The document discusses various concepts related to agricultural prices, including: - Minimum support prices (MSP) which aim to protect farmers from steep price declines. - Procurement prices which are slightly higher than MSP and used by the government to purchase crops from farmers. - Issue prices which are the prices at which the government sells commodities to consumers through public distribution systems. - The role of the Agricultural Prices Commission in recommending MSPs and other price policies to the government.

2. 2
• Agricultural prices cover prices of
agricultural products (output prices)
and prices of requisites for
agricultural production (input prices)
at various stages of marketing.

3. 3
• To allocate resources.
• To distribute income
• To induce capital formation.
• Enhancing marketing efficiency and
performance

4. 4
• Agricultural prices give signals to both producers and
consumers regarding the level of Production and
consumption.
• Changes in the relative prices of the various agricultural
commodities affect the allocation of resources among
agricultural commodities by the consumers.
• If the price of a given commodity increases relatively to
all other agricultural commodities, then the producers
would be allocating more resources, i.e., land and other
inputs, for the production of that commodity.

5. 5
• Changes in agricultural prices thus effect a
transfer of income between the agricultural
and the non -agricultural sectors of the
economy.".

6. 6
• Goods and resources are limited, but needs
and wants are unlimited; so price will
determine affordability and those with the
buying power will have the limited.

7. 7
• Price signal the demand and supply
situations.
• Shortages are reflected in high prices, and
surpluses are reflected in lower prices.

8. 8
• Prices facilitate matching of demand and
supply therefore clearing the market

9. 9
• Prices transmit information to various actors
in the market thus enabling them to make
informed decision on what and when to buy
and sell.

10. 10
• Prices act as incentives/ disincentives to
consumers and producers.

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• Aim - the intervention in the agricultural
produce markets to influence the price
levels and their fluctuations, particularly
from farm gate to retail level. .
• The assurance to the farmers that his
efforts to augment production through
adoption of improved technology would
not become unremunerative through the
price factor.

12. 12
• The policy was framed keeping in view
three different angles, viz.,
i. providing food grains for the
Public Distribution System,
ii. ensuring reasonable
(affordable to consumers)
prices for food grains, and
iii. Inducing adoption of the new
technology.

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• To achieve price stability without
hampering the income of the farmers.
• To provide price support to the farmers in
the initial stages and remunerative prices at
later stages.
• To protect the interests of the consumers,
supplying essential commodities at fair
prices

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• To maintain the reasonable relationship
between the prices of agricultural
commodities and manufactured products
through appropriate parity prices, thereby
terms of trade become favourable to the core
sector.
• To maintain appropriate relationship among
the competing crops and
• To provide favourable climate to the farmers
to apply requisite new technology for
augmenting agricultural production through
remunerative prices for agricultural
commodities.

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• Agricultural prices fluctuate more violently
than the prices of industrial products. Price
fluctuations bring disaster to producers as well
as consumers.
• A steep decline in the price of particular
crop in few years can inflict heavy losses on
the growers of that crop. This will not only
reduce the income but also dampen the spirit
to cultivate the same crop in the coming year. If
this happens to be a staple food item of the
people, supply will remain below the demand.

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• Prices of a particular crop increase rapidly
in the particular period, them the consumer
will definitely suffer. In case, the prices
continuously increase for the particular crop,
this can have disastrous effect on the sector of
the economy.

17. 17
• Procurement operations.
• Public distribution at fixed issue prices,
rationing, restrictions on movement of food
grains from one place to another place i.e.
state to state.
• Minimum price for sugarcane to sugar
factories.

18. 18
• Maximum controlled prices, assured
minimum prices, statutory minimum prices,
ban on exports, stepping up of imports,
regulation of futures trading.
• Floor and ceiling prices, controls on futures
trading and imports have been the major policy
measures taken for regulation of prices of raw
cotton and jute

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• Institutions: The government has set up two
institutions to implement the price policies.
• Agriculture Price Commission (1968): This
commission advices the government regarding
agriculture price policy, also determines
MSP and procurement prices of agriculture
products.

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• Food Corporation Of India (1985): This
corporation organizes procurement of food
grains at price determined by govt. and their
sale through public distribution system.

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• Fixation of MSP or procurement prices:
The government determines minimum
support price of many agriculture product
such as wheat, rice, maize, every year based
on recommendation made by Agriculture
Price Commission.

22. 22
• Maximum Price Fixation: Government also
determines maximum prices for certain
agriculture product. The govt. sells many
agriculture products such as grain, sugar, rice
at prices through fair prices under PDS.

