11

Agricultural Price Policy Agricultural Price Policy Formulation by CACP: Formulation by CACP:

an Overviewan Overview

Presentation by The Commission Presentation by The Commission for Agricultural Costs and Prices for Agricultural Costs and Prices

(CACP) at the Planning (CACP) at the Planning Commission, 12Commission, 12thth August, 2010 August, 2010

22

Contents of the PresentationContents of the Presentation

1. 1. Data BaseData Base at field level for collecting at field level for collecting cost of cultivation and concepts A2 and C2 cost of cultivation and concepts A2 and C2 costs.costs.2. 2. MethodologyMethodology for projecting for projecting costs to the costs to the current year from previous years datacurrent year from previous years data3. 3. FactorsFactors that determine MSP of crops that determine MSP of crops

In the end, Feedback from farmers on data In the end, Feedback from farmers on data and methodology and methodology

33

CACP GenesisCACP Genesis

Need for a price policy to take care of the Need for a price policy to take care of the interests of producers and consumers.interests of producers and consumers.

Government set up a Committee under the Government set up a Committee under the Chairmanship of Late L.K.Jha in 1964.Chairmanship of Late L.K.Jha in 1964.

Based on the recommendations, Government set Based on the recommendations, Government set up the Agricultural Prices Commission in January, up the Agricultural Prices Commission in January, 1965. (Chairmen in 60s and 70s M.L.Dantwala, 1965. (Chairmen in 60s and 70s M.L.Dantwala, Ashok Mitra, Dharam Narain)Ashok Mitra, Dharam Narain)

The Commission was re-named as the The Commission was re-named as the Commission for Agricultural Costs and Prices Commission for Agricultural Costs and Prices (CACP) in March, 1985. (CACP) in March, 1985.

44

Composition of the Commission (Present)Composition of the Commission (Present)

ChairmanChairman

Member-SecretaryMember-Secretary

One Official Members (generally economists or One Official Members (generally economists or experts from agricultural economics) experts from agricultural economics)

Two Non-official Members (representing the Two Non-official Members (representing the farming community)farming community)

Total 5 members including ChairmanTotal 5 members including Chairman

55

Terms of Reference for CACPTerms of Reference for CACP

Advise on price policy keeping interests of producers Advise on price policy keeping interests of producers and consumers.and consumers.

The price policy should focus on incentivising The price policy should focus on incentivising producers; rationally utilise resources; effect on rest of producers; rationally utilise resources; effect on rest of the economy.the economy.

Suggest measures on non-price factors.Suggest measures on non-price factors.

Undertake studies in respect of different crops assigned Undertake studies in respect of different crops assigned by Govt. and organise research studies on price policy.by Govt. and organise research studies on price policy.

Advise Govt. on problems relating to agri. prices and Advise Govt. on problems relating to agri. prices and production etc. production etc.

66

Why Minimum Support PriceWhy Minimum Support Price ??

Remunerative and stable price environment important for Remunerative and stable price environment important for increasing agricultural production and productivity (a long increasing agricultural production and productivity (a long term price guarantee)term price guarantee)

Market place for agricultural produce inherently unstable.Market place for agricultural produce inherently unstable.

This often inflict undue losses on growers, despite This often inflict undue losses on growers, despite adopting best cultivation practices.adopting best cultivation practices.

Hence, Minimum Support Prices (MSPs) for major Hence, Minimum Support Prices (MSPs) for major agricultural products fixed by Government each year, agricultural products fixed by Government each year, based on recommendations of CACP. based on recommendations of CACP.

77

Crops under MSP coverageCrops under MSP coverage

CACP recommends MSP for 24 crops:CACP recommends MSP for 24 crops:

Kharif CropsKharif Crops — Paddy, Jowar, Bajra, Ragi, — Paddy, Jowar, Bajra, Ragi, Maize, Tur (Arhar), Moong, Urad, Groundnut, Maize, Tur (Arhar), Moong, Urad, Groundnut, Sunflower seed, Soyabean, Sesamum, Nigerseed, Sunflower seed, Soyabean, Sesamum, Nigerseed, Cotton, and Tobacco.Cotton, and Tobacco.

