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Indian Economy / Agriculture Sector

Agricultural Pricing Policy in India

The main aim Agricultural Pricing Policy is fixation of Minimum Support Price for agricultural commodities and announcing the prices well in advance and to discourage the regional pricing system.

Agricultural Pricing System

The agricultural pricing system includes different prices involved while acquring and distributing various crops by the government. These include minimum support price, procurement price, economic cost and issue price.

  • Minimum Support Price (MSP)

    • Minimum Support Price is one kind of market intervention by the Government in order to ensure the farmers against any sharp fall in agricultural product prices.

    • Commission for Agricultural Costs and Prices (CACP) suggests the MSP at the beginning of the agricultural season for different food and non-food crops.

    • If the market price of any commodity is above MSP, the farmer has the option to sell at the market prices. But if the market prices of the commodities falls below MSP, the Government agencies will purchase the total quantity of agricultural produce that is offered by the farmers at the announced MSP.

    • MSP is based on the cost of cultivating the crop, inflation and reasonable rate of return. Generally, the prices of different commodities are fixed based on their quality and grade.
  • Procurement Price

    It is the price at which Food Corporation of India (FCI) procures the farm products from the farmers. It may be more than or equal to MSP depending on the quality but less than the prevailing market price. It is applicable only to food crops.

  • Economic Cost

    It includes Procurement Price by FCI, labor charges, market fees, transport cost and storage charges.

  • Issue Price

    It is the price at which FCI issues the essential commodities to the States and Union Territories. It may be less than or equal to the Economic Cost depending upon the policies of Government of India.

Agricultural Crop Insurance in India

  • In 1985, Comprehensive Crop Insurance Scheme (CCIS) was brought in for insuring the yield of the crop. It covered only some of the crops.

    Only farmers, who were having loan, were given insurance cover. Banks used to cut the loan amount and paid the remaining.

  • In 1999, during Rabi season, CCIS was revised to National Agricultural Insurance Scheme (NAIS or Rashtriya Krishi Bima Yojana).

    The NAIS is

    • To give insurance cover and financial support to the farmers just in case of failure of notified crops due to natural calamities, pests, etc.

    • To encourage progressive farming practices, namely high value inputs, high technology, etc.

    • To help stabilize the farm income especially in disaster years.

    • The scheme was drawn back after Rabi 2015-16.
  • Pradhan Mantri Fasal Bima Yojana (PMFBY)

    • Pradhan Mantri Fasal Bima Yojana came into force in place of NAIS and Modified NAIS from Kharif 2016 season.

    • PMFBY provides financial support and insurance cover to the farmers if there is failure of any of the notified crops because of natural calamities, diseases, pests, etc.

    • It encourages farmers to follow modern and innovative agricultural practices.

    • It tries to stabilize the income of the farmers so that they can continue in farming.

    • It ensures flow of credit continuously to the agricultural sector.

Agricultural Marketing Policy in India

  • Government tries to establish regulated market for agricultural produce.

  • It emphasizes in construction of warehouses as per requirement like normal godowns, AC godowns, cold storages plants, ventilated godowns, etc.

  • Government gives importance to strengthen the transport arrangement (forward linkages) with high priority to rural roads.

  • Marketing strategies include grading of the agricultural produce, updation of price every day, enforcing the standards of the weights and measures, etc.