1. Support Prices
Moon in the Mirror

2. A price guarantee for farmers
• The Agricultural Prices Commission was set up in January
1965 to advise the Government on price policy for
agricultural commodities, with a view to evolving a
balanced and integrated price structure in the perspective
of the overall needs of the economy (emphasis added)
and with due regard to the interests of the producer and
the consumer” (GOI, 1965).
• Later on extended to 25 crops
– Cereals: Paddy, Wheat, Jowar, Bajra, Maize, Ragi, Barley
– Pulses: Moong, Urad, Arhar, Gram,
– Oilseeds: Groundnut, Rapeseed and
Mustard, Niger, soybean, Sunflower, Sesamum and Safflower
– Fiber Crops: Cotton and Jute
– Others: Sugarcane, VFC Tobacco, Onion, Potato, Coconut

3. Various Committees
• 1965: LK Jha Committee
• 1980: Sen Committee
• 1990: Hanumanth Rao Committee
• 1995: Report of the Task Force on Terms of
Trade between Agriculture and Non-
Agricultural Sectors

4. Strategies
• Announcement of MSP for major Foodgrains
• Procurement prices for purchasing surplus
from the cultivators
• Public Distribution System and building proper
buffer stocks for the purchased
• zonal restrictions for the movement of
foodgrains to manage the supply and demand.

5. Factors considered
1. Cost of production
2. Changes in input prices
3. Input-output price parity
4. Trends in market prices
5. Demand and supply
6. Inter-crop price parity
7. Effect on industrial cost structure
8. Effect on cost of living
9. Effect on general price level
10. International price situation
11. Parity between prices paid and prices received by the farmers.
12. Effect on issue prices and implications for subsidy

6. Regional Variations
• Costs of Production per Quintal of Paddy 2012-13
– Andhra Pradesh : Rs. 1207.11
– Chhattisgarh : Rs. 1111.07
– Jharkand : Rs. 1433.98
– Maharashtra : Rs. 1766.92
– Uttarakand : Rs. 813.96
– Punjab : Rs. 908.48
• MSP for Quintal
– Common Variety : Rs. 1250
– Fine Variety : Rs. 1280

7. Problems in estimating yields
• Considerable divergence exists between yields obtained from Crop
Cutting Experiments (CCEs) and those from Comprehensive Scheme
(CS Scheme) to study Cost of Cultivations both by Department of
Economics and Statistics (DES) of Ministry of Agriculture
• In the last ten years between 2001-01 to 2009-10 on average the
yields estimated by CCEs were lower than CS Scheme across crops
viz.,
– Paddy (19.7%)
– Maize (10.80%)
– Tur (17.12%)
– Soybean (16.41%)
– Groundnut (-0.82%)
– Cotton (301.97%)
• CACP takes the yields from the CS scheme significantly
underestimating per quintal cost of production.
• CACP collects the data from CS Scheme through 5800 centres
through the state agriculture universities where as the CCEs are
done across 9,73,184 centres with the help of State Governments.

8. FARM HARVEST PRICES AND MINIMUM SUPPORT
PRICES OF PADDY IN AP
Farm Harvest Price Minimum Support
Price
YEAR Kharif Rabi Average Grade-A Commo
n
1998-99 510.53 426.17 486.35 470 440
1999-00 559.42 524.44 538.66 520 490
2000-01 507.93 478.58 499.61 540 510
2001-02 565.77 529.40 550.16 560 530
2002-03 623.29 578.08 609.27 560 530
2003-04 569.37 572.27 570.38 560 530
2004-05 605.49 604.07 605.02 580 550
2005-06 648.21 579.59 616.95 600 570
2006-07 670.19 622.22 650.30 610 580
2007-08 777.76 767.17 773.66 675 645
2008-09 1035.75 892.28 963.56 921 950
2009-10 1100.67 955.76 1072.66 1030 1000
2010-11 880.65 850.76 865.70 1080 1030
2011-12 AP Govt
Source: DES,
1050 1110 1080

9. Prices recommended by AP government for 2012-13
Crops Cost of Rec. Support MSP in 2012-13
Cultivation Rs Price Rs /acre Rs/Quintal
/acre
Paddy (Fine var) , , 1280
Paddy (Common) , , 1250
Groundnut , , 3700
Jowar , , 1520
Maize , , 1175
Redgram , , 3850
Blackgram , , 4300
Greengram , , 4300
Soyabean , ,
Cotton , ,
Sugarcane ,
Ragi , , 1500
Sunflower , , 3700
Sesame , , 4200

10. State governments irresponsible
MSPs recommended for 2013-14 (Rs/q)
Crop Announced MSP Announced MSP Recommended MSP
(Rs/q) 2011-12 (Rs/q) 2012-13 (Rs/q) 2013-14
Paddy 1110 1280 2811
Blackgram 3300 4300 7295
Soybean 1650 2200 4382
Groundnut 2700 3700 8019
Sunflower 2800 3700 7412
Sesame 3400 4200 7847
Ragi 1050 1500 2925
Maize 980 1175 2100
Jowar 1000 1520 2862
Redgram 3850 7277
Greengram 4300 7287
Government of Andhra Pradesh