Rabi CropsRabi Crops — Wheat, Barley, Gram, Lentil — Wheat, Barley, Gram, Lentil (Masur), Rapeseed/Mustard, and Safflower.(Masur), Rapeseed/Mustard, and Safflower.

Other crops Other crops —— Raw Jute, Sugarcane, and Copra.Raw Jute, Sugarcane, and Copra.

88

Data Base for Collecting Cost of Cultivation Data Base for Collecting Cost of Cultivation at field level at field level

‘‘The Comprehensive Scheme for Studying the cost of The Comprehensive Scheme for Studying the cost of cultivation of Principal Crops in India’ (CS) initiated in 1971 cultivation of Principal Crops in India’ (CS) initiated in 1971 is the data base.is the data base.

The CS is administered by the Directorate of Economics The CS is administered by the Directorate of Economics and Statistics (DES), Depart. of A&C, Ministry of Agricultureand Statistics (DES), Depart. of A&C, Ministry of Agriculture

The scheme at present covers 19 States and is The scheme at present covers 19 States and is implemented through 13 Agricultural Universities, 3 general implemented through 13 Agricultural Universities, 3 general universities and Directorate of Tobacco Development.universities and Directorate of Tobacco Development.

These 17 implementing agencies collect and compile data in These 17 implementing agencies collect and compile data in different states and send it to DES for generating the different states and send it to DES for generating the estimates of cost of cultivation.estimates of cost of cultivation.

99

Comprehensive Scheme (CS): Comprehensive Scheme (CS): SamplingSampling

Sampling methodology adopted is three stage Sampling methodology adopted is three stage stratified random sampling.stratified random sampling.

Each State divided into homogenous agro-Each State divided into homogenous agro-climatic zones climatic zones

Primary sampling units (first stage units) are Primary sampling units (first stage units) are tehsilstehsils allocated to different zones allocated to different zones

Second stage units within each tehsil are Second stage units within each tehsil are villagesvillages/ clusters of villages/ clusters of villages

Third stage units are Third stage units are operational holdingsoperational holdings selected at random from each land-size classselected at random from each land-size class..

1010

Classification of Operation HoldingsClassification of Operation Holdings

There are about 840 tehsils and There are about 840 tehsils and 84008400 sampled sampled operational holdings covered under the study. operational holdings covered under the study.

Samples changed every three years.Samples changed every three years.

The following is the classification of operational The following is the classification of operational holdingsholdings::

(a) Less than 1 hectare(a) Less than 1 hectare

(b) Between 1 and 2 hectares(b) Between 1 and 2 hectares

(c) Between 2 and 4 hectares(c) Between 2 and 4 hectares

(d) Between 4 and 6 hectares(d) Between 4 and 6 hectares

(e) Above 6 hectares(e) Above 6 hectares

In each size class, two holdings are selected. Thus 10 In each size class, two holdings are selected. Thus 10 holdings are selected in each villageholdings are selected in each village

1111

System of Data CollectionSystem of Data Collection

Data collected on inputs and outputs in physical and Data collected on inputs and outputs in physical and monetary terms following uniform methodology. The field monetary terms following uniform methodology. The field data collected on the cost accounting method data collected on the cost accounting method

Daily entries of debit/ credit for the expenditure/ income Daily entries of debit/ credit for the expenditure/ income made to assess the total cost/ benefit.made to assess the total cost/ benefit.

Field data collected by field men who are posted in the Field data collected by field men who are posted in the village and one field supervisor allocated to 10 field men.village and one field supervisor allocated to 10 field men.

Farm Analysis Package (FARMAP) software is used for Farm Analysis Package (FARMAP) software is used for processing of cost data. It was developed back in 1992 processing of cost data. It was developed back in 1992 in collaboration with FAO. New package recommended.in collaboration with FAO. New package recommended.

Assistant Statistician is in-charge of data entry, validation Assistant Statistician is in-charge of data entry, validation and transfer of data to the Ministry of Agriculture.and transfer of data to the Ministry of Agriculture.

