Agricultural Price Policy: MSP, Procurement Price , Issue Price,

Hello friends, welcome to Pallpal GK. In this session we are taking up Agricultural Price Policy. We will start with the basic introduction to Agricultural Price Policy in India, what are its objectives, what are its instruments and then we will see some important terms related to it like minimum support price MSP, procurement price, issue price, fair and remunerative price. Along with it we will also see some of the important institutions related to Agricultural Price Policy like CACP, Commission for Agricultural Costs and Prices, then FCI, Food Corporation of India and we will end today's session with an appraisal to Agricultural Price Policy. So, let's begin today's session. In independent India, food scarcity is a very big issue and along with it there was frequent price fluctuations in agricultural goods. So, because of these two reasons there was a need for Agricultural Price Policy. It means that it's a policy to determine, regulate and control the prices of agricultural products. This Agricultural Price has a significant impact both on consumers as well as on producers. So, the objective of Agricultural Price Policy is that both consumers and producers should be benefited from it. Let's look at the consumption side first. There should be self-sufficiency and food security. So, these are two important goals of Agricultural Price Policy that reasonable rates pay food should be available to public through PDS that is Public Distribution System and also there is a need for maintenance of buffer stock. Buffer stock should be maintained so that in any emergency condition food supplies can be maintained. So, Agricultural Price Policy's goal is that farmers should be provided with a price support mechanism through MSP that is Minimum Support Price through which they can be guaranteed that they will get a minimum fair price. And secondly, another major goal of Agricultural Price Policy is that if we set remunerative prices for agricultural produce, then farmers will be motivated to invest more with upgraded technology and so, agar investment badhega toh production bhi badhega in agricultural sector. Iske alawa price policy also sees that aise prices set kiye jaa sakhe so that a optimal mix of crops can be achieved in the economy. Next, we will see the policy tools or the instruments to achieve the objectives of Agricultural Price Policy. Toh sabse pehle toh we should know that agricultural price or for that matter any price, koi bhi price in a free market, it is determined by the forces of demand and supply. Jahan yeh dono factors balance hota hai, waha actual price, market price determined hota hai. Ab agar kisi good ke liye, demand is very high in the market and supply comparatively bohot kam hai. Yani bohot saare log ek particular good ko khareebne ke liye ready hai lekin market availability bohot kam hai. Toh is case mein jo prices hain, that prices would increase. Price increase ho jayenge because consumers are ready to buy the scarce goods. And opposite case mein kya hota hai, agar jo demand hai, wo kam hai aur supply bohot zyada hai, production accha ho raha hai, bohot zyada supply ho gayi hai market mein, khareebne wale log kam hai. Toh bechne wale kya karenge, they would decrease the prices. Price ko woh kam karna shuru karenge ki bhai hamari cheezein sell off ho jaye. Toh yeh jo forces of demand and supply hai, it determines the actual prices in the market. Price kya hoga, it is determined by this. Now agricultural price policy ka goal hai, ki jo prices hain market mein, agricultural goods ki, usmein ek stability bani rahe. Volatile now are prices. And for that, there are two basic tools. The first one is buffer stock and public distribution system. Toh agar market mein, agricultural goods ki prices bohot zyada bad gayi hain, bohot increase ho gayi hain, toh government can release their stock from the buffer stock in the market to stabilize the prices of agricultural produce. And also through PDS, that is public distribution ke through, woh jo weaker sections of the society hain, unko food commodities ek reasonable rate pe provide kar sakti hain. Second case mein, maan lijiye agar market mein, agricultural produce ki prices bohot zyada kam ho gayi hain, decrease ho gayi hain, toh jo hamare farmers hain, jo produce kar rahe hain, unko ek fair price mil sake. Iske liye, we have minimum support price. And we will see, jo bhi tools hain, procurement price kya hain, yeh saari cheezo ko, we will see it in detail now. Minimum support price or MSP is defined as the guarantee price for the produce from the government against excessive fall in the market price. Toh ek guarantee hain, government ki taraf se, to the farmers, that even in case ki market ki prices jo hain, market price ek