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-
                                                                 BuFFer stocK
     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.