2. Flow of presentation
• What is price policy
• Important factors
• What is Procurement
• Govt’s Grain procurement
• MSP
• Objectives of MSP
• MIS
• References
2
3. What is price policy
A price policy for agricultural produce aims at securing
remunerative prices to farmers to encourage them to
invest more in agricultural production.
Keeping this in mind, the government announces
minimum support prices for major agricultural products
every year.
These price are fixed after taking into account the
recommendations of the Commission for Agricultural
costs and prices (CACP)
3
4. factors considered by the CACP to
regulate price policy
• Cost of production
• Changes in input prices
• Input/output price parity
• Trend in market prices
• Demand and supply situation
• International market price situation
• Parity between prices paid and prices received by
farmers (Terms of Trade)
4
5. What is procurement
• Procurement is the acquisition of something of
goods and/or services at the best possible total cost
of ownership, in the right quality and quantity, at
the right time, in the right place and from the right
source of the direct benefit or use of corporations,
individuals, or even governments.
5
6. Govt.’s Grain procurement
• The record purchase of over 51 MT achieved last
year.
• But private interest in procurement of both wheat
and rice has been limited , owing to export ban and
purchase restrictions imposed by the government.
• This passive attitude of the private sector along with
an increase in the Minimum support price (MSP), has
aided government purchase
6
7. Contd….
• It is worth noting that wheat MSP has been raised by
8 percent and the rice purchase price by 20 percent
this year.
• Wheat procurement has already touched 22.24 MT,
marginally lower than the previous year’s
procurement of 22.68 MT.
• Similarly, rice purchase has touched 28.45MT, just
below last year’s purchase of 28.5 MT
7
8. Contd…
• In 2009-10 the central pool had wheat stocks of
29.82 MT and rice stocks of 21.40 MT making for a
total of 51.22 MT.
• The stocks of both the grains are much higher than
the buffer stock norm for the period- 4 MT for wheat
and 12.2MT for rice
8
9. Procurement of rice and wheat(2006-07to2008-09)
2006-07 35.8
2007-08 37.6
2008-09 55.9 (32.80+22.69)
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10. Minimum Support price of Agriculture
commodity
• Minimum support price announced by the
government is that price at which government is
ready to purchase the crop from the farmers directly
if crop price becomes lower to MSP.
• Govt. has been announcing minimum support price
(MSP) for 24 major crops
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11. The main objectives of announcing MSP
are:
• To prevent fall in prices in the situation of over
production.
• To protect the interest of farmers by ensuring them a
minimum price for their crops in the situation of a
price fall in the market
11
12. Minimum support and special Drought Relief price for Kharif and
Rabi crops in India(20006-07 to 2009-10) Rs. per quintal
Crop/Co
mmodity
2006-07 2007-08 Increase in
MSP 2007-
08 over
2006-07
2008-
09
Increase
inMSP200
8-09 over
2007-08
2009-
10
Increase in
MSP2009-
10over2008
-09
Kharif
crops
Paddy 580 645 65 (11.2%) 850 205
(31.8%)
950 100 (11.8%)
Jowar 555 620 65 (11.7%) 860 240
(38.7%)
860 0.0
Bajra 540 600 60 (11.1%) 840 240
(40.0%)
840 0.0
Maize 540 620 80 (14.8%) 840 220
(35.5%)
840 0.0
Arhar 1410 1550 140 (9.9%) 2000 450
(29.0%)
2300 300 (15.0%)
Cotton 1770 1800 30.(1.7%) 2500 700
(38.9%)
2500 0.0
12
14. Market intervention scheme
• The Market intervention scheme (MIS) is an ad-hoc scheme
under which are included horticultural commodities and
other agricultural commodities which are perishable in nature
and which are not covered under the minimum price support
scheme
• Government implements M.I.S. for a particular commodity on
the request of a state Government concerned
• Losses suffered are shared on 50:50 basis between Central
Government and the State govt.
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15. Commodity-wise Central Government share of Loss under
Market Intervention Scheme (MIS) In India (2003-2004 to
2005-2006)
Year Commodity State Amount (Rs.in Lakh) *
Ginger Mizoram 140.63
Potato West bengal 62.5
Chillies Andhra Pradesh 1242
Potato UttarPradesh 292.52
2003-2004 Orange Rajasthan 19.06
Corrinder seed Rajasthan 45.3
Cumin seed Rajasthan 162.5
Ginger Mizoram 144.15
Onion Rajasthan 21.87
Hatkora Mizoram 14.86
Apples'c' Grade Himachal Pradesh 203.12
2004-2005 Apples'c' Grade Jammu& Kashmir 210.93
Black Pepper Kerala 1010
Chillies Andha Pradesh 1071.21
Garlic Rajasthan 21.87
Onion Rajasthan 19.53
Apple'c' Grade Himachal Pradeesh 663.75
2005-2006 Apple'c' Grade Uttaranchal 53.57
Malta Uttaranchal 50
Hatkora Mizoram 7.2
Chillies Mizoram 15
16. Commodity price supports
• They are the power and wealth of the state to
“Subsidize” producer by artificially supporting prices
of agricultural commodities reducing the cost of
producing them, or in some cases direct cash
payments to producers
• Commodity price supports are stautory devices
designed to enhance the net income of Agricultural
producers there laws are called Subsidies
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