Agriculture price policy

Agricultural price policy means a policy to determine, regulate and control the prices of
agricultural products

Agricultural price policy means a policy to determine, regulate and control the prices of
agricultural products.

The government formulated price policy for agricultural produce to secure

remunerative prices for farmers to encourage them to invest more in agricultural
production. Keeping in mind, the government announces Minimum Support Prices
(MSP) for major agricultural products every year. Agricultural Price Policy
Important objectives of agricultural price policy are:
(i). To determine, regulate and control agricultural prices;
(ii). To prevent violent fluctuations in agricultural prices;
(iii) To provide fair prices for agricultural products to the farmers;
(iv) To provide quality goods to households at reasonable prices;
(v) To maintain an appropriate relationship and balance between the prices of foodgrains and
non-foodgrains;
(vi) To integrate prices between various states

What are the main features of agricultural price policy in India

The main instruments of agricultural price policy have been: (1) assured prices to
producers through the system of minimum support prices implemented through
obligatory procurement, (2) inter- and intra-year price stability through open market
operations, (3) maintaining buffer stocks, and (4) distributing food grains ..

Instruments of agricultural price policy in India

Minimum support prices

A minimum support prices is declared by government, normally at the beginning of sowing
season for every important agricultural commodity. These prices are a long term guarantee to
farmers that the prices of these products will not be allowed to fall below a certain level.
These prices assure the farmers and encourage them to carry on and to expand their
production. They put their best efforts to get maximum production. If the prices fall below
minimum support prices, government will buy the entire marketable surplus at procurement
prices

Procurement Prices
These are the prices which are declared by government, generally at the time of harvest of
crops. These are the prices at which the government buys agricultural products from farmers.
These prices serve two important objectives.
To provide guarantee to the farmers that the prices of these products will not be allowed to
fall below a certain level. If market prices fall below this level, the farmers can sell their
products to government.
 It enables government to procure these products for maintaining public distribution system
and buffer stocks. These prices are announced by government on the recommendations of
Commission for Agricultural Costs and Prices (CACP). These prices are widely used by
government for the procurement of wheat and rice. Procurement prices are generally higher
than minimum support prices.
 Issue Prices
 Issue prices are the prices at which food grains are allocated and supplied by Food
Corporation of India (FCI) to the states and union
territories. These prices meet the requirements of public distribution system. Prices of goods
to be supplied through fair price shops directly depend upon issue prices. Issue prices are
normally less than market prices and higher than procurement prices

Retail Prices
Public distribution system is carried on through the network of fair price shops (ration shops).
These shops supply essential consumer goods to households at the prices fixed by
government. These prices are known as retail prices. Retail prices are higher than issue prices
so that the expenses of public distribution system may be recovered and the licensees may get
a certain margin.

Buffer Stock Operation

Buffer stock operations refer to buying and selling of food stocks by government. These
operations serve two important purposes:
To regulate and control price fluctuations within a reasonable limit.
 To enable government to procure food stocks so that regular supply of these stocks may be
ensured throughout the year as well as throughout the country. These operations are carried
on by Food Corporation of India (FCI). Whenever there is a fall in the prices of food stocks,
FCI starts buying them at procurement prices and whenever there is a rise in these prices, FCI
starts selling. Thus, buffer stock operations play an important role in stabilizing agricultural
prices.

Effects of Agricultural Price Policy:

It is correctly stated that agricultural price has worked remarkably well to streamline the price
stability activities. However, its effect is shortly mentioned below:

1. Incentive to Increase Production: Agricultural price policy has been providing necessary
incentive to the farmers for raising their agricultural output through modernisation of the
sector. The minimum support price is determined effectively by the government which will
safeguard the interest of the farmers.

2. Increase in the level of income of Farmers: The agricultural price policy has provided
necessary benefit to the farmers by providing necessary encouragement and incentives to
raise their output and also by supporting its prices. All these have resulted in an increase in
the level of farmers as well as its living standards.
3. Price Stability: The agricultural price policy has stabilized the price of agricultural
products to a greater extent. It has successfully checked the undue fluctuation of price of
agricultural products. This has created a favourable impact on both the consumers and
producers of the country.