particular agricultural commodity ka agar bohot zyada neeche chala bhi jata hai, toh even in that case, government is ready to buy the produce from the farmers at a minimum support price. Let's suppose, ek farmer ne decide kiya ki bhai, pulses grow karte hain apne farm mein. And aaj current market price pulses ka 120 rupees per kg hai. Toh usko yeh profitable lag raha hai and so he has decided to produce pulses. Now, by the time his crop is ready, his produce is ready, toh pulses ki market price, let's suppose, 60 rupees per kg ho gaye. Toh yaha toh farmer ko huge loss bear karna padega. Now, is case mein kya hain, government pehle se hi ek minimum support price or we can say MSP announce karke rakhti hain for a number of agricultural commodities. Let's suppose, yaha peh government ne MSP for pulses pehle se hi, 100 rupees per kg announce karke rakha hai ki bhai, prices bhale hi neeche gir jaye, but government would buy pulses from the farmer at 100 rupees per kg. Toh farmer ko zyada loss bear nahin karna padega. Government is providing a minimum support prices to the farmers. So, this is MSP. MSP, it acts as an insurance for the farmers. That is, agar market price bahut decrease ho gaye hai, toh farmers can sell their produce to the government at MSP. But, farmers kisi compulsion ki andar nahin hai that they have to sell their produce to the government only. Government ko wo kaise sell karte hain? Through FCI, that is Food Corporation of India ke through and different government agencies hain, jiske through wo apna produce government ko sell off kar sakte hain. But, in case agar farmers ko market me achcha price mil raha ho, achche daam mil rahe ho, jo minimum support prices zyada hain, then farmers are free to sell their produce in the open market. Open market me farmers apne produce ko beth sakte hain. But, in case if the market prices are too low, agar market price bahut hi zyada kam hai, toh farmers ko distressed sell se bachata hai MSP, because MSP ek minimum support price guarantee kar raha hai. Then, government ka aim hai that through MSP, minimum support price ke through, government can procure, government can buy food grains for PDS, public distribution system ke liye, government buys food grain from the farmers. Toh iske saath government ka ek aur objective bhi MSP ke through poora hota hai. And, also through MSP, government gives incentives to produce a particular crop. Agar government kisi particular crop ka minimum support price achcha deti hai, man liye achcha announce karte hai ki bhai, is particular crop ke liye minimum support price kaafi high rakha hai, then farmers would be motivated to produce that particular crop. Toh ek tarah se, government apne hisaab se, farmers ko motivate karte hai that what crop they should produce. For example, in recent years, there were huge shortage of pulses and oil seeds in our economy. And, so we had to import huge quantities of pulses as well as oil seeds, jiski wajah se hamara inflation bhi kaafi badh gaya tha. And, that's why 2016 mein jab government ne MSP announce kiya, toh pulses and oil seeds ke liye MSP baaki saal se zyada announce kiya. So that, farmers would be more motivated to produce these crops and we do not need to import these commodities from abroad and also our inflation can be controlled. Different agricultural commodities ke liye minimum support price kya hona chahiye? This is recommended by the CACP, Commission on Agricultural Costs and Prices. This is very important and on the basis of the recommendations of CACP, government of India, it announces the minimum support price. Government of India precisely saying CCEA, that is Cabinet Committee on Economic Affairs. This makes the announcement, yaha decision liya jaata hai and government makes the announcement for the MSP. Toh examination mein yeh bahut hi frequent question hai, ki MSP is recommended by whom? This is announced by whom? There are different kharif and rabi crops jiske liye MSP announce hoti hai. Toh total there are around 26 agricultural commodities jiske liye MSP presently announce hoti hai. Kharif crops mein paddy hai, jawar, bajra, maize, ragi, different kinds of dal like arhar dal, moong, urad, then cotton, groundnut in shell, sunflower seed, soya bean, sesame. In ke liye MSP announce hota hai. In rabi crops we have wheat, barley, gram, masoor, mustard, jute, copra etc. Toh different commodities jiske liye different MSP, government announce karti hai before the sowing season for each of these crops. Then while recommending the MSP, minimum support price ko recommend karne ke time CACP takes into consideration number of factors like total cost of production kya aaya, total inputs kya use kiye farmer ne, then demand and supply kaisa hai and what are the price trends in the market, both in the domestic market as well as in