Agriculture produce price policy in India

Agriculture Produce Price Policy
In
India
Suryadev Maity
Reg No - 12397104

• With 20 agri-climatic regions, all 15 major climates in the world
exist in India. The country also possesses 46 of the 60 soil types
in the world.
• Agricultural Price Policy plays an important role in
achieving growth and equity in the Indian
economy and the agriculture sector. The major
objective of the Government’s Price Policy is to
protect both producers and consumers. Achieving
food security at both the national and household
levels is one of the major challenges in India
today.

In India, the agriculture price policies and allied
instruments started pre-Independence era.
• On 1 August, 1964, the Government appointed a
Committee under the Chairmanship of Shri L.K.
Jha
• The objective of the Government’s price policy for
agri-produce is to set remunerative prices with a
view to encourage higher investment and
production. Though the Government decided to
purchase food grains at fixed prices, if market
prices fell precipitously, but till 1954 there was no
sharp decline in food prices.

AGRICULTURE PRICE
POLICY
 Agricultural Price Policy in India emerged in the context of food
scarcity and price fluctuations provoked by drought of mid-
sixties and war with Pakistan.
 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.

Objectives Of Price Policy:-
 To meet the domestic consumption requirement.
 To provide price stability in the agricultural product.
 To ensure reasonable relation between the prices of food
grains and non food grains.
 To ensure reasonable relationship between prices of
agricultural commodities and manufactured goods.

 To smooth seasonal and cyclical fluctuations of prices of
agricultural commodities.
 To remove price difference between two regions.
 To make available food to consumers in the time of shortage.
 To increase the production and exports of agricultural product.
 To provide raw material to the industries at reasonable price.

Need for Agriculture Price
Policy:
 To ensure stability in price of agriculture products.
 To ensure constant usage of modern inputs in agriculture, it is
necessary that farmers are assured minimum price for their
produce.
 Due to specific nature of agriculture products, there are many
difficulties in agriculture marketing, such as perishability,
problems of storage etc;
 Price policy is important for proper crop planning.
 To prevent exploitation of farmers from zamindars etc; in absence
of price policy person may purchase products at very low price.

Main Features:
 Institutions:Institutions: The government has set up two institutions to
implement the price policies.
Agriculture Price Commission (1968):Agriculture Price Commission (1968): This commission
advices the government regarding agriculture price policy, also
determines MSP and procurement prices of agriculture
products.
Food Corporation Of India (1985)Food Corporation Of India (1985):: This corporation
organizes procurement of food grains at price determined by
govt. and their sale through public distribution system.
The Commission for Agriculture Costs and Prices (CACP) sets
Minimum Support Price (MSP) for 24 commodities and
Statutory Minimum Price (SMP) for one.

 Fixation of MSP or procurement prices: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.
 Maximum Price Fixation: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.
 Buffer stock:Buffer stock: To prevent change in prices of agriculture
products beyond a certain limit, govt. maintains buffer stock of
goods. This is done by FCI.
When price of food grain starts increasing, Govt. starts selling
food grains from buffer stock at specific prices. As a result,
increase in price of food grain can be checked.
 Public Distribution System (PDS).

Factors Taken Account:Factors Taken Account:
 Cost of ProductCost of Product
 Changes in Input PricesChanges in Input Prices
 Input / Output Price ParityInput / Output Price Parity
 Trends in Market PricesTrends in Market Prices
 Inter-crop Price ParityInter-crop Price Parity
 Demand and Supply SituationDemand and Supply Situation
 Effect on Industrial Cost StructureEffect on Industrial Cost Structure
 Effect on General Price LevelEffect on General Price Level
 Effect on Cost of LivingEffect on Cost of Living
 International Market Price SituationInternational Market Price Situation
 Parity between Prices Paid and Prices Received byParity between Prices Paid and Prices Received by

Effects Of Agriculture
Price Policy:
Increase in productionIncrease in production
Change in cropping patternChange in cropping pattern
Advantage to farmerAdvantage to farmer
Advantage to consumerAdvantage to consumer
Stability in pricesStability in prices

Shortcomings of
agriculture price policy:
Limited coverageLimited coverage: prices of only agriculture: prices of only agriculture
commodities are fixed by government.commodities are fixed by government.
Less remunerative pricesLess remunerative prices: The policy has failed to: The policy has failed to
provide remunerative prices for agro-products. Priceprovide remunerative prices for agro-products. Price
fixed under MSP was remunerative only in rice.fixed under MSP was remunerative only in rice.
Failed to achieve price stabilityFailed to achieve price stability: In year 2008-2009,: In year 2008-2009,
agriculture price index went up by 9.46% and thusagriculture price index went up by 9.46% and thus
affecting poor section of society. It has failed in itsaffecting poor section of society. It has failed in its
objectives.objectives.