4. Change in Cropping Pattern: As a result of agricultural price policy, considerable

change in cropping pattern of Indian agriculture is needed. The production of wheat and rice
has increased considerably through the adoption of modern techniques by getting necessary
support from the Government. But the production of pulses and oilseeds could not achieve
any considerable change in the absence of such price support.

5. Benefit to Consumers: The policy has also resulted in considerable benefit to the
consumers by supplying the essential agricultural commodities at reasonable price regularly.

6. Benefit to Industrials: The agricultural price policy has also benefited the agro industries,
like sugar, cotton textile, vegetable oil etc. By stabilizing the prices of agricultural
commodities, the policy has made provision for adequate quantity of raw material for the
agro industries of the country at reasonable price.

the major shortcomings of the agricultural price are as under:

1. Inadequate Coverage: Inadequate coverage of procurement facility has rendered the price
ineffective. The facility of official procurement reaches only a handful of farmers—of the
total food gains production, procurement covers hardly 15 per cent.

2. Remunerative Price: The remunerative price and/or subsidized inputs have failed to keep
pace with the rate of increase in costs. It has had two consequences. The farmer is
discouraged from producing the maximum level of output; he tries to balance his output
against the level of costs, and settles for a lower level of outputextile, vegetable oil etc. By
stabilizing the prices of agricultural commodities, the policy has made provision for adequate
quantity of raw material for the agro industries of the country at reasonable price.

Agricultural marketing

Meaning

Agricultural marketing covers the services involved in moving an agricultural product

from the farm to the consumer. These services involve the planning, organizing, directing
and handling of considerations, and include pre- and post-harvest operations viz.,
assembling, grading, storage, transportation and distribution.agricultural produce in such a
way as to satisfy farmers, intermediaries and consumers.
Agricultural Marketing is a process which starts with a decision to produce a saleable farm
commodity, and it involves all the aspects of market structure or system, both functional and
institutional, based on technical and economic

The important types of agricultural markets in India are as follows:

Type # 1. Primary or Local Markets:

Primary markets, known as Hatts or Shandies are held once or twice a week in the
neighbourhood of a group of villages. There are more than 22,000 such markets in India.
Most of the agriculturists sell their farm products in these markets. More than 50% of the
total marketed surplus is sold in these markets. These markets are organized by village
Panchayats who charge some rent from shopkeepers for the space occupied. Haggling and
bargaining is a common feature of these markets. The village bania acts as a middleman in
these markets.
Type #  2. Secondary Markets:
These are also known as ‘wholesale’ or ‘assembling’ markets and are called ‘mandis’ or
‘gungs’. There are about 4145 such markets. These markets are permanent in nature; business
in the markets is transacted regularly throughout the year.
The produce is handled in large quantities and specialized operators become necessary for the
performance of different services. The markets provide facilities of storage, handling and
banking services and are well-served by roads and railways. A number of middlemen operate
in these markets.
Type #  3. Terminal Markets:
These markets perform the function of carrying goods to consumers, final buyers or to places
of processing. Such markets are to be found in big cities or at ports. The area of their
operation extends over a state.
Type #  4. Fairs:
Fairs held on religious occasions at pilgrim centres are important sources of marketing of
agricultural produce in India. Such fairs are held annually and are organized by district
officers, local bodies or private agencies. These fairs are very popular in Bihar, W. Bengal,
UP, Orissa, Maharashtra, Gujarat and Rajasthan.
Type #  5. Regulated Markets:
These have been set up by the Government with the purpose of checking fraudulent practices
which are generally practiced by traders in the primary and secondary markets. In these
markets, the rules and regulations are prescribed by the Government marketing practices.
Type #  6. Co-Operative Marketing:
These markets function on the basis of principles of cooperation. A cooperative marketing
society carry the agricultural produce direct to the consumers thus eliminating a large army of
middlemen and intermediaries.
Type #  7. State Trading: State trading in agricultural produce has become an important
element of agricultural marketing in India. State agencies like, Food Corporation of India,
set up their exclusive centres in and around villages and mandis at harvest time to procure
produce from peasants to Government at fixed prices.

