Posts Tagged ‘Commission on Agricultural Costs and Prices’

MINIMUM SUPPORT PRICE…… “The Farmer’s Armor”

MSP is a part of agricultural pricing policy of the central government. It is considered as a form of market intervention and also as one of the supportive measures (safety nets) to the agricultural producers.

In the phase of liberalization, MSP has a strong linkage to the market. In this situation, three important aspects deserve attention:

.

(i) insulating the farm producers against the unwarranted fluctuations in prices, provoked by higher production and the international price variations and

.

(ii) creation of an incentive structure for the farm producers in order to direct the allocation of resources towards desired crops and

.

(iii) insulating consumers against sharp price rise, which may have been created by monsoon failure or even by vested interest by creating artificial scarcity. The focus is to providing remunerative prices for the cultivators.

.

ROLE OF CACP

.

The Commission on Agricultural Costs and Prices (CACP) discusses the price situation of various commodities with the representatives of the State government and various stakeholders to declare the prices of any agricultural product. The CACP while recommending MSPs takes into account factors such as cost of production, change in prices of inputs, demand and supply, market price trends and cost of living among other factors. MSP is determined by the principle of full cost of production that includes the rental value of land, an imputed value of family labor and returns to farmers.

.

In fixing the support prices, CACP relies on the cost concept which covers all items of expenses of cultivation including in that the imputed value of inputs owned by farmers such as rental value of owned land and interest on fixed capital. Some of the important cost concepts used by CACP are the C2 and C3 costs.

.

C2 cost includes all actual expenses in cash and kind incurred in production by actual owner plus rent paid for leased land plus imputed value of family labour plus interest on value of owned capital assets (excluding land) plus rental value of owned land (net of land revenue). Now, C3 cost is derived as: Cost C2 + 10 percent of cost C2 to account for managerial remuneration to the farmer.

.

Costs of production are calculated both on per quintal and per hectare basis. Since cost variations are large over States, CACP recommends that MSP should be considered on the basis of C2 cost.

.

Role of FCI

.

On behalf of the Central Government, Food Corporation of India (FCI) along with State Governments and their agencies responsible for procurement of agri product on MSP fixed by CACP. But FCI procure the commodities from such states where production of any specific product is surplus. The main areas for procurement of wheat and rice are the surplus states like Punjab, Haryana, and some parts of Uttar Pradesh for both crops and Andhra Pradesh for rice. This has led two kinds of problems. One, growing buffer stock with FCI and our go-down are overflowing stocks of food grains, but, at the same time some parts of the country reported starvation. Second rest part of country producing these commodities doesn’t access the advantage of MSP.

.

Farmers of those states do not fully get the benefit of the support price. This has created serious imbalances in demand and supply of principal crops in the country.

.

Similarly, the country has been facing large shortages of pulses and edible oils .

.

Latest Development

.


The Cabinet Committee on Economic Affairs, chaired by Prime Minister Manmohan Singh, increased the minimum support price (per quintal): Arhar-Rs. 3,000, Moong-Rs. 3,170, Urad- Rs. 2,900, Paddy (common variety) Rs.1,000, and for grade A at Rs.1,030, Groundnut- Rs.2,300, Sunflower-Rs. 2,350, Niger seed Rs. 2,450,Soyabean (black)- Rs.1,400, Soyabean (yellow)- Rs.1440 and sesame- Rs.2900, Jowar (hybrid), bajra andmaize, the minimum support price has been raised by Rs. 40 and fixed at Rs. 880. MSPs of Jowar (Hybrid), Bajra and Maize each have been raised by Rs. 40 per quintal and fixed at Rs.880 per quintal.

Conclusion

.


The policy has a favorable impact on farm income and has led to an economic growth. The implementation of Minimum Support Prices (MSP) has played an important role in meeting the ultimate goal of improving the agricultural production and the welfare of the agricultural community. Presently, 25 major crops are covered under the minimum support price program. Thus now MSP is oriented to crop diversification which had not encouraged earlier. Our policy makers are trying to effective implementation of MSP in all over the country.

.

OUR Websites:  http://www.smcindiaonline.com,http://www.smccapitals.com,
http://www.smctradeonline.com,http://www.smcwealth.com