Agricultural prices role of cacp - msp, frp (smp) and sap

Agricultural Prices - Role of CACP -
MSP,
FRP (SMP) and
SAP

1. Agricultural Prices

2. Agricultural Price 2 Agricultural prices cover prices of agricultural products (output prices) and prices of requisites for agricultural production (input prices) at various stages of marketing.

3. Agricultural Price - Functions 3 To allocate resources . To distribute income To induce capital formation . Enhancing marketing efficiency and performance

4. Agricultural Price – Functions - To allocate resources 4 Agricultural prices give signals to both producers and consumers regarding the level of Production and consumption . Changes in the relative prices of the various agricultural commodities affect the allocation of resources among agricultural commodities by the consumers. If the price of a given commodity increases relatively to all other agricultural commodities, then the producers would be allocating more resources , i.e., land and other inputs, for the production of that commodity.

5. Agricultural Price – Functions - To distribute income 5 Changes in agricultural prices thus effect a transfer of income between the agricultural and the non -agricultural sectors of the economy.".

6. Agricultural Price – Distributive function 6 Goods and resources are limited , but needs and wants are unlimited ; so price will determine affordability and those with the buying power will have the limited .

7. Agricultural Price – Signalling function 7 Price signal the demand and supply situations . Shortages are reflected in high prices , and surpluses are reflected in lower prices .

8. Agricultural Price – Equilibrating function 8 Prices facilitate matching of demand and supply therefore clearing the market

9. Agricultural Price – Transmission function 9 Prices transmit information to various actors in the market thus enabling them to make informed decision on what and when to buy and sell .

10. Agricultural Price – Provision of incentive 10 Prices act as incentives / disincentives to consumers and producers .

11. Agricultural Price Policy 11 Aim - the intervention in the agricultural produce markets to influence the price levels and their fluctuations , particularly from farm gate to retail level . . The assurance to the farmers that his efforts to augment production through adoption of improved technology would not become unremunerative through the price factor.

12. Agricultural Price Policy 12 The policy was framed keeping in view three different angles, viz., providing food grains for the Public Distribution System , ensuring reasonable (affordable to consumers) prices for food grains, and Inducing adoption of the new technology .

13. Agricultural Price Policy - Objectives 13 To achieve price stability without hampering the income of the farmers . To provide price support to the farmers in the initial stages and remunerative prices at later stages . To protect the interests of the consumers , supplying essential commodities at fair prices

14. Agricultural Price Policy - Objectives 14 To maintain the reasonable relationship between the prices of agricultural commodities and manufactured products through appropriate parity prices, thereby terms of trade become favourable to the core sector. To maintain appropriate relationship among the competing crops and To provide favourable climate to the farmers to apply requisite new technology for augmenting agricultural production through remunerative prices for agricultural commodities.

15. Need of Agricultural Price Policy 15 Agricultural prices fluctuate more violently than the prices of industrial products. Price fluctuations bring disaster to producers as well as consumers. A steep decline in the price of particular crop in few years can inflict heavy losses on the growers of that crop . This will not only reduce the income but also dampen the spirit to cultivate the same crop in the coming year. If this happens to be a staple food item of the people, supply will remain below the demand.

16. Need of Agricultural Price Policy 16 Prices of a particular crop increase rapidly in the particular period, them the consumer will definitely suffer . In case, the prices continuously increase for the particular crop, this can have disastrous effect on the sector of the economy.

17. Need of Agricultural Price Policy 17 Procurement operations . Public distribution at fixed issue prices , rationing, restrictions on movement of food grains from one place to another place i.e. state to state. Minimum price for sugarcane to sugar factories .

18. Need of Agricultural Price Policy 18 Maximum controlled prices , assured minimum prices , statutory minimum prices , ban on exports, stepping up of imports, regulation of futures trading. Floor and ceiling prices , controls on futures trading and imports have been the major policy measures taken for regulation of prices of raw cotton and jute

19. Main Features 19 Institutions : The government has set up two institutions to implement the price policies. Agriculture Price Commission (1968) : This commission advices the government regarding agriculture price policy , also determines MSP and procurement prices of agriculture products.

20. Main Features 20 Food Corporation Of India (1985) : This corporation organizes procurement of food grains at price determined by govt . and their sale through public distribution system .

21. Main Features 21 Fixation of MSP or procurement prices : The government determines minimum support price of many agriculture product such as wheat, rice, maize, every year based on recommendation made by Agriculture Price Commission .

22. Main Features 22 Maximum Price Fixation : Government also determines maximum prices for certain agriculture product . The govt. sells many agriculture products such as grain, sugar, rice at prices through fair prices under PDS.

