How Ensure a Remunerative Price for Agri Produce in India
Updated: Oct 9, 2020
Getting a very low harvest price has become a major problem in the Agriculture market these days. Day by day farmer protests are increasing requesting a remunerative price for their produce. While the cost of production is going up constantly, farmers don’t get a fair price for their produce. High input cost is the major concern is the high cost of production. Also, middlemen's intervention for agriculture marketing has become another big cause of not getting fair prices for farmers. Middlemen buy farmers produce at dirt cheap and sell again to retail sellers at a higher price. While they earning higher profits, farmers get only a very low income. By introducing the mandi system, this problem has reduced up to some level. By today agriculture market liberalization is needed.
Minimum Support Price
This is the only and best method to ensure the remunerative price for Agri produce. The government of India has been implemented with the aim to protect farm producers and stop the drastic falls in the farm prices due to middlemen and fluctuation of market conditions. MSPs are announced at the beginning of every sowing season according to the Commission of Agricultural Cost and Prices (CACP) recommendations. MSP is set at 1.5 times more than the cost of production. The cost of inputs, interest on working capital, and imputed value of unpaid family labor is considered as the cost of production by the government.
According to this new policy Grameen Markets have been established and link them with Agriculture Produce and Market Committee (APMC) and electronic- National Agriculture Market (e- NAM).
Both the macro level and micro level data of the market are used by the commission when formulating recommendations with respect to the MSP. They are as follows.
· Cost of cultivation per hectare. Cost structure in various regions in the country and their changes.
· Cost of production per quintal in various regions in the country and their changes.
· Input prices and their changes.
· Product market prices and their changes.
· Commodity prices sold and purchased by farmers and their changes.
· Supply related information.
· Demand related information.
· International market prices and their changes.
· Prices of derivatives of the farm produce and their changes.
· Processing cost of agriculture products and their changes.
· Marketing cost.
· Macro-economic variables – the general level of prices, consumer price indices, etc.
According to the Indian government announcement, MSP recommendations cover 22 mandate crops (14 Kharif season crops, 6 rabi crops, and 2 commercial crops) and the fair and remunerative price is given for sugarcane.
Alternative mechanisms to ensure a fair price for farmers
These are proposed by NITI Aayog; (National Institution for Transforming India), with the consultation of state governments.
1. Market Assurance Scheme (MAS)
MAS shows which states would be free to procure from farmers all crops for which MSP is announced. MSP values of procured of crops will be transferred to the bank of beneficiary farmers. The entire procurement decision is taken by the respective State/ Union Territories.
2. Price Deficiency Procurement Scheme (PDPS)
If the sale price is lower than the average market price, under PDPS Farmers will compensate for the difference between MSP and the sale price subject to a ceiling that may not exceed 25% of MSP. This compensated amount is also directly transferred to the bank of beneficiary farmers.
3. Private Procurement in Stockers Scheme (PPSS)
Here private entities will be invited in the procurement of crops through a transparent process. Due to this transparent mechanism, private sectors can empanelment for procurement, if the prices fall below MSP. Some tax incentives and a commission will be provided to private entities. This scheme also helps to reduce the government’s liability for storage and post procurement management and disposal.