UNIT-V

Variation in agricultural prices

Q1) What are government measures-initiated increase farmer’s income.

Ans:

Union Budget 2020 India: Agriculture and allied sector is one of the significant contributors to India’s economy with a share of 14.9% 1 in the total Gross Value Added (GVA) in 2017-18 at constant prices. It also employs 43.9% 2 of the country’s total workforce. Given the importance of this sector to both the economy and the country’s rural population, the Central Government has identified various priorities for the development of this sector. Some important ones include doubling of farmers income by 2022-23, improving the terms of trade for farmers by focusing on target-based exports, promoting precision agriculture through use of innovative technologies, increasing water-use efficiency and renewing focus on animal husbandry, dairy and fisheries thereby shifting cultivators from farm to non-farm activities.

To achieve these objectives various initiatives and schemes have been undertaken by the Government. For increasing the farmer’s income, the government raised the MSP for select crops; it is also providing Rs 6,000 annually to farmers under the Pradhan Mantri Kisan Samman Nidhi (PMKSN); for linking the farmers directly to the market the government is working on the National Agricultural Market (e-NAM), a single national market allowing interstate trading of agricultural produce.

For improving the on-farm water use efficiency, the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) has been launched. For ensuring continuous supply and mitigating price volatility in Tomato, Onion and Potato the government is implementing the Tomato, Onion and Potato (TOP) scheme under Operation Greens aimed at promoting market linkages, farm gate agri infrastructure, agri-logistics, processing facilities etc. To boost exports, financial assistance and subsidies to exporters is being provided through the Agricultural and Processed Food Products Export Development Authority (APEDA).

Last year a separate Department of Animal Husbandry, Dairy and Fisheries was formed to give special impetus for harnessing the immense potential of this agri-allied sector. Other initiatives like the Fasal Bima Yojna, Agri Marketing infrastructure scheme, Model Agri Produce Marketing Act etc. are also being undertaken for the overall development of this sector.

Last year the government significantly increased the budget outlay of the Agri and Allied sector by about 78% to Rs 1.30 lakh crore. To supplement these initiatives and to take forward the agri sector development agenda, some additional measures that the government can consider are as follows.

* For providing farmers adequate access to finance, innovative lending schemes linking loan repayment to the crop harvest period rather than a fixed term may be introduced. Further delineating formal guidelines to permit restructuring of farmer loans with lenders based on the crop harvested, market prices and compulsory farm insurance may also be considered.

* Last year’s budget announced forming another 10,000 Farmer Producer Organizations (FPOs) in the next 5 years. To make these FPOs sustainable it is suggested that innovative financing schemes with flexible collateral assessment requirement may be considered for FPOs. Further to promote use of innovative technologies in agri production, incentives may be provided to FPOs for adopting smart technologies like smart water sprinklers, sensors-based pest control, humidity & soil nutrient sensors etc. This will help individual farmer members to access latest technologies at relatively lower cost.

Q2) Describe a survey data organized by NABARD on price instability.

Q3) Write a note on – variation in agriculture price.

Ans: Theory of price: Study of how prices of goods are determined in the commodity market and how prices of factors of Production are determined in the factors market.

Inverse relationship between quantity demanded of a commodity and its own Price (law of demand): Remaining other things constant, Downward slope of demand curve indicates that more is purchased response to fall in price. This can be explained in terms of the following factors:

Price elasticity of demand: Measurement of percentage change in quantity demand in relation to a given percentage change in own price of commodity.

Degrees of price elasticity of demand –

Price elasticity of supply: Measurement of change in quantity supplied of a commodity due to change in its price.

Law of variable proportion: when more and more of variable factor is combined with fixed factor, a stage will definitely come when marginal product of variable factors starts diminishing.

Factors affecting elasticity of supply:

Q4) Write a short note on' income Instability of farmers.

Ans: Income of Indian farmers is widely instable due to various factor, as farmers cultivates crop with Traditional outlook, they mostly involve in subsistence farming and are dependent on outdated and ancient methods of farming. Some reasons result in income instability of farmer’s are:

Q5) Elaborate MSP as a live to strengthen agriculture price.

Ans: Minimum Support value (MSP) may be a market intervention initiated by the govt of India to secure agricultural producers against any sharp fall in farm prices. The minimum support prices are started by the govt of India at the start of the sowing season certainly crops on the idea of the recommendations of the Commission for Agricultural prices and costs (CACP). MSP is price fastened by Government of India to guard the farmers - against imprudent fall in price throughout significant production years. The minimum support prices are guarantee price for farmer’s produce by the Government. The major objectives are to support the farmers from anguish sales and to acquire food grains for public distribution. Determination of MSP

• Production cost

 • Changes in price of inputs

• Input-output price uniformity

 • Market price's trend

• Demand and supply

• Inter-crop price uniformity

• Effect on industrial cost structure

 • Effect on cost of living

• Effect on general price level

• International price situation

 • Uniformity between prices paid and prices received by the farmers.

• Effect on implications for subsidy and issue prices

Q6) Mention subsidies provided by government to Indian farmers.