the international market. Then inter crop price parity, terms of trade between agricultural and non-agricultural goods. Iske alaabha ek reasonable profit margin kya hona chahiye farmers ke liye, toh in sabhi factors ko consider karke CACP makes the recommendation for minimum support prices for different agricultural goods to the government. Next procurement price ko dekha, toh government actually kis price pe farmer se agricultural produce ko buy karti hai, that is known as procurement price. It is defined as the price at which the government buys from the farmer and this is announced after the harvest. MSP hamara sowing ke time hai, jab crops ko lagaare hote tabhi announce kiya jaata hai and procurement price is announced after the harvest and it is higher than the MSP. We will see another term, FRP that is fair and remunerative price. FRP is the minimum price that sugar mills they have to pay to the farmers. Sugar industry bohot hi important agro based industry hai in India and so FRP is a very important and relevant term here. So, FRP ka bhi recommendation is given by CACP, that is Commission for Agricultural Costs and Prices and this is given after consulting state governments and association of sugar industry. And the final decision is taken by the committee, Cabinet Committee on Economic Affairs, that is CCEA and this is announced by the central government. 2009 se FRP is being announced, iske pere there was the concept of SMP, that is statutory minimum price for sugarcane farmers. Next we will see buffer stock and public distribution system. Buffer stock operations, they are a very important instrument of agricultural price policy in India. Agricultural prices ki stability ke liye ek bohot hi important integral component hai. Under this buffer stock policy, the government builds up the stock of agricultural commodities. They either buy from the domestic market or they acquire it through imports and then they release this, these stocks of agricultural commodities when the prices are rising. Jab agricultural commodities ki prices bohot high ho jaye, agricultural commodities ki scarcity ho market mein, then they release these stocks to maintain the price stability in the economy. These stocks are also used in emergency situations like drought, crop failure floods or crop damages or any other calamities to prevent sharp rise in the market prices of the agricultural commodities. And iske saath we have public distribution system also. Toh buffer stock pe jo bhi food commodities hoti hain, usko weaker section of the societies tak pohuchaya jata hai through public distribution system. Jo bhi beneficiaries hote hain, unko through PDS, food subsidized rate pe government pohuchati hain through fair price shop. This is known as public distribution system and FCI, that is Food Corporation of India. It is the sole repository of the food grains reserved for the PDS. PDS ke liye jo bhi food grains government procure karti hai, acquire karti hai, unko FCI ke paas rakha jata hai. And FCI then releases it to the fair price shops. Isse related a term hai, issue price. Issue price is defined as the price at which the government supplies produce to the fair price shops and ration depots. So, government PDS ke through jab food commodities supply karti hai, then FCI, it releases the produce to the fair price shops at the issue price. Jis price pe FCI food ko public distribution system ke liye release karti hai, that is known as issue price. And the difference between the MSP and the issue price is subsidy. Mal liye government ne MSP yaani farmer ko hundred rupees diya for a commodity and issue price jo wo hai, that is jis price pe FCI goods sell off kar rahi hain to the fair price shop. If it is at the rupees fifty, then ye jo pachaas rupe ka difference hai in dono ke beech mein. This is the subsidy that the government is providing to the beneficiaries of the PDS. To unko ye pachaas rupe jo beech ka difference hai, jo government khud bhar rahi hai. This is the subsidy that the government provides. We will now see the institution related to agricultural price policy CACP, that is Commission for Agricultural Costs and Prices. Initially this was known as Agricultural Price Commission, which was formed in 1965. And the objective was to evolve a balanced and integrated structure for the agricultural price policy, so that it meets the overall needs of the economy and both producers and consumers should be benefited from it. Then 1985 mean, this was renamed as Commission for Agricultural Costs and Prices and the primary purpose was for advising government on agricultural pricing policy. To iske jo main functions hain that includes assuring reasonable produce price to the farmers. Farmers ko ek remunerative price diya jaa sake. Uska assurance dena, uska recommendation karna