The working group on risk management in
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| 6.2. MSP: At present, the Government of India announces minimum support prices for 25 major agricultural commodities covering all-important cereals as well as pulses, oilseeds, cotton, jute, sugarcane and tobacco. These take into account several factors including, cost of production, changes in input prices and input- output price parity. However, the MSP mechanism has been criticized on the following grounds It serves only a few States and commodities Subsidy burden due to MSP operation is high MSP does not fully cover spatial variations in production costs MSP does not fully account for inflation There are procedural bottlenecks ineffective implementation A paradigm shift is needed in the post WTO regime, where market forces play a greater role in price discovery and better price realization. Further, the emergence of commodity futures markets, also take care of market uncertainties through price discovery and risk coverage, etc. Therefore, a two price regime i.e. MSP and Procurement Price, will have to be brought into practice in a situation when market prices rule considerably higher than the MSP. This would imply that in a year of low production, a procurement price closer to the market price would have to be offered to the farmers rather than MSP. The need to strengthen the operation of MSP across regions and crops is vital. While a larger share of wheat and rice procurement by the Government was due to active involvement of State agencies in Punjab and Haryana, change is being witnessed with the introduction of a decentralized procurement policy in 1997-98. For instance, during 103 2005-06, Chhattisgarh became the third largest contributor to the procurement of paddy. States like West Bengal and Orissa also contributed to the procurement at much larger scale. With the diversification of agriculture, other crops, such as Copra, Cotton, Tur, Rapeseed and Mustard, Safflower were also the beneficiary of MSP intervention. However, in terms of area coverage and volume of market surplus, these crops are relatively minor compared to the wheat and rice. The position of production and procurement for various agricultural commodities is given in Table, below: Download 0.68 Mb. Share with your friends:
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