23. 23
• Improving the transparency of the price
mechanism. Under price stability people
can recognise changes in relative prices
(i.e. prices between different goods), without
being confused by changes in the overall
price level. This allows them to make well-
informed consumption and investment
decisions and to allocate resources more
efficiently;

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• Reducing inflation risk premia in interest
rates (i.e. compensation creditors ask for the
risks associated with holding nominal assets).
This reduces real interest rates and increases
incentives to invest;
• Avoiding unproductive activities to hedge
against the negative impact of inflation or
deflation;

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• Reducing distortions of inflation or
deflation, which can exacerbate the
distortionary impact on economic behaviour of
tax and social security systems;
• Preventing an arbitrary redistribution of
wealth and income as a result of unexpected
inflation or deflation; and contributing to
financial stability.

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• The Agricultural Prices Commission was set
up in January, 1965 to advise the Government
on price policy of major agricultural
commodities under L.K. Jha committee.
• Ministry of Agriculture and Farmers
Welfare.
• It is a statutory body that submits separate
reports recommending prices for Kharif and
Rabi seasons.

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• Since March 1985, the Commission has been
known as Commission for Agricultural
Costs and Prices under Sen committee.
• The Commission is composed of a Chairman,
a Member Secretary, two official members
and three non-official members. The non-
official members are representatives of the
farming community.

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• To advise the Government on the price
policy embodying fixation of minimum
support prices for agricultural commodities.
• To recommend appropriate measures to
make price policy effective.
• To suggest suitable measures to reduce
the cost of marketing and recommend fair
price margins at various stages of
agricultural marketing

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• To advice Government of India on any
problem relating to agricultural prices
and agricultural production
• To fix various price policy instruments
viz., Minimum Support Price (MSP)
based on average cost of production,
procurement price as a premium over
and above the MSP, ceiling price, issue
price, levy price etc.

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• Prices fixed by the government with
the objective of protecting farmers
against a decline in prices during the
year of bumper production, protecting
consumers from excessive price
increases and ensuring procurement
for buffer stocks or operation of PDS.

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• This is the price announced by the
government and recommended to CACP
to protect the producer – farmers against
excessive fall in price during bumper
production years.
• These prices give a sort of price guarantee
to the farmers which means that a price not
lower than the announced minimum price
will be paid to the farmers when they bring
their product for sale in the market.

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• In case the market price for the
commodity falls below the announce
minimum price due to bumper
production and glut in the market,
government agencies purchase the
entire quantity offered by the farmers
at an announced minimum price.

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• The minimum support for different
agricultural crops viz., food grains,
oilseeds, fiber crops, sugarcane and
tobacco (24 crops) are announced by
the Government of India before the
start of the sowing season of the
crop.

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• Cost of Production,
• Input-Output Price Parity,
• Inter-crop price parity,
• an effect on cost of living,
• international price situations

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• To prevent fall in the price in the situation
of over production.
• To protect the interests of the farmers by
ensuring them a minimum price for their
crops in the situation of a price fall in the
market.
• To meet the domestic consumption
requirement
• To provide price stability in the agricultural
product

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• To ensure reasonable relationship
between prices of agricultural
commodities and manufactured goods
• To remove price difference between
two regions or the whole country.
• To increase the production and exports
of agricultural produce.
• To provide raw material to the different
industries at reasonable prices in the
whole country.

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• A minimum price has been assigned a
statutory status in case of sugarcane and as
such the announce price.
• SMP is announced by the central
government based on the cost of cultivation
estimated by the CACP.
• Concept of SMP was replaced by the Fair and
Remunerative Price (FRP) of sugarcane

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• This is the basic price which the sugar
mills must pay sugarcane growers.
• However, citing differences in cost of
production, productivity levels and also as
a result of pressure from farmers' groups,
some states (Uttar Pradesh, Punjab,
Haryana, Tamil Nadu and Uttarakhand)
used to declare state-specific sugarcane
prices called State Advised Prices
(SAP), usually higher than the SMP.

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• APC has not favoured maximum or
ceiling prices for agricultural
commodities.
• In the case of food grains, the states
were unable to enforce legally fixed
maximum prices.

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• Refers to the price at which
government procures from
producers to maintain buffer stocks
and feed Public Distribution System.
• This is the price announced by the
government and recommended to
CACP

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• Procurement prices are fixed generally
at a level which is somewhat higher
than the level of minimum support
prices but lower than the prevailing
market prices.
• Procurement price is declared after
harvesting.

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• Price at which the commodity is made
available to consumers at fair price
shops.
• It is always higher than procurement
price.