hai iska kaam hai CACP ka. And by assuring a minimum support price to the farmers, CACP is also providing incentives to the producers for adopting improved technology for farming and so they are promoting investment in farm enterprises. Apart from the pricing policy, the CACP also suggests non-pricing measures. Non-pricing measures like credit policy for the farmers, crop and income insurance schemes for them. Then from time to time they also take up different studies with respect to different crops as may be prescribed by the central government to them and apart from them, they also advise on any problems relating to agricultural prices and other production that may be referred to it by the government and overall they try to effectively integrate and recommend non-price measures with price recommendations and they ensure that agricultural sector remains competitive in nature. Next we'll see Food Corporation of India or FCI. FCI is the designated central nodal agency for price support operations of cereals, pulses and oilseeds. Please note here that for the price support operations of cotton, cotton ke liye we have another organization known as Cotton Corporation of India, CCI and Food Corporation of India is for cereals, pulses and oilseeds. So, this was set up in 1964. Major objectives kya hai FCI ka? First is to provide remunerative prices to the farmers, then to make food grains available to the vulnerable sections of the society at a affordable price or at a reasonable price and maintain buffer food stock as a measure of food security and intervene in the market for price stabilization. So, these are the basic objectives of FCI. Apart from them, storage of food grains ek bahut hi important function hai FCI ka and it has the responsibility of storing huge inventory of food grains over a significant period of time and for this FCI has a network of strategically located warehouses for storing food grains across all over the India. So, FCI basically maintains a buffer stock of food grains for public distribution system and for other welfare schemes also which is undertaken by the government of India, thus it ensures food security for the nation. Now, let us come to the conclusion part that is the appraisal of price policy, agricultural price policy in India. Toh price policy kaafi had tak successful raha hai and it has been instrumental in creating a fairly stable agricultural prices in India and they have also induced farmers to adopt new production technology and thereby it has helped to increase the output of food grains and also through PDS subsidized rates pe vulnerable sections of the society ko food grains available kiya jaa raha hai, but in spite of having a number of benefits of the present agricultural price policy uske shortcomings bhi bahut saare. We will see what are these, the first one is that the pricing policy needs to be evolved in such a way that a qualitative superior crop mix that is ek nutritionally superior mix of crops, they should be produced in the economy uske liye kuch incentive provide karna chahiye. Then it is observed that FCI that is Food Corporation of India wo largely occupied rehta hai in purchasing large volumes of produce from the traditional surplus producing states like Punjab, Haryana and Western UP jo majorly agricultural states hai India mein, FCI largely yahi engaged reh jata hai and the newly emerging agricultural states jo hai waha jo minimum support prices government promise karti hai usko undertake karne ke liye waha purchase karne ke liye FCI and other state agencies they are not fully prepared, they are not fully geared up to undertake the price support operations there. Next point jo ek bahut bada drawback hai present agricultural price policy ka that we rely too heavily on price incentives in the form of assured crop prices, in the form of MSP for increase in production and jo non-pricing factors hai they are largely ignored, non-pricing factors like efficient technology provide karna, financial inputs provide karna, land reforms, improved human resources. So, all these factors are also very significant in expanding the total output and productivity in the agricultural sector. So, now it is largely accepted that instead of providing subsidized agricultural output, subsidized food grains ya MSP price incentives jo di ja rahi hai unki jagah pe there is a need for improving the social and economic infrastructure in the rural areas and if the agricultural infrastructure is strong then automatically the agricultural productivity will improve and our price policy will achieve its objective. So, this was all for today's session. I hope you have liked it. For more videos please subscribe to my channel Palpal GK and you can also visit our website and like us at Facebook. Have a very nice day. Thank you very much.