Agriculture Price Policy

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agriculture price policy

Agricultural price policy in India was introduced since independence. But the agricultural price policy formulated in India has varied widely for different years and also for different crops. This policy put much emphasis on the prices of foodgrains like wheat, rice and coarse Cereals such as jowar, bajra, maize etc.

In India, the price policy was first introduced in 1947 with the formation of Food grains Policy Committee which recommended a policy of progressive decontrol, reduction of imports or food grains and substantial increase in the production of foodgrains. Again in 1950, Foodgrains Procurement Committee was appointed which introduced the system of rationing and control in the supply of foodgrains in the country.

The main objective of the price policy in India was to protect the interests of consumers. In this policy no attention was paid to provide incentive price to farmers. It was only in 1964, a clear-cut policy was introduced for providing incentive price to farmers.

The Third Plan document rightly observed that, “The producer of foodgrains must get a reasonable return. The farmer, in other words, should be assured that the prices of foodgrains and the commodities that he produces will not be allowed to fall below reasonable minimum.” Accordingly, the foodgrains Price Committee was appointed in 1964.

This committee recommended various measures such as:

  • Introduction of rationing in major cities,  
  • Establishing lower prices through lower prices or Fair price shops,  
  •  Acquisition of control over adequate stocks,  
  • Withdrawing restrictions of inter-state movement of foodgrains,  
  • Imposing regulation and licensing of wholesale trade of foodgrains and finally strengthening of the administrative machinery in the States. Again as per the recommendation of this committee, the Agricultural Price Commission was set up in 1965.

In 1966, the government appointed another foodgrains Policy Committee which recommended the following matter in connection with the prices of agricultural commodities:

  • In order to create a favourable condition for increasing production, the government should announce the minimum support prices well in advance of the sowing season.  
  • Procurement price should be higher than support price so that it can offer proper incentive to the producer and reasonable price to consumer.  
  • To create a favourable Climate for long-term Investment, minimum support prices should be fairly stable.

Moreover, in 1965, the Food Corporation of India (FCI) was set up for making necessary procurement, storage and distribution of foodgrains. In 1989-90, total capital employed in FCI was to the extent of Rs 5,138 crore with its total storage capacity at 18 million tonnes.

The policy of minimum support prices was accepted by the Fourth Plan but its effectiveness depends on the efficacy of the purchasing machinery like FCI and State Trading Corporation (STC). The Fifth Plan also formulated the agricultural price policy in order to meet two important considerations, i.e., firstly for providing incentive for sustained and higher agricultural production and secondly for inducing the farmers to plan the production of various crops as per estimated demand through discriminating manipulation of inter­crop prices relationship.

In order to build up buffer stocks, various public sector organisations would announce purchase prices at different times which would be higher than minimum support prices.

Again, the Sixth Plan realised the importance of price policy for agricultural development on the following grounds “Firstly, modern agriculture increasingly involves the use of costly inputs as part of improved technology and hence an assured minimum prices becomes a necessary underpinning for sustained agricultural production. Secondly, price policy is an important tool for facilitating crop planning, an aspect which so far has not received adequate attention in the country. Finally, price policy can be geared towards community are not eroded by continuing unfavourable terms of trade between the agricultural sector and non-agricultural sector.”

At present, the government decides on the MSPs for various agricultural commodities taking into account the recommendations of the Commission for Agricultural Costs and Prices (CACP), the views of state governments and central ministries as well as such other relevant factors which are considered important for fixation of support prices for agricultural commodities.

In 2011-12, the MSPs for various agricultural crops have already been increased. In the mean time, the MSPs of some major crops exhibit a rising trend in line with costs and as incentive for higher output.

Need of Agricultural Price Policy: Movement of price is a common feature. But rapid and violent movement or fluctuations in the prices of agricultural commodities have serious consequences on the economy of the country. As the sudden steep fall in the price of a particular crop, result in huge loss to the farmers producing that crop as their income declines.

This will force the farmers not to cultivate the crop next year leading to a serious shortage in the supply of that food item and that may force the government to import that food crop from foreign countries.

