< Previous | Contents | Next >
Managing enough food in the domestic market has been the prime focus of the governement since Independence. Meeting the physical target of food together with the challenge of enabling Indians to procure food for their consumption was also there. Over the year, we see the government devising various ways and means to handle the twin challenges. Once, the country joined the WTO, a new need was felt for producing surplus and competing with the world, so that the benefits of globalisation could also be reaped by the agriculture sector. This section discusses the challenges to management of food in the country.
Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices —a guarantee price to save farmers from distress sale. The MSPs are announced at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP, 1985). The major objectives are to support the farmers from distress sales and to procure food grains for public distribution. In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies
purchase the entire quantity offered by the farmers at the announced minimum price.
Commencing with ‘wheat’ for the 1966– 67, currently the MSPs are announced for 24 commodities including seven cereals (paddy, wheat, barley, jowar, bajra, maize and ragi); five pulses (gram, arhar/tur, moong, urad and lentil); eight oilseeds (groundnut, rapeseed/mustard, toria, soyabean, sunflower seed, sesamum, safflower seed and nigerseed); copra, raw cotton, raw jute and virginia flu cured (VFC) tobacco. The MSPs are fixed at incentive level , to fulfil the following purposes:
(i) to induce more investment by farmers in the farm sector,
(ii) to motivate farmers to adopt improved crop production technologies, and
(iii) to enhance production and thereby farmers, income.
In the absence of such a guaranteed price, there is a concern that farmers may shift to other crops causing shortage in these commodities. The agricultural price policy in India emerged in the backdrop of food scarcity and price fluctuations provoked by drought, floods and international prices for exports and imports.25
The Market Intervention Scheme (MIS) is similar to MSP, which is implemented on the request of state governments for procurement of perishable and horticultural commodities in the event of fall in market prices. The scheme is implemented when there is at least 10 per cent increase in production or 10 per cent decrease in the ruling rates over the previous normal year. Proposal of MIS is approved on the specific request of the state/UT governments, if the states/UTs are ready to bear 50 per cent loss (25 per cent in case of North-Eastern states) incurred on its implementation.
In 1966–67, the Government of India announced a ‘procurement price’ for wheat, a bit higher than its MSP (the purpose being security of food
procurement for requirement of the PDS). The MSP was announced before sowing, while the procurement price was announced before harvesting—the purpose was to encourage farmers to sell a bit more and get encouraged to produce more. But this increased price hardly served the purpose as a suitable incentive to farmers. It would have been better had it been announced before sowing and not after harvesting. That is why since the fiscal 1968–69 the government announced only the MSP, which is also considered the effective procurement price.26
The price at which the government allows offtake of foodgrains from the FCI (the price at which the FCI sells its foodgrains). The FCI has been fetching huge losses in the form of food subsidies. 27 The foodgrains procured are transported to the godowns of the FCI located across the country (counted in the buffer stock). From here they head to the sale counters—to the TPDS or Open Market Sale. The transportaion, godowning, the cost of maintaining the FCI, carriage losses, etc., make the foodgrains costlier (the additional expenses other than the MSP is known as the ‘economic cost of foodgrains’). To make the foodgrains affordable to the consumers, the issue prices for foodgrains are set lower than the total cost of procurement and distribution— the gap converts into the ‘food subsidy’.