Ans: Introduction of the High Yielding Varieties (HYV) seeds programmed in the 1960s demanded a higher supply of fertilizer and irrigation water to the farmers, the government tried to ensure that they were accessible and affordable. Subsidy on fertilizers is provided by the Central government and subsidy on water is provided by the State governments.

Types of Agricultural Subsidy in India

Fertilizer Subsidy:  Expansion of cheap chemical or non-chemical fertilizers among the farmers. It amounts to the difference between price received from farmers and price paid to manufacturer of fertilizer (domestic or foreign), rest of the burden is bear by the central government. This subsidy ensures:

(I) To provide cheap inputs to farmers,

(ii) Reasonable returns to manufacturer,

(iii) Stability in fertilizer prices, and

(iv)Fertilizers provided to farmers in adequate quantity at the requirement.

Power Subsidy: The electricity subsidies imply that the government charges lower rates for the electricity supplied to the farmers than actual rates. Power is mainly used by the farmers for irritation purpose. It is the Distinguish between the cost of generating and distributing electricity to farmers and price received from farmers. The State Electricity Boards (SEBs) either generate the power themselves or buy it from other producers such as NTPC and NHPC. Power subsidy “acts as an incentive to farmers to invest in pumping sets, tube wells, bore wells etc. 

Irrigations subsidy: under this, government provides irrigation facilities at the cheaper rates than the markets rates. It is the Distinguish between maintenance and operating cost of irrigation infrastructure in the state and irrigation charges recovered from farmers. Constructed by government and govt. charges low prices or no prices at all for their use by the farmers. It may also be through availability of cheap private irrigation equipment such as pumping sets.

Seed Subsidy: High yielding variety seeds can be provided by the government at lower prices, and at the future payment options. The research and development activities needed for production of   productive seeds are also undertaken by the government, the expenditure on these is a sort of subsidy granted to the farmers.

Export Subsidy: This subsidy is given to the farmers to face the international barriers and completion. When farmers or exporters sells agricultural products in foreign market, they earn money for themself, as well as foreign exchange for the country. Therefore, agricultural exports are generally encouraged as long as these don’t harm the domestic economy. Subsides provided to uplift exports are referred as export subsidies.

Credit Subsidy: It is the distinction between interest charged from farmers, and actual cost of providing credit, plus other costs such as write-offs bad loans. Availability of credit is a major problem for poor and marginal farmers. They don’t have sufficient cash to buy agricultural equipment’s and cannot approach the credit market because they don’t have the collateral needed for loans. To carry out production activities they approach the local landlords or money lenders. Taking merits of the helplessness of the poor farmers the lenders charge very high interest rate. Even many times, the farmers with collateral cannot avail loans because banking institutions are mainly urban based and many a times, they don’t indulge in agricultural credit operations, which is considered to be risky. To resolve these problems the government provided following provisions:

(1) More banking operations and transaction in rural areas-which will advance agricultural loans, and

(2) The rate of interest can be maintained low through subsidization schemes, and

(3) The collateral requirements can be relaxed for the poor.

Agriculture Infrastructure subsidy: Private efforts in many areas don’t prove to be sufficient to improve agricultural production. Good roads, information about the market, power, transportation to the ports, storage facilities etc. are vital for production and sale operations. These facilities are in the realm of public goods, the costs of which are huge and whose benefits accrue to all the cultivators in an area. No individual farmer will come forward to provide these facilities because of their bulkiness and intrinsic problems related to revenue collections (no one can be excluded from its benefit on the ground of non-payment). Therefore, the government takes the responsibility of providing agriculture infrastructural facilities and given the condition of Indian farmers a lower price can be charged from the poorer farmers.

Q7) Describe types of instabilities faced by farmers.

Ans:

Indian farmers are suffering from various instabilities like yield instability, price Instability, tenurial Instability etc.

In-spite of technology, Indian farmers are still dependent on natural factors and hence are highly unsure. Modern livestock husbandry is less dependent on weather as compared to crop farming but a tough winter or a dry summer can still have a marked influence on livestock production.

Move over, the chance of livestock epidemics is always there. Fluctuations in crop yield take place over which the farmer has no management and which he’s unable to foresee. The extent of yield fluctuation is, however, likely to be greater in some areas as compared to others. For example, tropical regions are more vulnerable to yield instability than the temperate areas.

Moreover, the yield of some crops like cotton is variable than that of others crops like wheat. These variation within the relative degree of instability apart, the essential fact is that the individual farmer is unable to predict accurately the output that he can obtain from a specific input combination.

This happens owing to the biological nature of agricultural industry which makes the yield much more smitten by natural factors as compared to the products of non-farming industries. Yield instability is additionally termed as technical Instability, because it refers to the variability within production co­efficient of a given technique.

In further to yield or technical instability, Instability also exists with relevance to the prices of agricultural products. Price is more or less an uncontrolled or exogenous variable so far as the individual farmer is bothered.