1212

COST CONCEPTS : A2COST CONCEPTS : A2

Paid out costs (out of pocket expenses) and Imputed costs. Paid out costs (out of pocket expenses) and Imputed costs. Several cost concepts. We concentrate on A2 and C2 Several cost concepts. We concentrate on A2 and C2

Cost A2: Paid out costsCost A2: Paid out costs(a) Value of hired labour (human, animal, machinery).(a) Value of hired labour (human, animal, machinery).(d) Value of seed (both farm produced and purchased)(d) Value of seed (both farm produced and purchased)(e) Value of insecticides and pesticides(e) Value of insecticides and pesticides(f) Value of manure (owned and purchased)(f) Value of manure (owned and purchased)(g) Value of fertilizer(g) Value of fertilizer(h) Depreciation on implements and farm buildings (h) Depreciation on implements and farm buildings (i) Irrigation charges(i) Irrigation charges(j) Land revenue, cesses and other taxes(j) Land revenue, cesses and other taxes(k) Interest on working capital(k) Interest on working capital(l) Miscellaneous expenses (Artisans etc.)(l) Miscellaneous expenses (Artisans etc.)(m) Rent for leased-in land(m) Rent for leased-in land

1313

Percentage Shares of Inputs in Percentage Shares of Inputs in total Input Cost (Paddy)2007-08total Input Cost (Paddy)2007-08

InputsInputs APAP AssamAssam PunjabPunjab Tamil NaduTamil Nadu UPUP WBWB

Human LabourHuman Labour 55.6155.61 60.5560.55 35.1035.10 47.5047.50 46.6946.69 61.1761.17

Bullock LabourBullock Labour 3.453.45 27.2627.26 0.580.58 1.971.97 9.899.89 11.2311.23

Machine LabourMachine Labour 13.5313.53 1.701.70 23.2923.29 18.9818.98 9.949.94 4.204.20

SeedsSeeds 4.294.29 5.405.40 4.664.66 9.959.95 10.1410.14 3.943.94

FertilizerFertilizer 13.2713.27 1.691.69 15.0015.00 12.1912.19 11.4811.48 8.758.75

ManureManure 2.372.37 2.562.56 1.161.16 3.003.00 2.082.08 3.303.30

InsecticideInsecticide 4.704.70 0.000.00 9.539.53 1.731.73 0.580.58 1.581.58

Irrigation ChargesIrrigation Charges 2.782.78 0.840.84 10.6810.68 4.694.69 9.209.20 5.825.82

SumSum 100.00100.00 100.00100.00 100.00100.00 100.00100.00 100.00100.00 100.00100.00

1414

Percentage Shares of Inputs in Percentage Shares of Inputs in total Input Cost (Wheat)2007-08total Input Cost (Wheat)2007-08

InputsInputs BiharBihar HaryanaHaryana MPMP PunjabPunjab UPUPRajasthaRajastha

nn

Human LabourHuman Labour 25.0725.07 32.6232.62 28.3728.37 21.5821.58 27.0927.09 33.4733.47

Bullock LabourBullock Labour 4.214.21 1.101.10 6.466.46 0.480.48 4.904.90 2.682.68

Machine LabourMachine Labour 25.2425.24 28.6628.66 20.0420.04 37.7437.74 24.7124.71 18.5818.58

SeedsSeeds 13.3913.39 8.558.55 13.8113.81 8.548.54 11.5111.51 12.7612.76

FertilizerFertilizer 15.3315.33 15.1915.19 12.5012.50 20.2820.28 14.4414.44 10.3910.39

ManureManure 0.040.04 0.000.00 0.020.02 0.390.39 0.200.20 1.851.85

InsecticideInsecticide 0.000.00 3.193.19 0.040.04 7.097.09 0.200.20 0.610.61

Irrigation ChargesIrrigation Charges 16.7316.73 10.6910.69 18.7618.76 3.893.89 16.9416.94 19.6619.66

SumSum 100.00100.00 100.00100.00 100.00100.00 100.00100.00 100.00100.00 100.00100.00

1515

Cost Concepts: C2 Cost Concepts: C2

C2 ( overall cost of production) = A2 + Imputed costsC2 ( overall cost of production) = A2 + Imputed costs

Imputed value of family labourImputed value of family labour (statutory wage rate or (statutory wage rate or the actual market rate, whichever is higher)the actual market rate, whichever is higher)

Rental value of owned landRental value of owned land( net of land revenue)( net of land revenue)estimated on the basis of prevailing rents in the village estimated on the basis of prevailing rents in the village for identical type of land or as reported by the sample for identical type of land or as reported by the sample farmers subject to the ceiling of ‘fair rents’ given in the farmers subject to the ceiling of ‘fair rents’ given in the land legislation of the concerned state. land legislation of the concerned state.

