The working group on risk management in
Market Intervention Scheme (MIS)
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| 6.3. Market Intervention Scheme (MIS): The Centre implements the Market Intervention Scheme (MIS), on specific requests from the State/UT Governments, to prevent distress sale of horticultural and other cash commodities. Under the scheme, losses are shared by State/UT government and GOI on 50:50 basis, with the ceiling of 25% of the procurement value and rest of the loss, if any, is to be borne by the procurement agency/State Government. The commodities covered under the scheme are onion, potato, ginger, kinoo, red chillies, black pepper, coriander seed, eggs and oil palm. Purchases under MIS are undertaken by NAFED at market Intervention Price (MIP) fixed by GOI. MIP is fixed after taking into account the cost of production and bare minimum margin to provide market support to growers. The MIP fixed by GOI, is generally higher than the prevailing market prices. Thus, the implementing agencies incur losses on account of price and perishable nature of the commodities covered under MIS. To sum up, MIS too has reported handicaps in the present form. These are: (i) Most States do not provide for 50% of the losses. (ii) Loss is restricted to 25% of the procurement value and as such, procurement agencies States do not come forward for MIS operations. (iii) Stocks are disposed off at the prevailing market price, which is much below the procurement price. Hence, losses are large (iv) MIS is not reliable and sustainable in the present form. Based on past experience, NAFED has reported that in handling of various agricultural commodities under MIS, the losses incurred are generally more than 25% and in some cases up to 95%, despite meticulous planning and handling of the scheme by the implementing agencies. Some of the reasons for heavy losses under MIS are: v Purchases under MIS are always made at a price higher than the prevailing market prices. v MIS is generally extended for procurement of perishables, which by nature are susceptible to a higher percentage of spoilage and damages during handling. v Procured stocks have to be disposed of at prevailing market rates, which are generally far below the cost of procurement and are governed by market forces of demand and supply. v Procured stocks are not immediately or simultaneously disposed of, as this may further subdue the market prices, affecting sales realization. Consequent compulsion of holding the procured stock, jacks up the cost on account of storage rentals, interest and shortages during the storage. v Geographic, weather and market conditions prevailing both at the time of procurement and disposal, also largely influence market prices. The losses suffered under MIS are largely on account of these factors, which are beyond the control of implementing agencies. To make the scheme sustainable and meaningful for risk coverage, the Government needs to reimburse the losses on actual basis as in the case of MSP. Further, the scheme is required to be implemented on the lines of MSP so that the production of horticulture crops and other perishables could be encouraged. However, a proper institutional linkage and coordination with processing / user industries is also needed to be worked out to provide a ready market for such products to keep the losses to the minimum. MIS should be supplemented by NAIS to ensure a fixed income to the farmers, in a situation of undue fluctuations in price and crop damage. In order to make MIS effective, the Working Group suggests the following measures: (i) Prices be fixed by an Expert Body, basically to cover the price risk. (ii) Reimburse the losses on an actual basis to the procurement agencies, on the lines of MSP. (iii) Establish dependable linkages and coordination with processing / user industries, to provide ready markets, so that losses could be kept to the minimum. Download 0.68 Mb. Share with your friends:
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