Alternatively, a sudden hike in the price of a particular crop may cause huge suffering to the consumers which may force the consumers to discard it or to curtail their other expenditure substantially for meeting the consumption expenditure on that crop. In both ways, the large scale fluctuation in the price of agricultural produce will create a disastrous effect on the economy of the country.

Price policy of the government for agricultural produce seeks to ensure remunerative prices to growers for their produce in order to encourage higher investment and production and also for safeguarding the interests of consumers by making available food supplies at reasonable prices.

The price policy of the country also seeks to evolve a balanced and integrated price structure in keeping with the overall needs of the economy.

In order to achieve this end, the government announces minimum support prices (MSPs) for major agricultural commodities in each season and also organises purchase operations through the Food Corporations of India (FCI), and cooperative and other agencies designated by state governments for the purpose.

In order to safeguard the interest of both producers and consumers a comprehensive agricultural price policy must be suitably formulated. This should be supported by maintaining buffer stocks of agricultural commodities alongwith the extensive Network of Public Distribution System.

These will provide a minimum support price to the producers and arrange the supply of these agricultural produce to the consumers at fair prices. Thus while fixing the minimum support prices and procurement prices care must be taken to fix those prices at such level which will induce the farmers to produce more. Thus, the agricultural price policy can be designed as an “instrument of Growth”.

Suggestions for Rationalisation of Agricultural Price Policy

Establishment of Some More Agencies

Apart from Food Corporation of India, some more agencies should be set up for ensuring rational prices of other agricultural products and also for procuring other agricultural products. In the meantime the government has already set up Cotton Corporation and Jute Corporation, which needs to be further strengthened.

Extension of the Price Policy

The agricultural price policy should be extended to cover more commodities over and above the 15 commodities covered at present. The commodities like pulses, potato, onion and other important vegetables and fruits may also be covered.

 

Rationalisation of Price Fixation

The prices of agricultural commodities should be fixed in the most rational manner so that it could cover the entire costs of production. While fixing the prices, the increasing cost of agricultural input should be taken into consideration.

Protection of Consumers

The agricultural prices should be so determined that it can also protect the interest of the general consumers.

Modernisation

The agricultural price policy should be framed in such a manner so that it can induce the farmers to go for modernisation of their agricultural practices.

Improvement in Agricultural Marketing

In order to ensure the success of the agricultural price policy, the improvement of the Agricultural Marketing system is very important. The farmers should be set free from the clutches of middlemen and all intermediaries.

 


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Agricultural price policy is a set of government interventions that are designed to influence the prices of agricultural products. These interventions can take many forms, including price support, price stabilization, price Liberalization-2/”>Liberalization, price controls, price subsidies, price insurance, and agricultural price risk management.

The objectives of agricultural price policy can vary, but they often include ensuring the profitability of agriculture, stabilizing food prices, and promoting Food Security. Agricultural price policy can also be used to support rural development, protect the Environment, and promote trade.

The impacts of agricultural price policy can be complex and vary depending on the specific policy interventions. In general, however, agricultural price policy can have a significant impact on the prices of agricultural products, the profitability of agriculture, and the incomes of farmers.

Agricultural price policy is a controversial issue, and there is no consensus on the best way to design and implement agricultural price policy. However, agricultural price policy can be an effective tool for achieving a variety of government objectives, and it is important to carefully consider the potential impacts of agricultural price policy before implementing any policy interventions.

Agricultural price support is a government policy that aims to keep the prices of agricultural products above market levels. This is done by providing subsidies to farmers or by buying up surplus production. Price support can be used to protect farmers from low prices, to stabilize prices, or to promote production of certain crops.

Agricultural price stabilization is a government policy that aims to keep the prices of agricultural products within a certain range. This is done by buying up surplus production when prices are low and selling it when prices are high. Price stabilization can be used to protect farmers from price volatility, to ensure a stable supply of food, or to promote investment in agriculture.

Agricultural price liberalization is a government policy that aims to remove government controls on the prices of agricultural products. This is done by deregulating the agricultural sector and allowing market forces to determine prices. Price liberalization can be used to promote efficiency in the agricultural sector, to reduce government spending, or to increase competition.

