Price refers to the monetary value assigned to goods and services.
Common Objectives of Agricultural Pricing Policy:
- Short-term Profit Maximization: Focuses on immediate profits, often at the cost of long-term sustainability.
- Long-term Profit Maximization: Aims to increase market share and reduce long-term costs for sustained profitability.
- Maximizing Profit per Unit: Focused on achieving the highest possible margin per product sold.
Key Functions of Prices:
- Balances demand and supply
- Guides resource allocation in production
- Directs consumer income distribution
- Helps redistribute income across different economic sectors
- Regulates the movement of goods across time and geography
- Influences capital formation in agriculture and other sectors
History of Agricultural Price Policy:
The Agricultural Price Commission (APC) was set up in 1965 based on the recommendations of the Foodgrains Policy Committee, chaired by L.K. Jha. It was later renamed as the Commission for Agricultural Costs and Prices (CACP) in 1985. The CACP is a statutory body under the Ministry of Agriculture and Farmers Welfare, headquartered in New Delhi.
Current Chairman: Vijay Paul Sharma
Former Chairman: Ashok Gulati (2011–2014)
Role of CACP:
CACP plays a key role in recommending crop pricing, especially the Minimum Support Prices (MSP), by analyzing cost factors and market trends. It prepares separate reports for Kharif and Rabi seasons.
Objectives Behind Price Fixation:
- Direct resources to the production of essential commodities
- Ensure reasonable income for farmers
- Encourage agricultural capital formation
- Ensure affordability for consumers, particularly the economically weaker sections
- Maintain price stability
Factors Considered by CACP:
- Cost of cultivation
- Changes in input costs
- Input-output price relationship
- Trends in market rates
- Parities across various crops
- Domestic supply-demand scenario
- Impact on industrial costs and price levels
- Effect on consumer living costs
- Prices in domestic and international markets
- Farmer’s terms of trade
Crops Covered under MSP Recommendations:
- Cereals: Paddy, Wheat, Maize, Sorghum, Pearl Millet, Barley, Ragi
- Pulses: Gram, Tur, Moong, Urad, Lentil
- Oilseeds: Groundnut, Mustard, Soybean, Sesame, Sunflower, Safflower, Nigerseed
- Commercial Crops: Copra, Sugarcane, Cotton, Raw Jute
Types of Administered Prices:
- Minimum Support Price (MSP): Guaranteed price to farmers for their produce in case of a market price fall. Declared before Kharif and Rabi seasons.
- Statutory Minimum Price (SMP): Applied mainly to sugarcane. Sugar factories are legally bound to pay this price.
- Procurement Price: Price at which the government purchases produce to maintain buffer stocks and supply through PDS. Generally higher than MSP but lower than open market prices.
- Issue Price: Price at which commodities are sold through fair price shops. It is higher than the procurement price and aims to protect consumers.