Ineffective PDSIneffective PDS: Strong PDS (public distribution: Strong PDS (public distribution
system) is required for providing food grain to poorsystem) is required for providing food grain to poor
section.section.
But in India, sufficient quantity isn’t being provided.But in India, sufficient quantity isn’t being provided.
Less number of regulated marketsLess number of regulated markets: More number of: More number of
regulated markets is required .regulated markets is required .
But in India , it is less in number.But in India , it is less in number.

Suggestion for improving
Agriculture Price Policy:
•Extension of price policyExtension of price policy
•Establishment of more agencies.Establishment of more agencies.
•Proper fixation of pricesProper fixation of prices
•Improvement in PDSImprovement in PDS
•Improvement in productivity with suitable pricesImprovement in productivity with suitable prices
• Improvement in agriculture marketingImprovement in agriculture marketing
• Quality
• subsidies on inputs (fertilisers,
water, credit and power)

Commission for
Agricultural Costs And
Prices (CACP)
 The organization :The organization :
 The Agricultural Prices CommissionAgricultural Prices Commission was set up in
January, 1965 to advise the Government on price policy of
major agricultural commodities.
 It kept a view of evolving a balance and integrated price
structure in the perspective of the overall needs of the economy
and with due regard to the interests of the producer and the
consumer.
 Since March 1985, the Commission has been known as
Commission for Agricultural Costs and Prices under SenCommission for Agricultural Costs and Prices under Sen
committee.committee.

 Minimum support prices (MSP)Minimum support prices (MSP) for major agricultural
products are fixed by the government, each year, after taking
into account the recommendations of CACP
 The Commission is composed of
I. Chairman, a Member Secretary,
II. two official members
III.three non-official members who are representatives of the
farming community, having long field experience and active
association with the farming community.
 Present :
o Chairman                         :   Dr. Ashok Gulati
Member (Official)            :   Dr. Ashok Vishandass
Member Secretary          :   Dr. Anandi Subramanian

Objectives /Terms of
Reference
1. To advise on the price policy of paddy, rice, wheat, jowar, bajra, maize,
ragi, barley, gram, tur, moong, urad, sugarcane, groundnut and such
other commodities.
2. To recommend from time to time, in respect of different agricultural
commodities, measures necessary to make the price policy effective.
3. To take into account the changes in terms of trade between agricultural
and non agricultural sectors
4. To examine, where necessary, the prevailing methods and cost of
marketing of agricultural commodities in different regions, suggest
measures to reduce costs of marketing and recommend fair price
margins for different stages of marketing.

7. To keep under review the developing price situation and to
make appropriate recommendations, as and when necessary,
within the framework of the overall price policy.

8. To undertake studies in respect of different crops as may be
prescribed by Government from time to time.

9. To keep under review studies relating to the price policy and
arrangements for collection of information regarding agricultural
prices and other related data and suggest improvements in the
same, and to organize research studies in the field of price policy.
10. To advise on any problems relating to agricultural prices and
production that may be referred to it by Government from time to
time.

Food Security And Food
Policies
 Food security refers to the availability of food and one's access
to it. A household is considered food-secure when its occupants
do not live in hunger or fear of starvation.
 Objectives of the Food Policy:
 Effective price support operations for safeguarding the interests
of the farmers.
 Distribution of food grains throughout the country for public
distribution system.
 Maintaining satisfactory level of operational and buffer stocks of
food grains to ensure National Food Security

Food Grain Price Policy
 Food grains price committee was set up in 1964 to
determine producer prices of rice and wheat on all
India basis.

Food grain policy committee -1966
 The important aspects pertaining are:
1. Controls on movement
2. Compulsory levy procurement
3. Fixation of maximum statutory price of food grains
4. Rationing

The Food Corporation of India was setup under the Food
Corporation Act 1964 .
Objectives of FCI:
The Food Corporation Of
India
•To make food grains available at reasonable prices, particularly
to vulnerable section of the society
•To maintain buffer stocks as measure of Food Security
•To intervene in market for price stabilization
•to provide farmers remunerative prices

MINIMUM SUPPORT
PRICE/PROCUREMENT
PRICE
 The Minimum Support Price (MSP) Scheme is a scheme
of the Government of India to safeguard the interests of the
farmers.
 Under this Scheme the GOI declares the minimum support
Prices of various agricultural produces and assures the farmers
that their agricultural produce will be purchased at the MSP,
thereby preventing its distress sale.
 The Food Corporation of India (FCI) acts as the Nodal Agency
of the GOI. On behalf of FCI, the MSP Scheme is implemented
through the State agencies.

