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
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
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.
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
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
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.
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.
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
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