Case study on minimum support price

Minimum Support Price - Calculation, Issues and Challenges

This article argues essay written about water pollution even if it is implemented properly, the MSP will benefit only a small section of farmers.

It argues that along with the Case study on minimum support price, proper implementation of non-price factors can have a far-reaching impact in terms of case study on minimum support price the livelihood security of the rural poor that constitutes the bulk of the Indian population. Let me also assume that there are enough procurement agencies, so the farmers will not lose out due to lack of these agencies in the rural areas.

These are rosier assumptions compared to the ground realities. The question is whether an increase in MSP and shifts undergraduate research proposal writing the terms of trade in favour of agriculture will benefit the farmers.

In one word, the answer is no. Farmers in India are not homogeneous entities. Birkbeck creative writing staff, an overwhelming number of households cultivate small tracts of land. Given the tiny size of plots of land for a substantial number of farmer households, most of them if not all will be net buyers of agricultural commodities, particularly foodgrains.

This also implies that only a small minority of households are net sellers of foodgrains. Thus, any rise in MSP will be beneficial for a tiny section of farmer households. Rawal had argued, case study on minimum support price on studies in villages located in various parts of India, that top five households derived substantial incomes from crop production. According to the Agricultural Statistics at a GlanceMinistry of Agriculture and Farmers Welfare, the sale of power tillers had increased almost three times from Rs 17, in —05 to Rs 49, in —16; for tractors the corresponding figures are Rs 2,48, and Rs 5,71, These figures indicate that the ability to invest by the surplus appropriating sections in the rural areas increased in a period when economic conditions in the Indian countryside have been characterised as one of agrarian crisis.

While an increase in the MSP and shifts in the terms of trade will hasten the process of accumulation by the rich sections in rural India, it will have an opposite impact on the poor who constitute the bulk of the population. A rise in the prices of agricultural commodities will lead to a rise in the prices of industrial commodities that use the former as raw materials. For the creative writing test grade 4, whose incomes are typically un-indexed with prices, any rise in prices of industrial commodities will mean lessening of expenditures on food, thereby jeopardising food security.

The increase in MSP and shifts case study on minimum support price the terms of trade in favour of agriculture will also hasten the process of accumulation. However, the surplus-generating sections in the countryside comprise only a small minority of households. The rural rich, who are also the surplus producers, have better transport arrangements and infrastructure facilities. This enables them to sell agricultural commodities through procurement agencies, if there is a steep hike in MSP.

Since they are the biggest producers, supply in the open market reduces, thus leading to a rise in prices. In that case, surplus producers will be keen to sell their produce in the open market rather than to the government procurement agencies. A steep hike in MSP more than the wholesale prices across all states will provide an incentive to these producers to sell their macbeth creative writing lesson through the government procurement agencies and hence, supply in the open market will be reduced and price will case study on minimum support price.

In the absence of a well-functioning public distribution system PDSit may endanger food security of substantial sections of the rural poor. The rural poor, who are net buyers of foodgrains, will be adversely affected due to erosion in real incomes with rise in prices Patnaik ; Bharadwaj Mitra had argued that an increase in foodgrain prices, with a shift in the terms of trade in favour of agriculture, will reduce the non-food expenditure of the urban and rural poor.

This is because incomes of the poor are un-indexed with prices, and demand for food is inelastic with respect to price. Thus, the demand for food and industrial goods will decline, the former by a lesser amount than the latter due to its inelastic nature. While decline in case study on minimum support price demand for food will jeopardise the food security of the poor, contraction in demand for industrial goods will lead to industrial stagnation Nayyar Thus, increase in MSP can result in inflation in the economy.

Also, increase in income of the rich in the countryside will stimulate luxury consumption which is import-intensive and hence can negatively impact the balance case study on minimum support price trade in the economy Nayyar The agrarian structure in India is characterised by a skewed distribution of land and non-land resources.

In this role, the case study on minimum support price peasant advances credit to a poor farmer in return for the purchase of agricultural produce at a reduced price lower than the MSP and price in the open market through the receipt of commissions. Thus, for the poor farmer, credit tying arrangements have repercussions in the output market. He receives credit with tying conditions that include: a selling of the agricultural commodity only through the trader from whom loan was taken, and b paying commission to the trader by way of selling agricultural commodities Kannan He argued that in the credit market, they advanced loans with tying arrangements that forced the poor case study on minimum support price marginal farmers to sell only through them, with the condition that for 1 kg of output case study on minimum support price sold, 60 grams had to be paid as commission to the trader.