 CROPS COVERED UNDER MSP:
WHEAT, BARLEY, GRAM, SAFFLOWER
RAPESEED/MUSTARD, PADDY, JOWAR, BAZRA, MAIZE,
RAGI, PULSES, GROUNDNUT, SOYABEAN, SUNFLOWER,
SESAMUM, NIGERSEED, COTTON, TOBACCO, JUTE,
SUGARCANE
 How does government decides MSP?
 CACP
 View of state govt.
 View of ministries

Benefits of MSP:
 income security to farmer bringing
investment into agriculture
building up buffers,
a large network of FP shops,
stabilizing price line and consumer
welfare.

The Public Distribution System is one of the
important elements of the Government’s ‘Food
Security’ system.
 PDS involves management of supplies of
essential commodities and maintenance of their
uninterrupted flow at affordable prices to the
identified beneficiaries.
It also works as an instrument for moderating
the open market prices of food.
Public Distribution System

 PDS means distribution of essential commodities to
a large number of people through a network of FPS
on a recurring basis.
Commodities involved are:
 WHEAT
 RICE
 KEROSENE
 SUGAR

Goals of PDS
 Ensure social justice in distribution of basic
necessities of life;
 Even out fluctuations in prices and availability of mass
consumption goods;
 Support poverty-alleviation programs , particularly,
rural employment programs .
 Check and prevent hoarding and black marketing in
essential commodities

Who Operates PDS?
 By Central Govt: They are responsible for
procurement, storage, transportation (upto the district
headquarters) and bulk allocation of food grains.
 By State Govt: They are responsible for distributing
these food grains to consumers through a network of
Fair Price Shops.

Problems In PDS
 The poor do not have cash to buy 35 kg at a time,
and often they are not permitted to buy in installments.
 Low quality of food grains
 Week monitoring and lack of transparency
 Price charged exceeds the official price by 10 to 14%
 Allocations from GoI are valid only for a month, and if
the state government is not able to lift within that time,
its quota lapses.

Revamped PDS

GoI introduced a RPDS in 1992 in limited areas,
primarily drought prone, tribal and hilly, and remotely
located.
 The RPDS was being available to all in the selected
area.
 Food grains for distribution in RPDS areas were
issued to the States at 50 paise below the Central
Issue Price. The scale of issue was up to 20 kg per
card.

Targeted PDS

RPDS substituted by TPDS in 1997.
 It specifically aimed at BPL people in all parts of the
country.
 State-wise BPL quota is fixed on the basis of the
adjusted poverty share determined by the Planning
Commission based on official poverty

UNIQUE IDENTIFICATION
NUMBER
 It is a single answer to address wide ranging problems
in the Public Distribution System (PDS) in the country.
 There are some concerns regarding leakages and
misidentification due to class division in rural areas.
 The UID is an individual system so it will eliminate the
confusion over number of households.

Policy and Procedural
Reforms
 Elimination of Ghost Ration Cards
 There should be only one annual order
from the district indicating quota of each
dealer
 Making it obligatory for dealers to sell
non-cereal items
 Oversight by citizens
 Involve civil society

MARKET INTERVENTION
SCHEME
 FOR THOSE CROPS NOT COVERED UNDER MSP
– ONION, POTATO, TURMERIC, CHILLIES
 THESE CROPS ARE IMPORTANT AT REGIONAL
LEVEL
 NEED FOR PRICE SUPPORT DOES NOT ARISE
EVERY YEAR

Difference Between MSP
& MIS
PARTICULARS MSP MIS
COMMODITIES FIXED NOT FIXED
REGULARITY EVERY YEAR AD HOC
SUPPORT PRICE DECIDED BY UNION UNION & STATE
GOVERNMENT
GOVERNMENT
PURCHASES ALL OFFERED BY PRE-DECIDED
FARMERS LIMITED QUANT
APPLICABILITY COUNTRY SPECIFIED
LOSS UNION GOVT. EQUALLY
SHARED BY STATE
AND
UNION GOVT.

Agriculture produce price policy in India

Agriculture produce price policy in India

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Agriculture produce price policy in India