton if their prices fall below MSP during FY25, said analyst Abhishek Agrawal of Comtrade, a commodity trading firm. An MSP is a federally fixed floor rate meant to prevent distress sales by farmers.

Schemes like PM AASHA are meant to be activated only when prices of pulses and oilseeds fall below minimum support price (MSP) levels. The rates of both oilseeds and pulses are currently ruling higher than MSP in any case, an official said.

However, a senior official said the government’s allocation suggests that procurement of pulses at minimum support prices will now be conducted additionally by national cooperatives, National Cooperative Consumers’ Federation of India Ltd (NCCF) and National Agricultural Cooperative Marketing Federation of India Ltd (NAFED). 

Also, the government will rely on enhancing PM AASHA allocations during supplementary grants and during the full budget in July. The government could also rely on off-budget borrowing to finance its procurement operations.

Off-budget funding refers to the practice of financing an expenditure that is not fully accounted for in budgetary allocations. It often helps the government to lower the fiscal deficit number.

The latest budget has been widely seen as signalling a path towards fiscal consolidation, or actions to reduce debt while pushing growth through higher investment in assets.

A large fiscal deficit influences sovereign credit worthiness ratings assigned by global rating agencies. A poor rating increases the government’s borrowing costs.

The lower fiscal deficit projected in the budget comes on the back of a cut in the estimated spending on food, fertiliser and fuel subsidies for 2024-25. Spending on these items — which accounts for the largest revenue spent after interest payments — is estimated to be at ₹3.74 lakh crore for FY25, down 23% from the revised estimates for the ongoing financial year, Budget documents show.

India’s accounting practices are cash-based. An expenditure is incurred only when a debit is charged against the government’s bank accounts. By making the government agencies rely on borrowing to fund its operations, rather than paying it directly, the government in the past managed to limit its fiscal deficit.

The Union government’s consumer affairs department has procured 500,000 tonnes of masur (lentil) at market rates after failing to procure enough lentils at the MSP. This means there are enough stocks for market intervention in case of high prices.