23. Objective of Price Stability 23 Improving the transparency of the price mechanism . Under price stability people can recognise changes in relative prices (i.e. prices between different goods), without being confused by changes in the overall price level . This allows them to make well-informed consumption and investment decisions and to allocate resources more efficiently;

24. Objective of Price Stability 24 Reducing inflation risk premia in interest rates (i.e. compensation creditors ask for the risks associated with holding nominal assets). This reduces real interest rates and increases incentives to invest; Avoiding unproductive activities to hedge against the negative impact of inflation or deflation ;

25. Objective of Price Stability 25 Reducing distortions of inflation or deflation , which can exacerbate the distortionary impact on economic behaviour of tax and social security systems; Preventing an arbitrary redistribution of wealth and income as a result of unexpected inflation or deflation; and contributing to financial stability .

26. Commission for Agricultural Cost and Prices (CACP) 26 The Agricultural Prices Commission was set up in January, 1965 to advise the Government on price policy of major agricultural commodities under L.K. Jha committee . Ministry of Agriculture and Farmers Welfare . It is a statutory body that submits separate reports recommending prices for Kharif and Rabi seasons .

27. Commission for Agricultural Cost and Prices (CACP) 27 Since March 1985 , the Commission has been known as Commission for Agricultural Costs and Prices under Sen committee . The Commission is composed of a Chairman , a Member Secretary , two official members and three non-official members . The non-official members are representatives of the farming community.

28. CACP - Functions 28 To advise the Government on the price policy embodying fixation of minimum support prices for agricultural commodities. To recommend appropriate measures to make price policy effective . To suggest suitable measures to reduce the cost of marketing and recommend fair price margins at various stages of agricultural marketing

29. CACP - Functions 29 To advice Government of India on any problem relating to agricultural prices and agricultural production To fix various price policy instruments viz., Minimum Support Price (MSP) based on average cost of production , procurement price as a premium over and above the MSP , ceiling price, issue price, levy price etc.

30. Administered Prices 30 Prices fixed by the government with the objective of protecting farmers against a decline in prices during the year of bumper production, protecting consumers from excessive price increases and ensuring procurement for buffer stocks or operation of PDS.

31. Minimum Support Price 31 This is the price announced by the government and recommended to CACP to protect the producer – farmers against excessive fall in price during bumper production years. These prices give a sort of price guarantee to the farmers which means that a price not lower than the announced minimum price will be paid to the farmers when they bring their product for sale in the market.

32. Minimum Support Price 32 In case the market price for the commodity falls below the announce minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at an announced minimum price .

33. Minimum Support Price 33 The minimum support for different agricultural crops viz., food grains, oilseeds, fiber crops, sugarcane and tobacco ( 24 crops ) are announced by the Government of India before the start of the sowing season of the crop .

34. Minimum Support Price - Calculation 34 Cost of Production, Input-Output Price Parity, Inter-crop price parity, an effect on cost of living,  international price situations

35. Minimum Support Price - objectives  35 To prevent fall in the price in the situation of over production . To protect the interests of the farmers by ensuring them a minimum price for their crops in the situation of a price fall in the market. To meet the domestic consumption requirement To provide price stability in the agricultural product

36. Minimum Support Price - objectives  36 To ensure reasonable relationship between prices of agricultural commodities and manufactured goods To remove price difference between two regions or the whole country. To increase the production and exports of agricultural produce . To provide raw material to the different industries at reasonable prices in the whole country.

37. Statutory Minimum Price 37 A minimum price has been assigned a statutory status in case of sugarcane and as such the announce price. SMP is announced by the central government based on the cost of cultivation estimated by the CACP. Concept of SMP was replaced by the Fair and Remunerative Price (FRP) of sugarcane

38. Statutory Minimum Price 38 This is the basic price which the sugar mills must pay sugarcane growers . However, citing differences in cost of production, productivity levels and also as a result of pressure from farmers' groups, some states ( Uttar Pradesh, Punjab, Haryana, Tamil Nadu and Uttarakhand ) used to declare state-specific sugarcane prices called State Advised Prices (SAP), usually higher than the SMP .

39. Maximum Ceiling Prices 39 APC has not favoured maximum or ceiling prices for agricultural commodities. In the case of food grains, the states were unable to enforce legally fixed maximum prices .

40. Procurement Price 40 Refers to the price at which government procures from producers to maintain buffer stocks and feed Public Distribution System . This is the price announced by the government and recommended to CACP

41. Procurement Price 41 Procurement prices are fixed generally at a level which is somewhat higher than the level of minimum support prices but lower than the prevailing market prices . Procurement price is declared after harvesting .

42. Issue Price 42 Price at which the commodity is made available to consumers at fair price shops . It is always higher than procurement price .

43. THANK YOU! Dr.M.Sathaiah , Assistant Professor ( Agrl.Economics ), CAT,Theni