It varies between 30 and 33 percent of gross value of It varies between 30 and 33 percent of gross value of output (GVO )output (GVO )

Interest on value of owned fixed capital assetsInterest on value of owned fixed capital assets (excluding(excluding land) charged at 10% per annumland) charged at 10% per annum

1616

Methodology for Projecting Costs to the current year Methodology for Projecting Costs to the current year from previous years from previous years

Data made available to CACP at states level by DES. Data made available to CACP at states level by DES. This involve a time lag of two years. For example, in This involve a time lag of two years. For example, in 2008-09, we get data for 2006-07. 2008-09, we get data for 2006-07. Here the work of CACP startsHere the work of CACP starts after getting state level after getting state level data from DES. data from DES. The cost components are required to be projected for the The cost components are required to be projected for the ensuing crop season, by accounting for changes in prices ensuing crop season, by accounting for changes in prices of various inputs. of various inputs. The Commission makes use of wholesale price indices of The Commission makes use of wholesale price indices of farm inputs from the Economic Adviser’s office, Ministry farm inputs from the Economic Adviser’s office, Ministry of Industry and wage rates from Labour Bureau, etc. of Industry and wage rates from Labour Bureau, etc. Commission constructs, for each state and each crop, a Commission constructs, for each state and each crop, a variable input price index to account for likely change in variable input price index to account for likely change in input cost for the year of projection.input cost for the year of projection.

1717

Methodology for Projecting Cost Methodology for Projecting Cost Estimates(Contd)Estimates(Contd)

Price indices constructed include labour (human ,bullock, Price indices constructed include labour (human ,bullock, machine), fertilisers,manures,seeds,insecticides and machine), fertilisers,manures,seeds,insecticides and irrigation charges. Basically for paid-out costsirrigation charges. Basically for paid-out costsTotal input cost broadly divided into two parts: variable Total input cost broadly divided into two parts: variable input cost and fixed cost.Projection done only for input cost and fixed cost.Projection done only for variable cost.variable cost.After constructing individual price indices for each input, After constructing individual price indices for each input, a composite index is constructed.a composite index is constructed.Increase in variable input price index over each of latest Increase in variable input price index over each of latest available3 years data for projecting A2+FL cost,i.e. all available3 years data for projecting A2+FL cost,i.e. all paid-out cost including family labour.paid-out cost including family labour.Intesst on working capital worked separately and the Intesst on working capital worked separately and the added to the projected A2+FL cost to arrive at total added to the projected A2+FL cost to arrive at total projected variable costprojected variable cost

1818

Actual and Projected C2 cost of Actual and Projected C2 cost of production (Rs.quintal): All Indiaproduction (Rs.quintal): All India

PaddyPaddy 2003-042003-04 2004-052004-05 2005-062005-06

Actual C2 Actual C2 491.65 491.65 516.08 516.08 580.73 580.73

Projected C2 Projected C2 525.24 525.24 530.94 530.94 557.60 557.60

WheatWheat 2003-042003-04 2004-052004-05 2005-062005-06

Actual C2 Actual C2 504.58 504.58 513.11 513.11 579.02 579.02

Projected C2 Projected C2 496.82 496.82 515.56 515.56 541.52541.52

1919

Different Committees on Cost of CultivationDifferent Committees on Cost of Cultivation

S.R. Sen Committee (1980) : crop complex approach as S.R. Sen Committee (1980) : crop complex approach as basis of sampling instead of a single crop. basis of sampling instead of a single crop.

C.H. Hanumantha Rao Committee (1990) : value family C.H. Hanumantha Rao Committee (1990) : value family labour at actual wage rates for casual labour and not on labour at actual wage rates for casual labour and not on the basis of attached labour. the basis of attached labour.

Also recommended a separate C3 cost adding 10 Also recommended a separate C3 cost adding 10

percent on account of management input to C2 cost. percent on account of management input to C2 cost.

