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Price Deficiency Payment and Bhavantar Photo: Dibakar Roy · Pexels License · source ↗

Price Deficiency Payment (PDP) and Bhavantar Bhugtan Yojana

The Price Deficiency Payment (PDP) model pays the farmer the difference between the announced MSP and the actual market price realised on a notified sale at an APMC mandi — without the government physically procuring the crop. It was first piloted at scale by Madhya Pradesh in 2017 as the Bhavantar Bhugtan Yojana (BBY) and later folded into the Centre's PM-AASHA umbrella as the "Price Deficiency Payment Scheme" (PDPS).

Principle: pay the gap, don't procure

In conventional PSS, NAFED or the state agency physically buys the produce at MSP, takes ownership and stores/disposes the stock. PDP avoids the physical-procurement layer:

  • Farmer sells produce in the open APMC mandi at the prevailing market price
  • The state-recorded sale price for the lot is compared with the announced MSP
  • The differential — capped at the MSP minus a "modal price" derived from reference markets — is paid as DBT to the farmer's Aadhaar-linked bank account

This eliminates storage cost, gunny shortage and disposal-loss risk for the state — but it transfers downstream price risk to the farmer and creates new gaming incentives at the mandi-recording layer.

Bhavantar Bhugtan Yojana (Madhya Pradesh, 2017)

Madhya Pradesh launched BBY in kharif 2017 for soybean, urad, moong, tur, til, ramtil, maize and groundnut. Farmers registered on the MP e-Uparjan portal before sowing, declared sown area, sold the produce in a notified APMC mandi within a fixed window (typically 1 October to 30 November), and received the difference between MSP and a "modal price" (calculated as the average of two reference-market prices) — capped at the actual sale price.

The scheme paid out roughly Rs 3,000-3,500 crore in its first season and was politically credited with mobilising soybean farmers. Several pricing-anomaly episodes — traders depressing recorded prices on Bhavantar days, registered farmers selling produce from non-registered fields — emerged in the first season.

Why BBY did not become national

The 2018 PM-AASHA umbrella envisaged PDPS at national scale (alongside PSS and a pilot for Private Procurement and Stockist Scheme, PPSS). Uptake outside MP was limited because:

  • States did not want to absorb 50% of the deficiency cost
  • Mandi-recording integrity gaps made the scheme gameable
  • Bumper-crop years pushed deficiency payouts to fiscal limits
  • Farmers preferred physical PSS where the entire MSP was paid against delivery

Madhya Pradesh itself wound BBY down in subsequent kharif seasons, citing fiscal strain.

Haryana, Rajasthan and the post-PM-AASHA pattern

Haryana ran a Bhavantar-style payment for bajra and maize in 2018. Rajasthan piloted similar deficiency payments for moong and groundnut. The Centre's PDPS pilot under PM-AASHA was thinly utilised. The dominant Indian model remains physical PSS procurement plus state bonuses, not PDP — though the policy debate over PDP vs PSS recurs every farmer-protest cycle.

Strengths and limitations

PDP advantages: no warehouse/gunny logistics, transparent DBT, all farmers can participate, no quality grade lockout. PDP weaknesses: mandi-record gaming, fiscal exposure in glut years, no buffer-stock spillover for PDS, opacity in modal-price calculation.

See also: Price Support Scheme, Market Intervention Scheme, MSP — Minimum Support Price, MSP 23-crop list, NAFED procurement.

Sources

  1. Bhavantar Bhugtan Yojana portal. Madhya Pradesh government.
  2. PM-AASHA umbrella. Press Information Bureau.
  3. Price Deficiency Payment pilot. Press Information Bureau.