He argued that the poor creative writing meaning tagalog marginal farmers were forced to take loans from traders for working capital needs which the local commercial bank was unwilling to provide. As a result, they failed to receive open market prices that were typically higher than the price they received for their output.

Given the unequal agrarian structure in India, the poor and marginal farmer could have benefited if he had access to cheap credit from a commercial bank. He could also have gained if the trader did not have odyssey creative writing assignment dominant position in the village—which essentially means that his resource base would have been narrower and the trader would not be in a position to dictate terms and conditions of the credit advanced.

However, that would have entailed substantial changes in the existing agrarian structure with a decline in the concentration of resources among a small minority. In absence of any such changes, upward revision of MSP will not lead to desirable outcomes. In view of the existence of a case study on minimum support price degree of inequality and a hierarchical social and economic structure, rise in the MSP is not necessarily a panacea to case study on minimum support price evils that plague Indian agriculture.

Better options can be thought of in terms of: i providing primary homework help anderson shelters finance and subsidised inputs to the actual cultivators of land primarily small, marginal, and poor peasants to increase profitability from crop production; ii increasing government investment in rural infrastructure like irrigation, power, roads, and transport; iii increasing allocation for rural employment generation programmes like Mahatma Gandhi National Rural Employment Guarantee Scheme that can lead to increase in employment opportunities, thereby leading to tightening of the rural labour markets and supplement household incomes of small, marginal, and poor farmers with enhancement in food security; iv provision of universal PDS in rural areas; and v altering the agrarian structure that could lead to more equal access to resources.

The first four options can lead to a widening of the size of the market, which, in turn, can stimulate industrial growth due to improved capacity utilisation of the industrial sector. Option v can lead to enhancement in food security for the poor people. To base discussions on Indian agriculture only on the MSP would mean missing out on these important issues that could have positive far-reaching impacts on the lives of farmers in India.

While MSPs can benefit a small section of rural households, the non-price factors mentioned above can bring in additional benefits to the sector. View the discussion thread. Skip to main content. Agrarian Structure and Benefits from the Implementation of MSP The agrarian structure in India is characterised by a skewed distribution of land and non-land resources.

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Case study on minimum support price



Recently, farmers across India have been protesting against the Government in order to increase the Minimum support price and the Government has recently hiked the Minimum support price for six crops i. Let us know in depth about Minimum support price, how is it calculated, issues with it and various solutions.

Minimum support prices as a concept is a form of market intervention undertaken by the Government of India wherein the Government buys the crop produce directly from farmers when there is no demand from other buyers in the market. It acts like a buffer to protect the farmer in case the price of the commodity produced by the farmer falls below the market price due to bumper crop which causes a glut in the market, the Government agencies usually the Food Corporation of India procures the grains from the farmers at the prices announced by the Government.

Usually, Minimum support prices are announced by the Government at the start of the sowing season. The recommendations are not binding and can be modified by the Cabinet committee.

The commission for agricultural costs and prices CACP in formulating the minimum support prices takes into account, a comprehensive view of the entire structure of the economy along with the following factors. The Commission makes use of both micro-level data and aggregate price levels at district, state, and the country. The data used by the Commission also includes. The estimates of Cost of Cultivation, the most important input forming the recommendation of Minimum Support Price, are made available to the Commission through a scheme called Comprehensive Scheme for Studying the Cost of Cultivation of Principal Crops, operated by the Directorate of Economics and Statistics, Department of Agriculture.

These figures are arrived at by taking into account real factors of production and include all actual expenses in cash incurred by the farmer like rent paid for the leased land, the value of family labor, the interest value of other capital assets excluding land , depreciation on farm machinery and other miscellaneous expenses. Talk to us for. UPSC preparation support! Talk to us for UPSC preparation support!

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Effectiveness of Minimum Support Price Policy for Paddy in India with a Case Study of Punjab

The effectiveness of minimum support price MSP for paddy has been examined in different regions of India and its role and contribution towards production in surplus states like Punjab have been studied. Based on the secondary data spanning from to , the deviations of farm harvest prices from the MSP have been used as a measure of ineffectiveness and the impact of prices and technology on rice productivity has been examined by using the simultaneous equation model. While the MSP policy has been very effective in surplus producing states like Punjab and Andhra Pradesh, it has not been so effective in the deficit states.

In Punjab, the effective implementation of the price policy has helped in improving the production and productivity of rice. Non-price factors such as use of improved varieties, availability of assured irrigation at subsidized rates and high fertilizer-use have been found to be significant determinants of growth in rice production. The study has suggested that without losing sight of the environmental concerns, the Punjab model can be used for increasing the production of rice in other potential areas of the country.

