Support PricesMoon in the Mirror
A price guarantee for farmers• The Agricultural Prices Commission was set up in January  1965 to advise the Government on ...
Various Committees•   1965: LK Jha Committee•   1980: Sen Committee•   1990: Hanumanth Rao Committee•   1995: Report of th...
Strategies• Announcement of MSP for major Foodgrains• Procurement prices for purchasing surplus  from the cultivators• Pub...
Factors considered1.    Cost of production2.    Changes in input prices3.    Input-output price parity4.    Trends in mark...
Regional Variations• Costs of Production per Quintal of Paddy 2012-13   – Andhra Pradesh       : Rs. 1207.11   – Chhattisg...
Problems in estimating yields• Considerable divergence exists between yields obtained from Crop  Cutting Experiments (CCEs...
FARM HARVEST PRICES AND MINIMUM SUPPORT          PRICES OF PADDY IN AP           Farm Harvest Price           Minimum Supp...
Prices recommended by AP government for 2012-13Crops                     Cost of Rec. Support     MSP in 2012-13          ...
State governments irresponsible                   MSPs recommended for 2013-14 (Rs/q)Crop               Announced MSP     ...
Procurement of various food grains by the           Government (2004-05 to 2010-11)Year       Rice               Wheat    ...
States where the C2 cost projection by CACP were not coveredCrop         by MSP         A.P, Assam, Haryana, Karnataka, Ke...
Real Prices lower than MSP (2010-11)Crop                           MSP           M.P.   Maha - Gujarat Rajasthan          ...
Prices to Farmers       during 2010-11 and 2011-12Crop           2010-11 Rs/Quintal 2011-12 Rs/QuintalCotton              ...
Swaminathan recommendation?                                     C2+50%                    Addl            Product         ...
Procurement of rice during 2009-10              by FCI and State Agencies                                                 ...
Current Status MSP• MSP, if implemented properly, can effectively play the  expected roles: to act as incentive price, cro...
Main issues• Faulty Price determining mechanism   – Estimating costs of cultivations   – Factors taken into account by CCE...
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Moon in the Mirror: Support Prices to Farmers

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Moon in the Mirror: Support Prices to Farmers

  1. 1. Support PricesMoon in the Mirror
  2. 2. A price guarantee for farmers• The Agricultural Prices Commission was set up in January 1965 to advise the Government on price policy for agricultural commodities, with a view to evolving a balanced and integrated price structure in the perspective of the overall needs of the economy (emphasis added) and with due regard to the interests of the producer and the consumer” (GOI, 1965).• Later on extended to 25 crops – Cereals: Paddy, Wheat, Jowar, Bajra, Maize, Ragi, Barley – Pulses: Moong, Urad, Arhar, Gram, – Oilseeds: Groundnut, Rapeseed and Mustard, Niger, soybean, Sunflower, Sesamum and Safflower – Fiber Crops: Cotton and Jute – Others: Sugarcane, VFC Tobacco, Onion, Potato, Coconut
  3. 3. Various Committees• 1965: LK Jha Committee• 1980: Sen Committee• 1990: Hanumanth Rao Committee• 1995: Report of the Task Force on Terms of Trade between Agriculture and Non- Agricultural Sectors
  4. 4. Strategies• Announcement of MSP for major Foodgrains• Procurement prices for purchasing surplus from the cultivators• Public Distribution System and building proper buffer stocks for the purchased• zonal restrictions for the movement of foodgrains to manage the supply and demand.
