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IN INDIA
Introduction
Meaning of 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.
Introduction to Agricultural 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.,
providing food grains for the Public Distribution System,
ensuring reasonable (affordable to consumers) prices for
food grains, and
Inducing adoption of the new technology.
Trend of Agricultural 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 food
grains 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.
The objective of this policy was to reduce of imports of
food grains and substantial increase in the production of
food grains.
Again in 1950, Food grains Procurement Committee
was appointed which introduced the system of rationing
and control in the supply of food grains in the country.
In this policy no attention was paid to provide incentive
price to farmers.
It was only in 1966, a clear-cut policy was introduced
for providing incentive price to farmers.
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 favorable condition for increasing
production, the government announced the minimum
support prices well in advance of the sowing season.
Procurement price was kept higher than support price
so that it can offer proper incentive to the producer and
reasonable price to consumer.
To create a favorable climate for long-term investment,
minimum support prices was kept fairly stable.
Making adequate marketing arrangement for making
purchases at minimum support prices.
Moreover, in 1965, the Food Corporation of India (FCI)
was set up for making necessary procurement, storage
and distribution of food grains.
The Fifth Plan also formulated the agricultural price
policy in order to meet two important considerations.
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.
In order to build up buffer stocks, various public sector
organisations announced purchase prices at different
times which was higher than minimum support prices.
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.
Objectives of Agricultural 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 Agricultural 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.
Features of Agricultural Price Policy
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.
Food Corporation Of India (1985): This corporation
organizes procurement of food grains at price determined
by govt. and their sale through public distribution system.
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.
Allocation of Grains
FCI States
Central issue Price
(CIP)
Problems in PDS
The poor do not have cash to buy grains in bulk 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.
Suggestions for Rationalisation of Agricultural
Price Policy
Following are some of important suggestions which can
be advanced for the rationalisation of agricultural price
policy of the country.
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.
Improvement of PDS
The public distribution system should be improved so
as to ensure a success in the operation of agricultural
price policy.
The operation of fair price shops should be
streamlined and be made more efficient and
transparent.
THE END