Functions of agricultural marketing

1. Collection and assembling

2. Grading and standardization
3. Storage
4. Transportation
5. Processing
In order to have best advantage in marketing of agricultural produce the farmer should
enjoy certain basic facilities:

(i) The farmer should have proper information about the future demand of a particular
commodity in the market, so that he can plan earlier to sow the seeds of those crops which
can get him a fair return.
(ii) Most of the villages are not linked with the mandi or business centres, which are the only
means of transport for a farmer. Hence, a proper rural network with all-weather roads are
necessary to develop the farmers/rural areas.
(iii) Remote/small village farmers are dependent on other small towns/cities for sale and
purchase of outputs or inputs. An efficient road transport system is necessary for all types of
rural people/farmers
(iv) The farmer should have proper storage facilities for storing his agricultural produce.
(v) He should have holding capacity, in the sense, that he should be able to wait for times,
when he could get better prices for his produce and not dispose of his stocks immediately
after the harvest when the prices are very low.
(vi) He should have clear information regarding the market conditions as well as about the
ruling prices; otherwise, he may get cheated.
(vii) There should be more organized and regulated markets, where the farmers will not be
cheated by the middlemen or intermediaries.
(viii) The number of intermediaries should be less so that the middlemen’s profits are
reduced. Which as a result, will increase profits to the farmer.
(ix) The farmer can easily get institutional credit facilities for agriculture and allied activities.
(x) In the event of failure of crops, due to drought or other natural calamities, he should get
financial security and crop insurance for his crops.
(i) The farmer should have proper information about the future demand of a particular
commodity in the market, so that he can plan earlier to sow the seeds of those crops which
can get him a fair return.
(ii) Most of the villages are not linked with the mandi or business centres, which are the only
means of transport for a farmer. Hence, a proper rural network with all-weather roads are
necessary to develop the farmers/rural areas.
(iii) Remote/small village farmers are dependent on other small towns/cities for sale and
purchase of outputs or inputs. An efficient road transport system is necessary for all types of
rural people/farmers
(iv) The farmer should have proper storage facilities for storing his agricultural produce.
(v) He should have holding capacity, in the sense, that he should be able to wait for times,
when he could get better prices for his produce and not dispose of his stocks immediately
after the harvest when the prices are very low.
(vi) He should have clear information regarding the market conditions as well as about the
ruling prices; otherwise, he may get cheated.
(vii) There should be more organized and regulated markets, where the farmers will not be
cheated by the middlemen or intermediaries.
(viii) The number of intermediaries should be less so that the middlemen’s profits are
reduced. Which as a result, will increase profits to the farmer.
(ix) The farmer can easily get institutional credit facilities for agriculture and allied activities.
(x) In the event of failure of crops, due to drought or other natural calamities, he should get
financial security and crop insurance for his crops
.
Agricultural Marketing – Steps Taken for Improvisation

1. Creation of planned network of warehouses at all markets.

2. Linking co-operative credit with farming, marketing and processing.
3. Development of rural transport.
4. Adequate publicity to market information.
5. Stabilisation of food grain prices.
6. Government organisations, such as Food Corporation of India, Cotton Corporation of
India, etc., for marketing agricultural produce in a big way.
7. Marketing Surveys of various agricultural products were undertaken and these were duly
published. These surveys revealed the various problems encountered in agricultural
marketing and pointed out remedies to solve those problems.
8. The government took great interest in standardisation and grading of agricultural produce.
Agmark goods have a wider market and can command better prices also. There is a Central
Quality Control Laboratory and eight regional laboratories to test the quality and purity of
produce.
9. By 1985-86 there were over 5,600 regulated markets in India.
10. Warehousing facilities have been provided by the government and co-operative marketing
societies.