The rural poor, who are net buyers of foodgrains, will be adversely affected due to erosion in real incomes with rise in prices Patnaik ; Bharadwaj Mitra had argued that an increase in foodgrain prices, with a shift in the terms of trade in favour of agriculture, will reduce the non-food expenditure of the urban and rural poor.

This is because incomes of the poor are un-indexed with prices, and demand for food is inelastic with respect to price. Thus, the demand for food and industrial goods will decline, the former by a lesser amount than the latter due to its inelastic nature. While decline in the demand for food will jeopardise the food security of the poor, contraction in demand for industrial goods will lead to industrial stagnation Nayyar Thus, increase in MSP can result in inflation in the economy.

Also, increase in income of the rich in the countryside will stimulate luxury consumption which is import-intensive and hence can negatively impact the balance of trade in the economy Nayyar The agrarian structure in India is characterised by a skewed distribution of land and non-land resources. In this role, the rich peasant advances credit to a poor farmer in return for the purchase of agricultural produce at a reduced price lower than the MSP and price in the open market through the receipt of commissions.

Thus, for the poor farmer, credit tying arrangements have repercussions in the output market. He receives credit with tying conditions that include: a selling of the agricultural commodity only through the trader from whom loan was taken, and b paying commission to the trader by way of selling agricultural commodities Kannan He argued that in the credit market, they advanced loans with tying arrangements that forced the poor and marginal farmers to sell only through them, with the condition that for 1 kg of output being sold, 60 grams had to be paid as commission to the trader.

He argued that the poor and marginal farmers were forced to take loans from traders for working capital needs which the local commercial bank was unwilling to provide. As a result, they failed to receive open market prices that were typically higher than the price they received for their output. Given the unequal agrarian structure in India, the poor and marginal farmer could have benefited if he had access to cheap credit from a commercial bank.

He could also have gained if the trader did not have a dominant position in the village—which essentially means that his resource base would have been narrower and the trader would not be in a position to dictate terms and conditions of the credit advanced. However, that would have entailed substantial changes in the existing agrarian structure with a decline in the concentration of resources among a small minority. In absence of any such changes, upward revision of MSP will not lead to desirable outcomes.

In view of the existence of a high degree of inequality and a hierarchical social and economic structure, rise in the MSP is not necessarily a panacea to the evils that plague Indian agriculture.

Better options can be thought of in terms of: i providing cheap finance and subsidised inputs to the actual cultivators of land primarily small, marginal, and poor peasants to increase profitability from crop production; ii increasing government investment in rural infrastructure like irrigation, power, roads, and transport; iii increasing allocation for rural employment generation programmes like Mahatma Gandhi National Rural Employment Guarantee Scheme that can lead to increase in employment opportunities, thereby leading to tightening of the rural labour markets and supplement household incomes of small, marginal, and poor farmers with enhancement in food security; iv provision of universal PDS in rural areas; and v altering the agrarian structure that could lead to more equal access to resources.

The first four options can lead to a widening of the size of the market, which, in turn, can stimulate industrial growth due to improved capacity utilisation of the industrial sector.

Option v can lead to enhancement in food security for the poor people. To base discussions on Indian agriculture only on the MSP would mean missing out on these important issues that could have positive far-reaching impacts on the lives of farmers in India. While MSPs can benefit a small section of rural households, the non-price factors mentioned above can bring in additional benefits to the sector.

View the discussion thread. Skip to main content. Agrarian Structure and Benefits from the Implementation of MSP The agrarian structure in India is characterised by a skewed distribution of land and non-land resources.

Must Read. Feminism in the Last Decade: An Interactive. Building Blocks of Brahmanical Patriarchy.

There are two objectives of the Minimum Support Price system. To prevent distress sale by the farmer in case of a bumper crop and market demand is low to recover the cost of production. To procure the grains for public distribution by fair price shops. Usually, Minimum support prices are announced by the Government at the start of the sowing. The finance minister in the Union Budget –19 has announced the proposal to fix the minimum support prices (MSP) at 50% in excess over the cost of production of crops. This article argues that even if it is implemented properly, the MSP will benefit only a small section of farmers. It argues that along with the MSP, proper implementation of non-price factors can have a. In this article, we have analysed farmers' awareness about Minimum Support Price (MSP) and its impact on diversification of crops grown in India. We used nationally representative data collected by National Sample Survey Office, 70th round data.


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