Slide 1: 1 Market Intervention Schemes in Karnataka -An overview By
Dr. Vijayachandra Reddy.S. Slide 2: 2 Meaning & objectives
Difference between MSP and MIS
History of MIS
Forms of intervention
Determination of administered prices
MIS for different commodities
Price support policy in Karnataka
Market intervention scheme for arecanut
Conclusion. Scheme of presentation Slide 3: 3 The Market Intervention Scheme (MIS) is an ad-hoc
scheme under which are included agricultural
commodities and horticultural Commodities. This include measures such as such Minimum support price,
import regulation and crop insurance. Slide 4: 4 Objectives of market intervention scheme: 1. To provide stability to the prices of farm products.
2. To minimize uncertainty about the income of the farmers.
3. To maintain the flow of productive resources and desired growth in agricultural production.
4. To provide food grains and other farm goods to the consumers at reasonable rates.
5. To provide a regular flow of raw material to agro based industries. Slide 5: 5 AGRICULTURE AND AGRICULTURAL POLICY : AGRICULTURE AND AGRICULTURAL POLICY Why governments intervene in agriculture
to reduce price fluctuations
to raise farm incomes
to protect rural communities
to encourage greater self-sufficiency in food
Causes of short-term price fluctuations
fluctuations in the harvest
low price elasticity of demand
Causes of declining farm incomes
low income elasticity of demand
increases in supply 6 Slide 7: 7 HISTORY
Before independence it revolved around controlling rise in food grain prices.
1941 ; a ceiling on wheat price was imposed in erstwhile,Punjab.
1942 ; Food grain control order
interstate movement of food grain was banned and licensing of food grain traders introduced.
1943; Food Grain policy committee- Sir Theodore Gregori
To suggest measures for minimizations of fluctuation in the prices of Agricultural commodities Slide 8: 8 1944; Price Sub Committee On Agriculture–Mr.T.T.Krishnamachari
To suggest the ways to stabilize Agriculture prices
Fixation of minimum prices of food grain at which the Government should release stocks to the consumers whenever needed.
Fixation of minimum prices on the basis of FAQ
Constitution of a national level organization for the implementation of policy from time to time. Slide 9: 9 In spite of all these recommendations nothing tangible was
Done prior to independence to evolve a sound price policy
For Agricultural commodities. Slide 10: 10 1959:Ford Foundations Experts suggestions to combat food problem and set up Agricultural production
Announcement of minimum prices for food grains before the start of the sowing season to facilitate farmers in planning their acreage
Establishment of a permanent organization at the national level for the implementation of different aspects of price policy
1964:Food Grain Price Committee- Mr. L.K. Jha
Recommended for the establishment of Agril. Price commission to provide advice on a continuous basis on Agril. Price policy. Slide 11: 11 1965; Agricultural Price Commission (APC)
Terms of reference of CACP
To advice on the price policy for Agricultural Commodities like Paddy, Wheat, Rice etc.
To examine, where necessary, prevailing methods and cost of marketing of Agricultural commodities in different regions.
To keep under review the developing price situation and to make appropriate recommendation.
To advise on any problem relating to agricultural prices and production. Slide 12: 12 Foodgrain policy committee, 1966: Fixation of minimum support and procurement prices for foodgrains every year.
B. Maintenance of a sizable buffer stock of foodgrains to minimize seasonable price fluctuations.
C. Foodgrains procurement by food corporation of India instead of private trade. It made several suggestions, they are Slide 13: 13 Need to provide incentives to the producers for adopting improved technology and for developing a production pattern broadly in the light of national requirement.
Need to ensure rational utilization of land,water and other productive resources.
The likely effect of the price policy on the cost of living,level of wages & industrial cost structure. Consideration for the basis of the Price Policy for agricultural commodities Slide 14: 14 Along with the setting up of the APC, the FCI was also established to undertake purchase and sales of food grains on the behalf of Govt. Forms of intervention : 15 Forms of intervention Administered prices
Influencing supply & demand
Influencing behaviour of market functionaries
Creation of market infrastructure facilities Slide 16: 16 Administered Prices
-Used as potent tool for accelerating growth in argil. Output & to sustain farmers enthusiasm to expand production. Support Price
Statutory minimum Price
Issue Prices Influencing demand & supply : 17 Influencing demand & supply Domestic Procurement
-by levy method
Import & Export
Maintenance of buffer stock
Public distribution system Influencing behaviour of market middlemen : 18 Influencing behaviour of market middlemen Licensing of traders & mandatory declaration of stocks
Regulation of markets,
to curb unhealthy practices Viz.,
-levy of unauthorized charges
-non std wt & measures
Restriction of forward trading Creation of infrastructural facilities : 19 Creation of infrastructural facilities Construction of roads & provision of transport facilities
Creation of warehousing & storage facilities
Prescription of grade stds & uniform grading of agril. Products
Market intelligence & dissemination of price information
The mix of these intervention measures is usually called as “AGRICULTURAL PRICE POLICY” Determination of administered prices : 20 Determination of administered prices Market price method
Cost plus method
Comprehensive method Slide 21: 21 Market price method
support price for a commodity is related to the market prices in the preceding season
Cost plus method
MSP is linked to the cost of production,but it is not the only basis for arriving at the level of MSP
WHOSE Cost of production
WHICH cost of production Slide 22: 22 Comprehensive method Parity method
Based on the consideration that a unit of the commodity retains the same purchasing power in terms of other commodities as prevailing in the market. In this method, rather than relying on a single factor, a large number of factors are considered simultaneously for determining farm product prices In India : 23 In India Cost of production
Changes in input prices
Input output price parity
Trend in Mkt prices
Demand & supply
Inter crop price parity Effect on cost of living
Effect on general price level
Effect on industrial cost str.