Defects in the agricultural marketing in India

1. Lack of Organization:
There is lack of organization among producers. Producers are small and scattered. They have
no collective organization of their own to protect their interests.
2. Forced Sales:
The formers are forced to sell their products due to:
i. poverty and prior indebtedness.
ii. Lack of storage facilities.
iii. Time factor, particularly with regard to perishable goods.
3. Existence of Large Number of Middlemen:
There are a large number of intermediaries or middlemen between the producers and the
consumers. These middlemen sell the produce to the consumers at a higher price and give
lower returns to the producers.
Approximately 50% of the price paid by the consumer goes to middlemen.
4. Multiplicity of Market Charges:
The producers pay numerous and various marketing charges. They are more than 20% of the
income of the produce. They pay market charges at different levels such as – commission to
the dalal, weigh men charges, brokerage, charges of labourers who help in unloading the cart,
etc., apart from the deduction for impurities in the produce by the wholesaler.
5. Multiplicity of Weights and Measures:
There is lack of standard weights and measures. Weights made of sticks, stones, bits of old
iron are commonly used in the villages and markets.
The multiplicity of weights and measures employed has many defects:
i. It makes supervision very difficult.
ii. It gives opportunity to cheat the producers.
6. Adulteration:
Due to adulteration, the quality of the produce is reduced. Even the good produces are
subjected to customary inclusion of impurities. The adulterants, such as – papaya seeds, are
mixed with pepper; chilly powder is mixed with red brick powder supari with sawdust; ghee
with vanaspathi; and tea dust with sawdust. Medicines are also adulterated.
7. Inadequate Storage Facility:
Storage facility is far below the requirements in rural and urban areas. The loss due to
inadequate storage has been estimated to be 5-15% in weight and quality. Grains lose weights
due to the change of weather. Crops like jowar, pulses and maize are found to be infested
with insects even before harvest.
8. Lack of Transport Facility:
There are bad roads which lead to loss during transportation and cause strain to the animals.
The freight policy followed by railways in India is also not satisfactory. Railways do not have
the facility for quick and safe transport of perishable products.
9. Absence of Grading and Standardization:
There is no standard grade for important commodities like rice and wheat in the whole
country. The ungraded mixed qualities are sold at low prices.
10. Lack of Market Information:
Most of the farmers are illiterates and they are ignorant of the accurate prices ruling in the
market. They depend upon inaccurate information.
11. Lack of Financial Facility:
Most of the financial needs of the farmers in India are met by village moneylenders; the
moneylenders come forward, purchase the produce by paying low prices under the loan
agreement, and again issue loans for further cultivation or for their family needs. The loan is
advanced on the condition that the produce will be sold to them or through them.

Measures to improve the agriculture in India

The defects of agricultural marketing can be removed by the following measures:
i. Establishment of regulated market – Many defects of agricultural marketing and
malpractices of middlemen can be removed by the establishment of regulated markets.
ii. Use of standard weights and measures – Cultivators and purchasers are safeguarded
against cheating by false or underweight by the use of standard weights and measures.
iii. Storage and warehousing facilities – Increase in storage and warehousing facilities is
necessary to remove the defects in agricultural marketing. Warehousing is the protector of
national wealth.
iv. Improvement in transport facilities – For proper marketing of agricultural goods, adequate
and appropriate transport facilities are very important.
v. Provision of marketing information – The important providers of market information are:
private arrangements for traders, newspapers, government publications, regulated markets,
radio and TV and cooperative societies.
vi. Development of cooperative marketing – The defects of agricultural marketing are
removed by the development of cooperative marketing.

Land reforms
Land reforms refer to the reforms that are related to the ownership of land, land revenue,
rules and regulations, and more. Intermediaries between the government and actual tillers
of the soil popularly known as zamindars, have been abolished.

Among the other major land reform laws that were introduced were the tenancy
abolition and regulation acts. They attempted either to outlaw tenancy altogether or to
regulate rents to give some security to the tenants. In most of the states, these laws were
never implemented very effectively.

The Land Reforms of the independent India had four components:

1. The Abolition of the Intermediaries

2. Tenancy Reforms
3. Fixing Ceilings on Landholdings
4. Consolidation of Landholdings.
 These were taken in phases because of the need to establish a political will for their
wider acceptance of these reforms.
Abolition of the Intermediaries
 Abolition of the zamindari system: The first important legislation was the abolition of
the zamindari system, which removed the layer of intermediaries who stood between the
cultivators and the state.
 The reform was relatively the most effective than the other reforms, for in most areas it
succeeded in taking away the superior rights of the zamindars over the land and
weakening their economic and political power.

o The reform was made to strengthen the actual landholders, the cultivators.
 Advantages: The abolition of intermediaries made almost 2 crore tenants the owners of
the land they cultivated.

o The abolition of intermediaries has led to the end of a parasite class. More lands
have been brought to government possession for distribution to landless farmers.
o A considerable area of cultivable waste land and private forests belonging to the
intermediaries has been vested in the State.
o The legal abolition brought the cultivators in direct contact with the government.
 Disadvantages: However, zamindari abolition did not wipe out landlordism or the
tenancy or sharecropping systems, which continued in many areas. It only removed the
top layer of landlords in the multi-layered agrarian structure.
 o It has led to large-scale eviction. Large-scale eviction, in turn, has given rise to
several problems – social, economic, administrative and legal.
 Issues: While the states of J&K and West Bengal legalised the abolition, in other states,
intermediaries were allowed to retain possession of lands under their personal cultivation
without limit being set.

o Besides, in some states, the law applied only to tenant interests like sairati mahals
etc. and not to agricultural holdings.