  5. 5. Factors considered1. Cost of production2. Changes in input prices3. Input-output price parity4. Trends in market prices5. Demand and supply6. Inter-crop price parity7. Effect on industrial cost structure8. Effect on cost of living9. Effect on general price level10. International price situation11. Parity between prices paid and prices received by the farmers.12. Effect on issue prices and implications for subsidy
  6. 6. Regional Variations• Costs of Production per Quintal of Paddy 2012-13 – Andhra Pradesh : Rs. 1207.11 – Chhattisgarh : Rs. 1111.07 – Jharkand : Rs. 1433.98 – Maharashtra : Rs. 1766.92 – Uttarakand : Rs. 813.96 – Punjab : Rs. 908.48• MSP for Quintal – Common Variety : Rs. 1250 – Fine Variety : Rs. 1280
  7. 7. Problems in estimating yields• Considerable divergence exists between yields obtained from Crop Cutting Experiments (CCEs) and those from Comprehensive Scheme (CS Scheme) to study Cost of Cultivations both by Department of Economics and Statistics (DES) of Ministry of Agriculture• In the last ten years between 2001-01 to 2009-10 on average the yields estimated by CCEs were lower than CS Scheme across crops viz., – Paddy (19.7%) – Maize (10.80%) – Tur (17.12%) – Soybean (16.41%) – Groundnut (-0.82%) – Cotton (301.97%)• CACP takes the yields from the CS scheme significantly underestimating per quintal cost of production.• CACP collects the data from CS Scheme through 5800 centres through the state agriculture universities where as the CCEs are done across 9,73,184 centres with the help of State Governments.
  8. 8. FARM HARVEST PRICES AND MINIMUM SUPPORT PRICES OF PADDY IN AP Farm Harvest Price Minimum Support Price YEAR Kharif Rabi Average Grade-A Commo n 1998-99 510.53 426.17 486.35 470 440 1999-00 559.42 524.44 538.66 520 490 2000-01 507.93 478.58 499.61 540 510 2001-02 565.77 529.40 550.16 560 530 2002-03 623.29 578.08 609.27 560 530 2003-04 569.37 572.27 570.38 560 530 2004-05 605.49 604.07 605.02 580 550 2005-06 648.21 579.59 616.95 600 570 2006-07 670.19 622.22 650.30 610 580 2007-08 777.76 767.17 773.66 675 645 2008-09 1035.75 892.28 963.56 921 950 2009-10 1100.67 955.76 1072.66 1030 1000 2010-11 880.65 850.76 865.70 1080 1030 2011-12 AP Govt Source: DES, 1050 1110 1080
  9. 9. Prices recommended by AP government for 2012-13Crops Cost of Rec. Support MSP in 2012-13 Cultivation Rs Price Rs /acre Rs/Quintal /acrePaddy (Fine var) , , 1280Paddy (Common) , , 1250Groundnut , , 3700Jowar , , 1520Maize , , 1175Redgram , , 3850Blackgram , , 4300Greengram , , 4300Soyabean , ,Cotton , ,Sugarcane ,Ragi , , 1500Sunflower , , 3700Sesame , , 4200
  10. 10. State governments irresponsible MSPs recommended for 2013-14 (Rs/q)Crop Announced MSP Announced MSP Recommended MSP (Rs/q) 2011-12 (Rs/q) 2012-13 (Rs/q) 2013-14Paddy 1110 1280 2811Blackgram 3300 4300 7295Soybean 1650 2200 4382Groundnut 2700 3700 8019Sunflower 2800 3700 7412Sesame 3400 4200 7847Ragi 1050 1500 2925Maize 980 1175 2100Jowar 1000 1520 2862Redgram 3850 7277Greengram 4300 7287Government of Andhra Pradesh
  11. 11. Procurement of various food grains by the Government (2004-05 to 2010-11)Year Rice Wheat Coarse grains Total Prod Procur. Prod. Procur. Prod. Procu Prod. Procu.2004-05 885.3 246.85 721.5 167.95 276.0 8.27 1882.8 423.072005-06 831.3 276.56 686.4 147.87 334.6 11.51 1852.3 435.942006-07 917.9 251.06 693.5 92.26 340.6 0.00 1952.0 343.322007-08 933.5 287.36 758.1 111.28 339.2 2.03 2030.8 400.672008-09 966.9 336.85 785.7 226.89 407.6 13.75 2160.2 577.492009-10 991.8 301.34 806.8 253.82 400.3 4.08* 2198.9 555.082010-11 225.25*Source: Koushik Basu (2010) Economics of Food grain management in India and Data fromDirectorate of Economics and Statistics and updated from Ministry of Food and CivilSupplies website.