Agricultural price controls are government policies that set maximum or minimum prices for agricultural products. This is done to protect consumers from high prices or to protect farmers from low prices. Price controls can be used to ensure a fair price for consumers, to stabilize prices, or to promote production of certain crops.

Agricultural price subsidies are government payments to farmers that are designed to increase their incomes. This is done by providing direct payments to farmers or by providing them with tax breaks or other financial incentives. Price subsidies can be used to protect farmers from low prices, to stabilize prices, or to promote production of certain crops.

Agricultural price insurance is a government program that provides insurance to farmers against losses due to low prices. This is done by providing farmers with payments when the prices of their products fall below a certain level. Price insurance can be used to protect farmers from price volatility, to ensure a stable supply of food, or to promote investment in agriculture.

Agricultural price volatility is the tendency for the prices of agricultural products to fluctuate widely. This can be caused by a number of factors, including weather conditions, changes in demand, and changes in supply. Price volatility can make it difficult for farmers to plan their production and can lead to financial losses.

Agricultural price risk management is a set of strategies that farmers can use to reduce their exposure to price risk. This can include hedging, forward contracting, and price insurance. Price risk management can help farmers to protect their incomes and to make more informed production decisions.

Agricultural price policy instruments are the tools that governments use to implement agricultural price policy. These instruments can include price support, price stabilization, price liberalization, price controls, price subsidies, price insurance, and agricultural price risk management.

Agricultural price policy objectives are the goals that governments hope to achieve with agricultural price policy. These objectives can vary, but they often include ensuring the profitability of agriculture, stabilizing food prices, and promoting food security.

Agricultural price policy impacts are the effects that agricultural price policy has on the prices of agricultural products, the profitability of agriculture, and the incomes of farmers. These impacts can be positive or negative, and they can vary depending on the specific policy interventions.

Agricultural price policy evaluation is the process of assessing the impacts of agricultural price policy. This can be done by conducting economic studies, surveys, or interviews. Agricultural price policy evaluation can help governments to improve the design and implementation of agricultural price policy.

Agricultural price policy reforms are changes to agricultural price policy that are designed to improve its effectiveness. These reforms can include changes to the level of price support, the type of price support, or the way that price support is implemented. Agricultural price policy reforms can be controversial, and it is important to carefully consider the potential impacts of any reforms before implementing them.

Agricultural price policy challenges are the problems that governments face in implementing agricultural price policy. These challenges can include political pressure, administrative costs, and unintended consequences.

Here are some frequently asked questions and short answers about agriculture:

  1. The main objective of agricultural price policy is to:
    (a) Increase the income of farmers
    (b) Ensure food security
    (c) Stabilize prices
    (d) All of the above

  2. The main instruments of agricultural price policy are:
    (a) Minimum support price
    (b) Procurement price
    (c) Buffer stock
    (d) All of the above

  3. The minimum support price is the price at which the government is willing to buy the produce from farmers.
    (a) True
    (b) False

  4. The procurement price is the price at which the government procures the produce from farmers.
    (a) True
    (b) False

  5. The buffer stock is the stock of foodgrains that the government holds to stabilize prices.
    (a) True
    (b) False

  6. The main beneficiaries of agricultural price policy are:
    (a) Farmers
    (b) Consumers
    (c) Both farmers and consumers
    (d) None of the above

  7. The main criticisms of agricultural price policy are:
    (a) It leads to higher prices for consumers
    (b) It leads to inefficiency in the agricultural sector
    (c) It leads to Corruption
    (d) All of the above

  8. The main challenges of agricultural price policy are:
    (a) How to ensure that it benefits both farmers and consumers
    (b) How to make it more efficient
    (c) How to reduce corruption
    (d) All of the above

  9. The main reforms that are needed in agricultural price policy are:
    (a) Making it more market-oriented
    (b) Reducing the role of the government
    (c) Making it more transparent
    (d) All of the above

  10. The future of agricultural price policy is:
    (a) It will continue to be important
    (b) It will become less important
    (c) It will be replaced by other policies
    (d) It is difficult to say

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