The working group on risk management in
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- 6.1. Introduction
| 6. Price Support Measures The Working Group had detailed discussions with the Commission for Agricultural Costs Prices (CACP), and experts and stakeholders on MSP based procurement and related issues. The issues are well known and include benefits only a few States and commodities, does not fully cover the spatial variations in cost of production, procurement machinery doesn’t have adequate network, etc. 6.1. Introduction In a country like India, farming is one of the most vulnerable production activities which gets affected immediately, by the adverse actions of nature and humans, making it highly risky. Gains are also not high for the individual farmers due to smallholdings even if a normal/ bumper crop is harvested. Thus this sector is a classic example of “high risk low return” activity. The major risks in an agrarian economy are on account of wide fluctuations in yield and price, which when combined, pose a serious risk to the farmer’s income and well-being. Specific adverse agro climatic conditions contribute to the production risks of individual crops, both in irrigated and un-irrigated areas. Also, uncertain supply of agriculture products in relation to their demand, often causes high price volatility in the market. The perishable nature of agricultural commodities, particularly fruits and vegetables, further adds to variability in supplies and prices. Weaknesses of agricultural marketing systems and infrastructure too, contribute to the farmer’s risk in price income realization. Although, globalization and liberalization are expected to benefit the farmers by creating greater opportunities for better price realisation, the market sometimes exposes them to larger risks as Indian agricultural commodities are little known by internationally, making them dependent more on a push, rather than a pull factor. Further, the seasonality of production also leads to price volatility when harvested crops reach the markets in very large volumes within a short span of time. When there is a bumper crop, the farmers find themselves in the buyers market during the peak marketing season, which makes them a price taker. This kind of market often inflicts undue losses, even when they adopt the best available technology and produce efficiently. It is because of these factors that the policy of assurance of a remunerative and stable price environment has been pursued by the government for long. The specific instruments include, Minimum Support Price (MSP) and Market Intervention Scheme (MIS). Download 0.68 Mb. Share with your friends:
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