Y.K. Alagh Committee (2005): reposition the mandate of Y.K. Alagh Committee (2005): reposition the mandate of CACP to include iCACP to include integration of price policy with trade ntegration of price policy with trade policy in the changed scenario of globalized trade.policy in the changed scenario of globalized trade.

Also advocated adoption of LRMC principle etc. Also advocated adoption of LRMC principle etc.

Recommended that transport and some other costs Recommended that transport and some other costs should be included in the costs. should be included in the costs.

2020

Alagh Committee: Recent DecisionsAlagh Committee: Recent Decisions

For recommending MSP, the following items of For recommending MSP, the following items of cost will also be considered by CACPcost will also be considered by CACP

(i)(i) The premium, actually paid by farmers for crop The premium, actually paid by farmers for crop insurance, as a cost iteminsurance, as a cost item

(ii)(ii) Marketing and transport charges incurred by Marketing and transport charges incurred by farmersfarmersAdvising on tariff structure by CACP is not Advising on tariff structure by CACP is not acceptedacceptedAdoption of LRMC principle will not be accepted Adoption of LRMC principle will not be accepted for agricultural crops.for agricultural crops.Statutory Status will not be given to CACPStatutory Status will not be given to CACP

2121

STEPS FOLLOWED BY CACP IN THE PREPARATION OF STEPS FOLLOWED BY CACP IN THE PREPARATION OF PRICE POLICY REPORTSPRICE POLICY REPORTS

Identifying the main issues for the relevant crop seasonIdentifying the main issues for the relevant crop season

Issue of Questionnaire to the stakeholders, to seek factual Issue of Questionnaire to the stakeholders, to seek factual information and views on certain issues.information and views on certain issues.

Holding consultation sessions with the stakeholders Holding consultation sessions with the stakeholders (farmers, industry, state governments, central govt. depart.(farmers, industry, state governments, central govt. depart.

Undertaking field visits, for on-the-spot observations and Undertaking field visits, for on-the-spot observations and feedback.feedback.

Preparation of Price Policy Report.Preparation of Price Policy Report.

2222

PRICE POLICY REPORTS SUBMITTED BY CACPPRICE POLICY REPORTS SUBMITTED BY CACP

Every year 5 Reports are submittedEvery year 5 Reports are submitted: :

Price policy report on Kharif crops (15 crops)Price policy report on Kharif crops (15 crops)

Price policy report on Rabi Crops (6 crops)Price policy report on Rabi Crops (6 crops)

Price policy report on SugarcanePrice policy report on Sugarcane

Price policy report on CopraPrice policy report on Copra

Price policy report on Raw JutePrice policy report on Raw Jute

2323

USE OF WEIGHTED AVERAGE COST METHODUSE OF WEIGHTED AVERAGE COST METHOD

Cost of production vary from state to state and also Cost of production vary from state to state and also within the same state from region to region. within the same state from region to region. For example, the cost (C2 per quintal) for paddy is For example, the cost (C2 per quintal) for paddy is much higher in Andhra Pradesh (Rs.746) as much higher in Andhra Pradesh (Rs.746) as compared to Punjab (Rs.566) in 2010-11. compared to Punjab (Rs.566) in 2010-11. However, MSP is recommended for the country as a However, MSP is recommended for the country as a whole. Regional MSP’s would create inefficiency.whole. Regional MSP’s would create inefficiency.Hence, weighted average cost method followed. Hence, weighted average cost method followed. Weights are the shares in production.Weights are the shares in production.MSP ensures that at least the paid-out expenses and MSP ensures that at least the paid-out expenses and family labour of farmers (A2+FL cost) are generally family labour of farmers (A2+FL cost) are generally covered even in high cost regions, and C2 cost in covered even in high cost regions, and C2 cost in relatively efficient states.relatively efficient states.