 Therefore, many large intermediaries continued to exist even after the formal
abolition of zamindari.
o It led to large-scale eviction which in turn gave rise to several socio-economic and
administrative problems.
Tenancy Reforms
 After passing the Zamindari Abolition Acts, the next major problem was of tenancy
regulation.

o The rent paid by the tenants during the pre-independence period was exorbitant;
between 35% and 75% of gross produce throughout India.
 Tenancy reforms introduced to regulate rent, provide security of tenure and confer
ownership to tenants.

o With the enactment of legislation (early 1950s) for regulating the rent payable by the
cultivators, fair rent was fixed at 20% to 25% of the gross produce level in all the
states except Punjab, Haryana, Jammu and Kashmir, Tamil Nadu, and some parts of
Andhra Pradesh.
 The reform attempted either to outlaw tenancy altogether or to regulate rents to give
some security to the tenants.
 In West Bengal and Kerala, there was a radical restructuring of the agrarian structure that
gave land rights to the tenants.
 Issues: In most of the states, these laws were never implemented very effectively.
Despite repeated emphasis in the plan documents, some states could not pass legislation
to confer rights of ownership to tenants.

o Few states in India have completely abolished tenancy while others states have given
clearly spelt out rights to recognized tenants and sharecroppers.
o Although the reforms reduced the areas under tenancy, they led to only a small
percentage of tenants acquiring ownership rights.
Ceilings on Landholdings

 The third major category of land reform laws were the Land Ceiling Acts. In simpler
terms, the ceilings on landholdings referred to legally stipulating the maximum
 size beyond which no individual farmer or farm household could hold any land. The
imposition of such a ceiling was to deter the concentration of land in the hands of a few.
o It was 10-18 acres for best land, 18-27 acres for second class land and for the rest
with 27-54 acres of land with a slightly higher limit in the hill and desert areas.
 With the help of these reforms, the state was supposed to identify and take possession of
surplus land (above the ceiling limit) held by each household, and redistribute it to
landless families and households in other specified categories, such as SCs and STs.
 Issues: In most of the states these acts proved to be toothless. There were many
loopholes and other strategies through which most landowners were able to escape from
having their surplus land taken over by the state.

o While some very large estates were broken up, in most cases landowners managed to
divide the land among relatives and others, including servants, in so-called ‘benami
transfers’ – which allowed them to keep control over the land.
o In some places, some rich farmers actually divorced their wives (but continued to
live with them) in order to avoid the provisions of the Land Ceiling Act, which
allowed a separate share for unmarried women but not for wives.
Consolidation of Landholdings

 Consolidation referred to reorganization/redistribution of fragmented lands into one

plot.

o The growing population and less work opportunities in non- agricultural sectors,
increased pressure on the land, leading to an increasing trend of fragmentation of the
landholdings.
o This fragmentation of land made the irrigation management tasks and personal
supervision of the land plots very difficult.
 This led to the introduction of landholdings consolidation.

o Under this act, If a farmer had a few plots of land in the village, those lands were
consolidated into one bigger piece of land which was done by either purchasing or
exchanging the land.
 Almost all states except Tamil Nadu, Kerala, Manipur, Nagaland, Tripura and parts of
Andhra Pradesh enacted laws for consolidation of Holdings.
 In Punjab and Haryana, there was compulsory consolidation of the lands, whereas in
other states law provided for consolidation on voluntary basis; if the majority of the
landowners agreed.
 Advantages: 
It prevented the endless subdivision and fragmentation of land Holdings.

o It saved the time and labour of the farmers spent in irrigating and cultivating lands at
different places.
o The reform also brought down the cost of cultivation and reduced litigation among
farmers as well.