STRUCTURE

• Introduction – A brief introduction to agriculture price stabilization (15 words)                     
• Body – Explain
  • Methods of agricultural price stabilization(60 words)
  • price policies ln India to stabilize agricultural prices with their objectives (30 words)
  • method of calculation of Minimum Support Price (MSP) by CACP(30 words)
• Conclusion – Mention a short conclusion  (15 words)

ANSWER

Agricultural price stabilization means reduction in price fluctuations and regulation of price movements within a certain range. It does not imply constant prices or an unchanging price level. The objective of price stabilization should be to check price fall below a certain minimum level and price rise above a certain maximum level. The range within which fluctuations in prices are to be regulated is determined by a country or government.

MEASURES FOR STABILIZATION OF AGRICULTURAL PRICES:

The measures adopted for stabilizing agricultural prices vary considerably, depending on the economic circumstances and the objectives sought to be achieved. A list of measures adopted by government for stabilization of agricultural prices is given below:

• Non-price regulatory measures
  • Increasing and stabilizing agricultural production;
  • Regulating imports;
  • Regulating exports;
  • Encouraging agro-processing industries;
  • Building up buffer stocks;
  • Ensuring procurement and public distribution;
  • Regulating inter-regional movement of commodities;
  • Rationing
  • Expanding infrastructure
  • Improving the efficiency of the marketing system

• Direct price control measures
  • Fixation of maximum or ceiling price;
  • Fixation of minimum floor price
  • Fixation of both maximum and minimum price;
  • Fixation of an administered price

AGRICULTURE PRICE POLICY IN INDIA

Agricultural price policy means a policy to determine, regulate and control the prices of agricultural products.

Price Policies of the Government

• Minimum support prices
  • A minimum support prices is declared by government, normally at the beginning of sowing season for every important agricultural commodity. These prices are a long term guarantee to farmers that the prices of these products will not be allowed to fall below a certain level.
  • These prices assure the farmers and encourage them to carry on and to expand their production. They put their best efforts to get maximum production. If the prices fall below minimum support prices, government will buy the entire marketable surplus at procurement prices.
• Procurement Prices
  • These are the prices which are declared by government, generally at the time of harvest of crops. These are the prices at which the government buys agricultural products from farmers. These prices serve two important objectives:
  • To provide guarantee to the farmers that the prices of these products will not be allowed to fall below a certain level. If market prices fall below this level, the farmers can sell their products to government.
  • It enables government to procure these products for maintaining public distribution system and buffer stocks. These prices are announced by government on the recommendations of Commission for Agricultural Costs and Prices (CACP). These prices are widely used by government for the procurement of wheat and rice. Procurement prices are generally higher than minimum support prices.
• Issue Prices: Issue prices are the prices at which food grains are allocated and supplied by Food Corporation of India (FCI) to the states and union territories. These prices meet the requirements of public distribution system. Prices of goods to be supplied through fair price shops directly depend upon issue prices. Issue prices are normally less than market prices and higher than procurement prices.
• Retail Prices: Public distribution system is carried on through the network of fair price shops (ration shops). These shops supply essential consumer goods to households at the prices fixed by government. These prices are known as retail prices. Retail prices are higher than issue prices so that the expenses of public distribution system may be recovered and the licensees may get a certain margin.
• Buffer Stock Operations

Buffer stock operations refer to buying and selling of food stocks by government. These operations serve two important purposes:

• To regulate and control price fluctuations within a reasonable limit.
• To enable government to procure food stocks so that regular supply of these stocks may be ensured throughout the year as well as throughout the country. These operations are carried on by Food Corporation of India (FCI). Whenever there is a fall in the prices of food stocks, FCI starts buying them at procurement prices and whenever there is a rise in these prices, FCI starts selling. Thus, buffer stock operations play an important role in stabilizing agricultural prices.

HOW IS THE MSP DETERMINED:

• The Minimum Support Price was first introduced by the Government in 1966-67 for Wheat in the wake of the Green Revolution. It was introduced with the aim to save the farmers from depleting profits.
• The Government buys the crops at the MSP if the prices go down after harvest. This helps the farmers indirectly.
• The Government decides the MSP after taking into consideration the recommendations of the CACP, the opinions of the State Governments and all the other relevant Ministries.
• The Price Support Scheme (PSS) for oilseeds and pulses is implemented by the Department of Agriculture and Cooperation through the National Agricultural Cooperative Marketing Federation of India (NAFED).
• NAFED is the nodal procurement agency for oilseeds and pulses. Thus, when the prices of oilseeds, cotton, and pulses fall below the MSP, NAFED purchases it from the farmers at MSP.
• The procurement prices are usually announced at the beginning of the sowing season.
• This way, the CACP tends to have a very wide area of responsibility in the economic affairs of the country.