11. Procurement of various food grains by the
Government (2004-05 to 2010-11)
Year Rice Wheat Coarse grains Total
Prod Procur. Prod. Procur. Prod. Procu Prod. Procu.
2004-05 885.3 246.85 721.5 167.95 276.0 8.27 1882.8 423.07
2005-06 831.3 276.56 686.4 147.87 334.6 11.51 1852.3 435.94
2006-07 917.9 251.06 693.5 92.26 340.6 0.00 1952.0 343.32
2007-08 933.5 287.36 758.1 111.28 339.2 2.03 2030.8 400.67
2008-09 966.9 336.85 785.7 226.89 407.6 13.75 2160.2 577.49
2009-10 991.8 301.34 806.8 253.82 400.3 4.08* 2198.9 555.08
2010-11 225.25*
Source: Koushik Basu (2010) Economics of Food grain management in India and Data from
Directorate of Economics and Statistics and updated from Ministry of Food and Civil
Supplies website.

12. States where the C2 cost projection by CACP were not covered
Crop
by MSP
A.P, Assam, Haryana, Karnataka, Kerala, M.P, Tamil Nadu & West
Paddy
Bengal
Jowar A.P, Karnataka, M.P, Maharashtra & Tamil Nadu
Bajra Gujarat, Haryana, U.P, Maharashtra
Maize A.P, H.P, Karnataka, M.P, Rajasthan & U.P
Ragi Karnataka, Tamil Nadu
Tur
A.P, Gujarat, Karnataka & Orissa
[Arhar]
Moong A.P, Maharashatra, Orissa & Rajasthan
Urd M.P, Maharashtra, Orissa, Rajasthan & Tamil Nadu
Gram Haryana, Rajasthan
Barley Rajasthan

13. Real Prices lower than MSP (2010-11)
Crop MSP M.P. Maha - Gujarat Rajasthan
rashtra
Paddy 1000 850 785,853
Jowar 880 601 851
Maize 880 860 793
Bajra 880 700
Source: CACP Kharif Price Report,, 2011-12

14. Prices to Farmers
during 2010-11 and 2011-12
Crop 2010-11 Rs/Quintal 2011-12 Rs/Quintal
Cotton 6500 3600
Turmeric 14000 4000
Chillies 12000 5500
Redgram 5000 3500
Blackgram 5200 3500
Bajra 4000 2000
Jowar 2500 1800
Onion 16000 2500
Sweet Orange 75000 60000

15. Swaminathan recommendation?
C2+50% Addl
Product Market Target Addl exp exp (in
Crop ion cost MSP price price (in Cr) C2+ 0% Cr)
Paddy 1530 1250 1300 2295 14575 1683 6039.2
Jowar 1994 1500 1400 2990 379 2193 189.3
Bajra 1258 1175 955 1887 40 1383 18.6
Maize 1147 1175 1244 1720 1209 1262 43.9
Ragi 1177 1500 1289 1765 13 1295 0.2
Redgram 3668 4000 3826 5502 174 4035 21.6
Greengram 3840 4500 4712 5556 78 4224 0
Blackgram 3495 4300 4103 4628 128 3845 0
Groundnut 3746 3700 4678 5619 580 4120 0
Soya 1918 2200 2932 2877 0 2110 0
Cotton 3600 4174 98 3061 0
2783 3884
Sunflower 3992 3700 3650 5988 172 4391 5.5
Total 17614 6318.3

16. Procurement of rice during 2009-10
by FCI and State Agencies
(In '000 tonnes)
2009-10 *(OCTOBER to SEPTEMBER)
State / U.T
FCI State agencies Total
Andhra Pradesh 6228 204 6432
Assam 8 0 8
Bihar 283 549 832
Chandigarh 14 0 14
Chhatisgarh 437 2705 3141
Haryana 81 1737 1818
Jharkhand 15 7 23
Karnataka 72 10 83
Kerala 0 261 261
Madhya Pradesh 0 194 194
Maharashtra 55 156 211
Orissa 190 2277 2467
Punjab 474 8801 9275
Tamil Nadu 0 1143 1143
Uttar Pradesh 374 2317 2691
Uttaranchal 207 169 375
West Bengal 252 914 1166
Total : 8690 21443 30134
Neg. - below 500 tonnes *Position as on 30/07/2010.

17. Current Status MSP
• MSP, if implemented properly, can effectively play the
expected roles: to act as incentive price, crop pattern
and input intensity navigator, risk abater and
technology promoter
• Not an incentive price for the crop or technology
adoption
• Largely, the crops which received raw deal in terms of
relative prices were the ones grown by resource poor
farmers and in slow growth regions.
• Not a remunerative price
• Do not drive rational land use pattern

18. Main issues
• Faulty Price determining mechanism
– Estimating costs of cultivations
– Factors taken into account by CCEA
• Problems in administering
– Not in all crops and regions
– No procurement operations like in Odisha
– Dependency on Rice millers like in AP
– Only land owning farmers getting benefit like in Chhattisgarh
• Not a statutory right
• Minimum Support Price becoming Maximum Price because of levi
• Restricting Open Market prices using Essential Commodities Act
• Higher MSPs may lead to inflation and encourage cheaper imports
• Impact of NFSB