Indian agricultural prices are increasingly being decided by non-state actors, despite some public policies such as Minimum Support Prices, public procurement, etc.

1. Public Policy Context of Indian
Agricultural Prices:
Rising Role of Non-State Actors
Dr. Narasimha Reddy Donthi

3. 2007-08 to 2018-19:

5. Difference between cultivation cost and MSP
S.
No.
crop Cultivation
cost
Expected
MSP
Declared
MSP
1 Paddy 2529 3794 1868
2. Maize 2172 3258 1850
3. Pigeonpea 8084 12126 6000
4. Cotton 10,043 15,064 5,825
5. Soybean 4,694 7,041 3,880
6. Groundnut 5,282 7,924 5,275
7. Jowar 3,713 5,569 2,620
8. Pearl Millet 3,477 5,215 2,150

9. Determinants of MSP
While recommending price policy of various commodities under its mandate,
the Commission keeps in mind the various Terms of Reference (ToR) given to
CACP in 2009. Accordingly, it analyzes
1) demand and supply;
2) cost of production;
3) price trends in the market, both domestic and international;
4) inter-crop price parity;
5) terms of trade between agriculture and non-agriculture;
6) a minimum of 50 percent as the margin over cost of production; and
7) likely implications of MSP on consumers of that product.
It may be noted that cost of production is an important factor that goes as an
input in determination of MSP, but it is certainly not the only factor that
determines MSP.

10. MSP Determinants
1. Cost of production
2. Changes in input prices
3. Input-output price parity
4. Trends in market prices
5. Demand and supply
6. Inter-crop price parity
7. Effect on industrial cost structure
8. Effect on cost of living
9. Effect on general price level
10. International price situation
11. Parity between prices paid and prices
received by the farmers.
12. Effect on issue prices and implications for
subsidy

11. Market Structure
Monopoly
Oligopoly
Centralised
public
systems

15. Experience: Crops and Contracts
Sugarcane
• Contract
farming with
sugar factories
• Pricing
• Delayed
Payments
Potato
• Contract
farming with
PEPSICO India
Holdings
• Pricing
• Violations
Cotton Seed
Oil Palm
• Contract
farming with
processing units
• Pricing
• Imports
• Delayed
Payments

16. WTO – International Pressures
• Negative Support to
farmers 2000-18 (-5.7%)
• Budgetary spending +
market price support –
gross farm receipts
• Total budgetary support is
estimated at 2.9% of GDP –
decrease.
• Price-depressing effect of
domestic regulation
Public
Stockholding
• Peace
Clause
Food
subsidies
• AoA
Trade
Facilitation • ???

17. State Actors – 1/2
• Institutions aimed at regulating the market conduct, structure
(a) Regulation of primary agricultural produce markets; and
(b) Legal and regulatory provisions relating to storage, transportation,
packaging, processing, buying/selling and quality specifications. The specific
institutions in this category are: State Agricultural Marketing Board (SAMB),
State Department of Agricultural Marketing (SDAM), Agricultural Produce
Marketing Committee (APMC), Directorate of Marketing and Inspection
(DMI), Health Department, Civil Supplies Departments of the Central and
State Governments, etc.
• Institutions providing Physical infrastructure: SAMB, APMC, Public Works
Department (PWD), Food Corporation of India (FCI), Central and State
Warehousing Corporations and cooperatives.

18. State Actors – 2/2
• Institutions involved in administered prices: FCI, National
Agricultural Marketing Federation (NAFED), Cotton Corporation
of India (CCI), Jute Corporation of India (JCI), Commission for
Agricultural Costs and Prices (CACP), State agencies, and Fair
Price Shops (FPS).
• Institutions entering the markets directly: some of the above plus
commission agents, producers or consumer cooperatives, FPOs and
processors.
• Institutions influencing foreign trade: Agricultural and Processed
Food Export Development Agency (APEDA), and some
Commodity Boards

19. Non-State Actors
• Input companies
• Multinational companies
• Trade Agreement benefactors
• Trade missions
• Commodity exchanges
• Forward trading
• APMC Players
• Aditidaars
• Officials
• e-NAM
• Agri-food supply chains
• Investors (private equity funds,
Pension funds)
• Big tech companies
• Food processing companies
• Primary processors
• Industrial input suppliers
• Importers
• Offshore companies
• Trade partners
• Exporters
• Associations

20. nreddy.donthi22@gmail.com
THANK YOU