ri lt re and ood ana ement 8.19
(ii) to motivate farmers to adopt improved only the MSP, which is also considered the
crop production technologies, and effective procurement price.26
(iii) to enhance production and thereby
farmers, income. issue Price
In the absence of such a guaranteed price, The price at which the government allows offtake
there is a concern that farmers may shift to other of foodgrains from the FCI (the price at which
crops causing shortage in these commodities. The the FCI sells its foodgrains). The FCI has been
agricultural price policy in India emerged in the fetching huge losses in the form of food subsidies.27
backdrop of food scarcity and price fluctuations The foodgrains procured are transported to the
provoked by drought, floods and international godowns of the FCI located across the country
prices for exports and imports.25 (counted in the buffer stock). From here they head
to the sale counters—to the TPDS or Open Market
mArket intervention scheme Sale. The transportation, goodowning, the cost of
The Market Intervention Scheme (MIS) is similar maintaining the FCI carriage losses, etc., make the
to MSP, which is implemented on the request of foodgrains costlier (the additional expenses other
state governments for procurement of perishable than the MSP is known as the ‘economic cost of
and horticultural commodities in the event of fall foodgrains’). To make the foodgrains affordable
in market prices. The scheme is implemented when to the consumers, the issue prices for foodgrains
there is at least 10 per cent increase in production are set lower than the total cost of procurement
or 10 per cent decrease in the ruling rates over and distribution—the gap converts into the ‘food
the previous normal year. Proposal of MIS is subsidy’.
approved on the specific request of the state/UT
governments, if the states/UTs are ready to bear
50 per cent loss (25 per cent in case of North-
Eastern states) incurred on its implementation. India has a policy of maintaining a minimum reserve
of foodgrains (only for wheat and rice) so that food
Procurement Prices is available throughout the country at affordable
In 1966–67, the Government of India announced prices round the year. The main supply from here
a ‘procurement price’ for wheat, a bit higher goes to the TPDS (the PDS was restructured as
than its MSP (the purpose being security of the Targeted PDS in 1997) and at times goes for
food procurement for requirement of the PDS). Open Market Sale to check the rising prices, if
The MSP was announced before sowing, while needed.
the procurement price was announced before
The Buffer Stocking norms (of 2005) was
harvesting—the purpose was to encourage farmers
revised28 by the government (by mid-2014) in the
to sell a bit more and get encouraged to produce
backdrop of increased requirement of foodgrains
more. But this increased price hardly served the
purpose as a suitable incentive to farmers. It would to run the TPDS in the last few years and with the
have been better had it been announced before 26. New Agricultural Strategy, 1965; the CACP, 1967
sowing and not after harvesting. That is why since and Ministry of Agriculture, GoI, N. Delhi.
the fiscal 1968–69 the government announced 27. New Agricultural Strategy, 1965; Reports of the
CACP and Ministry of Agriculture, GoI, N. Delhi.
25. New Agricultural Strategy, 1965; Reports of the 28. Ministry of Finance, Economic Survey 2014–15, Vol.
CACP and Ministry of Agriculture, GoI, N. Delhi. 2 (New Delhi: Government of India, 2015), p. 85.