  12. 12. States where the C2 cost projection by CACP were not coveredCrop by MSP A.P, Assam, Haryana, Karnataka, Kerala, M.P, Tamil Nadu & WestPaddy BengalJowar A.P, Karnataka, M.P, Maharashtra & Tamil NaduBajra Gujarat, Haryana, U.P, MaharashtraMaize A.P, H.P, Karnataka, M.P, Rajasthan & U.PRagi Karnataka, Tamil NaduTur A.P, Gujarat, Karnataka & Orissa[Arhar]Moong A.P, Maharashatra, Orissa & RajasthanUrd M.P, Maharashtra, Orissa, Rajasthan & Tamil NaduGram Haryana, RajasthanBarley Rajasthan
  13. 13. Real Prices lower than MSP (2010-11)Crop MSP M.P. Maha - Gujarat Rajasthan rashtraPaddy 1000 850 785,853Jowar 880 601 851Maize 880 860 793Bajra 880 700Source: CACP Kharif Price Report,, 2011-12
  14. 14. Prices to Farmers during 2010-11 and 2011-12Crop 2010-11 Rs/Quintal 2011-12 Rs/QuintalCotton 6500 3600Turmeric 14000 4000Chillies 12000 5500Redgram 5000 3500Blackgram 5200 3500Bajra 4000 2000Jowar 2500 1800Onion 16000 2500Sweet Orange 75000 60000
  15. 15. Swaminathan recommendation? C2+50% Addl Product Market Target Addl exp exp (inCrop ion cost MSP price price (in Cr) C2+ 0% Cr)Paddy 1530 1250 1300 2295 14575 1683 6039.2Jowar 1994 1500 1400 2990 379 2193 189.3Bajra 1258 1175 955 1887 40 1383 18.6Maize 1147 1175 1244 1720 1209 1262 43.9Ragi 1177 1500 1289 1765 13 1295 0.2Redgram 3668 4000 3826 5502 174 4035 21.6Greengram 3840 4500 4712 5556 78 4224 0Blackgram 3495 4300 4103 4628 128 3845 0Groundnut 3746 3700 4678 5619 580 4120 0Soya 1918 2200 2932 2877 0 2110 0Cotton 3600 4174 98 3061 0 2783 3884Sunflower 3992 3700 3650 5988 172 4391 5.5Total 17614 6318.3
  16. 16. Procurement of rice during 2009-10 by FCI and State Agencies (In 000 tonnes) 2009-10 *(OCTOBER to SEPTEMBER)State / U.T FCI State agencies TotalAndhra Pradesh 6228 204 6432Assam 8 0 8Bihar 283 549 832Chandigarh 14 0 14Chhatisgarh 437 2705 3141Haryana 81 1737 1818Jharkhand 15 7 23Karnataka 72 10 83Kerala 0 261 261Madhya Pradesh 0 194 194Maharashtra 55 156 211Orissa 190 2277 2467Punjab 474 8801 9275Tamil Nadu 0 1143 1143Uttar Pradesh 374 2317 2691Uttaranchal 207 169 375West Bengal 252 914 1166Total : 8690 21443 30134Neg. - below 500 tonnes *Position as on 30/07/2010.
  17. 17. Current Status MSP• MSP, if implemented properly, can effectively play the expected roles: to act as incentive price, crop pattern and input intensity navigator, risk abater and technology promoter• Not an incentive price for the crop or technology adoption• Largely, the crops which received raw deal in terms of relative prices were the ones grown by resource poor farmers and in slow growth regions.• Not a remunerative price• Do not drive rational land use pattern
  18. 18. Main issues• Faulty Price determining mechanism – Estimating costs of cultivations – Factors taken into account by CCEA• Problems in administering – Not in all crops and regions – No procurement operations like in Odisha – Dependency on Rice millers like in AP – Only land owning farmers getting benefit like in Chhattisgarh• Not a statutory right• Minimum Support Price becoming Maximum Price because of levi• Restricting Open Market prices using Essential Commodities Act• Higher MSPs may lead to inflation and encourage cheaper imports• Impact of NFSB
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