2424

C2 Cost/quintal (Rs): Paddy (2010-11) C2 Cost/quintal (Rs): Paddy (2010-11)

StatesStates C2/quintalC2/quintal % shares in total production% shares in total production

Andhra PradeshAndhra Pradesh 746746 14.014.0

AssamAssam 843843 3.63.6

BiharBihar 656656 5.35.3

ChhattisgarhChhattisgarh 636636 5.35.3

GujaratGujarat 585585 1.51.5

HaryanaHaryana 762762 3.73.7

Himachal PradeshHimachal Pradesh 945945 0.10.1

JharkhandJharkhand 856856 3.53.5

KarnatakaKarnataka 645645 3.93.9

KeralaKerala 10931093 0.60.6

Madhya PradeshMadhya Pradesh 856856 1.61.6

MaharashtraMaharashtra 10681068 2.82.8

OrissaOrissa 748748 7.57.5

PunjabPunjab 566566 11.311.3

Tamil NaduTamil Nadu 812812 6.06.0

Uttar PradeshUttar Pradesh 776776 12.812.8

UttarakhandUttarakhand 663663 0.60.6

West BengalWest Bengal 778778 15.815.8

Wt AverageWt Average 742742

2525

C2 Cost/quintal (Rs): Wheat(2009-10)C2 Cost/quintal (Rs): Wheat(2009-10)

StatesStates C2/quintalC2/quintal % shares in total % shares in total productionproduction

BiharBihar 722722 5.45.4

ChhattisgarhChhattisgarh 10061006 0.10.1

GujaratGujarat 626626 4.44.4

HaryanaHaryana 661661 13.613.6

Himachal PradeshHimachal Pradesh 871871 0.80.8

JharkhandJharkhand 12321232 0.20.2

Madhya PradeshMadhya Pradesh 783783 9.09.0

PunjabPunjab 643643 21.021.0

RajasthanRajasthan 614614 9.49.4

Uttar PradeshUttar Pradesh 748748 35.035.0

UttarakhandUttarakhand 807807 1.11.1

Wt AverageWt Average 701701

2626

Yield and Costs in Paddy: Punjab 2000-01 (MSP Rs. 510)Yield and Costs in Paddy: Punjab 2000-01 (MSP Rs. 510)

Yield Interval (Qt./ha)Yield Interval (Qt./ha) Yield(qt/ha)Yield(qt/ha) Cost of cultiCost of culti

(Rs./ha)(Rs./ha)

Cost of prod.Cost of prod.(Rs/qt.(Rs/qt.

16-3616-36 3131 2077920779 663663

36-4336-43 4040 2063820638 520520

43-4743-47 4545 2109421094 468468

47-5147-51 4949 2216022160 453453

51-5551-55 5353 2223122231 422422

55-5855-58 5656 2282622826 406406

58-6158-61 5959 2419024190 410410

61-6361-63 6262 2226922269 361361

63-6763-67 6565 2334623346 361361

67-7567-75 7070 2456124561 350350

averageaverage 57.557.5 2230522305 386386

2727

Factors considered while formulating price policyFactors considered while formulating price policy

The Commission takes a comprehensive view of the entire The Commission takes a comprehensive view of the entire economy of the particular commodity. CACP does not economy of the particular commodity. CACP does not mechanically fix prices although C2 is the main factormechanically fix prices although C2 is the main factor

The factors considered are:The factors considered are:Cost of production; Cost of production; Demand and supply; Demand and supply; Trends in market prices—both domestic and Trends in market prices—both domestic and internationalinternational; ; Parity between prices paid and prices received by farmers; Parity between prices paid and prices received by farmers; Inter-crop price parity; Inter-crop price parity; Effect on industrial cost structure, cost of living, and Effect on industrial cost structure, cost of living, and general price level; general price level; Objective needs of the economy at a particular point of Objective needs of the economy at a particular point of time, including food security, agri. diversification, etc.time, including food security, agri. diversification, etc.Commission recommended higher MSP for wheat when Commission recommended higher MSP for wheat when there was shortage in 2006-07 (food security)there was shortage in 2006-07 (food security)Certain degree of informed judgment is used and not Certain degree of informed judgment is used and not mechanically cost-plus approach followedmechanically cost-plus approach followed

2828

Factors considered for Sugarcane Factors considered for Sugarcane Price PolicyPrice Policy

Cost of production of sugarcaneCost of production of sugarcaneReturn to the growers from alternative Return to the growers from alternative cropscropsAvailability of sugar to the consumer at a Availability of sugar to the consumer at a fair pricefair priceThe price at which sugar is soldThe price at which sugar is soldRecovery of sugar from sugarcaneRecovery of sugar from sugarcaneRealization from sale of by-products ,viz. Realization from sale of by-products ,viz. molasses,bagasse and press mudmolasses,bagasse and press mud