The farmer operates in an exceedingly market structure which approximates to perfect competition and, therefore, the worth he receives for a product of a given quality is altogether unaffected by any setup or courses of action that he or other farmer might adopt. He’s a price taker and not a price maker.

The outside factors which influence prices are:

(a) The behavior of different farmers taken together;

(b) weather-induced random fluctuations in output;

(c) changes in national income and prosperity; and

(d) discontinuous production cycles of the cobweb kind.

Product cost faced by the non-farm industries are also subject to fluctuations, but the degree of price Instability in these industries is much lesser in agriculture.

The main reason for this is that not solely are the non-farm industries much less affected by weather influenced price fluctuations but also that the monopolistic market structure in which they operate allows them to exercise greater control over prices of their products. Price fluctuations are likely to be reduced further in case of industry because it is easier to manage the supply of its products to changes in demand when compared with agriculture.

Another type of instability that is quite conspicuous in agriculture is the tenurial Instability. We know that land is generally rent out to tenants. The tenant, as farmer, doesn’t know for how long he will be able to retain the land in his Parmer may thus hesitate to make long lasting improvements in land as he may not be sure about earning the additional return from such improvements.

Yet another degree of instability is that which exists in regard to the price and quality of inputs. This type of instability is particularly essential in the case of capital inputs which are generally costly and subject to frequent qualitative improvements. The farmers generally react to this kind of input price Instability by postponing the purchase of such inputs.

Q8) Why are farmers not getting fair price? Why the drop-in rates?

Ans; Garlic has been the most recent casualty of the value crash within the vegetable market when poor returns of tomato and potato crops forced several farmers to abandon their manufacture due to a bumper output in recent days. The miseries of financially distressed farmers appear off from over whilst they still demand release of farm loans and remunerative costs for his or her manufacture through many platforms across the country. the matter of lots has hit the farmers badly. whereas garlic farmers in Madhya Pradesh and Rajasthan, that manufacture forty fifth of the country’s garlic, recently fetched as low as ₹1 a metric weight unit in wholesale costs, the instances of tomato farmers merchandising their harvest on the fields earlier this month — be it in Haryana, state or Uttar Pradesh when costs nosedived — have solely highlighted their woes. Tomato production throughout 2017-18, in line with the primary advance estimate, is probably going to be seven.8% beyond that of the previous year. However, it's 2 hundredth beyond the typical production of the past 5 years. Similarly, potato production is calculable to be one.5% beyond that of the previous year. However, compared with the typical production of the past 5 years, it is 8.7% higher. These figures indicate that farmers square measure manufacturing additional while not smart returns. Why square measure vegetable farmers not obtaining a good price? Season when season, farmers face worth uncertainties primarily due to fluctuations in demand and provide caused by bumper or poor production, speculation and sign by traders.
 

Q9) Are traders manipulating prices? What is the way forward?

Ans: In Madhya Pradesh, when garlic costs born sharply, the govt set to incorporate it within the Bhavantar Bhugtan Yojana (Price Deficit Payment Scheme) that was introduced within the Kharif 2017 season. Farmers, however, rue that with the conditions related to the theme, most of them square measure unable to achieve any profit. The theme is aimed toward providing worth deficit payments to farmers if the market costs square measure below the minimum support worth. Farmer leaders believe the implementation of this theme within the 1st season has resulted in very little profit to farmers, with little or no to forestall manipulation of costs by traders. “The government claims to own to own,900 large integer in compensation, however an oversized section of farmers has been excluded from the theme,” says Jai Kisan Andolan national caller Avik Saha. Those neglected bore the strength of a bigger worth crash as a result of market manipulation.
The fluctuation in vegetable costs has become a perennial downside and is typically related to the political economy of demand and provide. Farmers, primarily marginal and tiny landholders, depend upon intermediaries to sell their manufacture. Being biodegradable, vegetables square measure additional liable to worth fluctuation, therefore they need higher infrastructure for storage and promoting. Contract farming is an alternate for farmers to cut back monetary risks by providing Associate in Nursing assured marketplace for their manufacture at a pre-agreed worth. The Centre recently approved the State/UT Agricultural manufacture and stock Contract Farming and Services (Promotion and Facilitation) Act, 2018. The Act lays stress on protective the interests of farmers, considering them as weaker of the 2 parties going in a contract. The Act is aimed toward guaranteeing the acquisition of the complete pre-agreed amount of 1 or additional of manufacture, stock or its product. though varied sorts of contract farming exist in some pockets, a proper system isn't widespread. By and enormous, cultivation of business crops like cotton, sugarcane, tobacco, tea, coffee, rubber and farm has had some parts of informal contract farming. specialists believe that integration of vegetable and fruit growers with agro-processing units through contract farming might prove helpful to producers because it takes care of worth fluctuations and helps to mitigate production risk. Pratap Singh Birthal, faculty member at the National Institute of Agricultural political economy and Policy analysis, says: “Under the contract farming law, the agreements would facilitate farmers get Associate in Nursing assured worth for the manufacture, which can act as a buffer against price volatility and market fluctuations...”

Q10) Make a flow chart of “transmission of mechanism of agricultural product to grain yield.