2929

Contd----Contd----

Statutory Minimum Price (SMP) changed in Statutory Minimum Price (SMP) changed in nomenclature to Fair and Remunerative Price nomenclature to Fair and Remunerative Price (FRP) since 2009 through amendment to (FRP) since 2009 through amendment to Sugarcane (Control )Order, 1966, called Sugarcane (Control )Order, 1966, called Sugarcane (Control) Amendment Order,2009.Sugarcane (Control) Amendment Order,2009.

Its essential feature is reasonable margins for Its essential feature is reasonable margins for the growers of sugarcane on account of risk and the growers of sugarcane on account of risk and profits over and above overall C2 cost.profits over and above overall C2 cost.

3030

Percentage change of MSPPercentage change of MSPover all India C2 Cost for Commodities: 2009-10over all India C2 Cost for Commodities: 2009-10

CropsCrops MSP(Rs/Qtl)MSP(Rs/Qtl) C2(Rs/Qtl)C2(Rs/Qtl) MSP over C2(%)MSP over C2(%)

PaddyPaddy 10001000 645645 5555

CottonCotton 25002500 21112111 1818

Jowar Jowar 840840 804804 55

BajraBajra 840840 658658 2828

MaizeMaize 840840 738738 1414

RagiRagi 915915 861861 66

Tur (Arhar)Tur (Arhar) 23002300 21972197 55

MoongMoong 27602760 27052705 22

UradUrad 25202520 22572257 1212

GroundnutGroundnut 21002100 18791879 1212

Soyabean Soyabean 13501350 12001200 1313

Sunflower SeedSunflower Seed 22152215 19151915 1616

SesamumSesamum 28502850 30353035 -6-6

NigerseedNigerseed 24052405 23682368 22

3131

-contd….-contd….

CropsCrops MSP(Rs/Qtl)MSP(Rs/Qtl) C2(Rs/Qtl)C2(Rs/Qtl) MSP over C2(%)MSP over C2(%)

WheatWheat 10801080 649649 6767

BarleyBarley 680680 565565 2020

GramGram 17301730 14951495 1616

Lentil (Masur) Lentil (Masur) 18701870 14621462 2828

Rapeseed/MustardRapeseed/Mustard 18301830 11841184 5555

SafflowerSafflower 16501650 14561456 1313

SugarcaneSugarcane 129.84129.84 8181 6060

Jute Jute 13751375 11931193 1515

3232

MSP and Cost of prodn(C2) of Paddy

0.00

200.00

400.00

600.00

800.00

1000.00

1200.00

Rs/

Qui

ntal

cost MSP

3333

MSP and Cost of Production(C2) of Wheat

0.00

200.00

400.00

600.00

800.00

1000.00

1200.00

Rs/Q

uint

al cost

MSP

3434

Farmers’ feedbackFarmers’ feedbackFarmers have problems at all three levels (These are Farmers have problems at all three levels (These are perceptions of the farmers not of DES or CACP)perceptions of the farmers not of DES or CACP)

Data and Cost Concepts problemsData and Cost Concepts problemsComplaints regarding fieldmen not visiting the villages andComplaints regarding fieldmen not visiting the villages andvacancies of field men and other officials (vacancies of field men and other officials (DES and CACP metDES and CACP met and discussed these issues)and discussed these issues)Wage rates of agri.labour doubled particularly due to MNREGA Wage rates of agri.labour doubled particularly due to MNREGA and this is not reflected in CS dataand this is not reflected in CS dataIn general, the costs of inputs like seeds, irrigation water, In general, the costs of inputs like seeds, irrigation water, insecticides, labour, diesel etc. have increased many times and insecticides, labour, diesel etc. have increased many times and this is not reflected in the cost data of CSthis is not reflected in the cost data of CSSome costs are not included (e.g. one farmer said that he spent Some costs are not included (e.g. one farmer said that he spent Rs.300 per acre for catching rats on paddy fields)Rs.300 per acre for catching rats on paddy fields)Rental value of owned land is lowRental value of owned land is lowInterest for owned fixed capital charged 10% is lowInterest for owned fixed capital charged 10% is lowCost concept should include cost of market risk, etc.Cost concept should include cost of market risk, etc.

3535

Farmer’s Feedback (contd.)Farmer’s Feedback (contd.)Methodology of Projection (farmer feedback)Methodology of Projection (farmer feedback)

Criticism is that CACP is using two or three years old data Criticism is that CACP is using two or three years old data for computing costsfor computing costsState Governments provide higher costs per quintal (in State Governments provide higher costs per quintal (in general)general)

Formulating Price Policy (farmer feedback)Formulating Price Policy (farmer feedback)MSP’s are low. Lowest government employee gets higher MSP’s are low. Lowest government employee gets higher income than farmer.income than farmer.Farmer spends also on health and education. They want Farmer spends also on health and education. They want more like incomes policy than MSPmore like incomes policy than MSPFarmers say that M.S. Swaminathan’s recommendation of Farmers say that M.S. Swaminathan’s recommendation of 50% over cost should be implemented50% over cost should be implementedThey also compare when market prices and international They also compare when market prices and international prices are high and say that MSP should be linked with prices are high and say that MSP should be linked with international pricesinternational prices

3636

Mahatma Gandhi NREGA- its Mahatma Gandhi NREGA- its Impact in AgricultureImpact in Agriculture

Problem of availability of farm labourProblem of availability of farm labour Agicultural wage rate has cosiderably Agicultural wage rate has cosiderably increasedincreasedIn the last two years, rate of increaseIn the last two years, rate of increase

in wage rate in majority of states varies in the in wage rate in majority of states varies in the range of 15 to 42 percent. range of 15 to 42 percent.

Growing reluctance among agricultural labourers Growing reluctance among agricultural labourers to farming activity.to farming activity.

Need for slotting work under MNREGA while Need for slotting work under MNREGA while farming operations not in its seasonal tempo. farming operations not in its seasonal tempo.

3737

CONCLUSIONCONCLUSION

Comprehensive Scheme(CS) is a rich data base. Comprehensive Scheme(CS) is a rich data base. However, need to have a re-look at cost data of However, need to have a re-look at cost data of CS for two reasons.CS for two reasons.

It also gives an opportunity to look into It also gives an opportunity to look into recommendations made by Y.K.Alagh recommendations made by Y.K.Alagh Committee. The Committee notes that “CACP Committee. The Committee notes that “CACP does not analyse the cost behaviour of efficient does not analyse the cost behaviour of efficient and inefficient farmersand inefficient farmersImplementation of the Scheme required to be Implementation of the Scheme required to be tuned up for generation of cost estimates with tuned up for generation of cost estimates with greater accuracy.greater accuracy.

3838

ConclusionConclusionOn the On the Methodology of projecting costsMethodology of projecting costs, the options are limited except , the options are limited except reducing the time lag in providing the datareducing the time lag in providing the dataOn determining On determining levels of MSPslevels of MSPs

First, MSP can not be linked (or chase) to international or national market First, MSP can not be linked (or chase) to international or national market prices because MSP is generally prices because MSP is generally unidirectionalunidirectional. It may not be reduced . It may not be reduced when international prices go down.when international prices go down.

One suggestion is that procurement price should be different from MSP.One suggestion is that procurement price should be different from MSP.Second, Government has not accepted so far the recommendation of M.S. Second, Government has not accepted so far the recommendation of M.S.

Swaminathan (50% over C2 cost). Swaminathan (50% over C2 cost). Third, MSP can not be viewed as incomes policy or solve all problems of Third, MSP can not be viewed as incomes policy or solve all problems of

farmers because non-price factors are equally important for raising farmers because non-price factors are equally important for raising incomes of farmers.incomes of farmers.

Finally, the dilemma of price policy: Remunerative prices for farmers and Finally, the dilemma of price policy: Remunerative prices for farmers and low prices for consumers. Whenever CACP recommends higher prices, low prices for consumers. Whenever CACP recommends higher prices, people say it would hurt the consumers. Can we delink? people say it would hurt the consumers. Can we delink?

3939

THANK THANK YOUYOU