Industrial Mkt price situation
Parity between Price spread & received While determining the level of these prices Slide 24: 24 Acreage response to MSP for Paddy
-R.P.Singh & N.K. Singh(2006)
Acreage under paddy crop increased - 12 per cent - annual growth rate of 0.61 per cent during 1971-72 to 2005-06 in the country.
The growth rate in yield per hectare - quite more during 80’s & 90’s as compared to 70’s
Productivity significant influence on acreage allocation of paddy crop
MSP announced by Govt. did not emerge significant in making decision for allocation of acreage under paddy
Farmers response for allocation of acreage under paddy was influenced by productivity & not by MSP. Slide 25: 25 MIS for agril.commodities Slide 26: Minimum support price (Rs. per quintal) Slide 27: Procurement of rice for Central pool (marketing year-wise) Slide 28: Procurement of wheat (marketing year wise) Slide 29: Procurement made by NAFED during 2008-09 (on the request of State Governments) Under Market Intervention Scheme. Source: website: http://indiabudget.nic.in Slide 30: Cntd.. Proposals received from various States during 2001-02 to 2003-04. Slide 31: Cntd….. Source: (http://indiabudget.nic.in/es2004-05/chap510 ) Slide 32: 32 Price support poilicy in karnataka Slide 33: 33 State has evolved a scheme called FPS through which a revolving fund has been mobilized by equal contribution from the
state govt. & mkt committees.
In the recent past commodities like onion & potato which are highly perishable in nature have been procured in the state under FPS, which is probably the only such expt. in the country.
Under FPS commodities worth Rs.280 crores have been procured in the year 2006-2007 by the state Govt.Commodities like maize,copra,paddy,rice,cotton etc.
The state Govt.has enhanced the revolving fund to about Rs.400 crores . : 34 Floor Price(FP) : price declared by the SLC constituted for this purpose as a minimum price for a commodity having a prescribed FAQ std.to be purchased under the scheme.
Revolving Fund(RF): created for the operation of the FPS.
Fixing of FP: prescribed by the SLC in consultation with Agril. & Horticultural Dept.
-FP are prescribed one month before the harvest on the basis of FAQ std.
-valid for one full season only.
State Level Committee(SLC):Constituted at the state level for the operation of FPS. Slide 35: 35 Floor price scheme for Agricultural./Horticultural commodities
To protect the farmers against distress sale of agril./horticultural commodities by assuring a minimum support price
Applicability of the scheme:
Applicable in the whole state of Karnataka for onion & potato & other commodities which are not covered under MSP by GOI.
FPS shall be operated in co-ordination with MSP. Slide 36: 36 Purchase Agencies
Karnataka State Cooperative Marketing Federation.Bangalore
Horticultural Producers Cooperative Marketing Society Ltd.,Bangalore.
Karnataka Agro-industries Cooperation Ltd.,Bangalore.
Karnataka Food & Civil Supplies Corporation Ltd.,Bangalore.
Karnataka cooperative consumer’s Federation Ltd.,Bangalore.
Karnataka cooperative oil seeds growers Federation Ltd.,Bangalore.
Karnataka State Agro Corn Products Ltd,Bangalore.
Karnataka Horticultural Producers Co-op Marketing and Export Society Ltd,Hubli.
SLC may also request central agencies such as NAFED,FCI etc., Slide 37: Agencies involved in procurement of maize in Karnataka Source: KSAMB,2006(http://maratavahini.kar.nic.in/kmv_left1.asp ) Slide 38: Procurement of onion under price support in Karnataka Source: (http://agricoop.nic.in/Statatglance2005/AtGlance.pdf ) Slide 39: Market intervention scheme for Arecanut Arecanut was fetching a reasonably fair price till 2000.
But after 2000 prices started to decline.
GOK in 2002-03 included arecanut under the MIS.
CAMPCO- state level designated agency for procurement.
In 2002-03 Support price : white chali – Rs 6000/ quintal.
Out of 1,00,000 tonnes of production 10,000 tonnes of FAQ std will be procured under this scheme
In 2004-05 Support price :
white chali – Rs 6000/ quintal Red boiled type-Rs 8500/quintal Slide 40: 40 Growth and stability of prices (real and nominal) Arecanut during
different periods in Mangalore market Source: Prakash et.al. (1998) Note: *, **, *** indicate significant at 1,5 and
10 percent levels, respectively Slide 41: 41 Conclusion: Market intervention can be used to control the prices of the
Thorough review of methodology for arriving at MSP.
States should be encouraged to set up their own Agricultural
MSP should be announced before sowing season.
MSP at levels much above market price are not desirable. Drawbacks of government intervention : Drawbacks of government intervention shortages and surpluses
bureaucracy and inefficiency
lack of market incentives
shifts in government policy
lack of freedom for the individual Slide 43: Case Study-I
Farmers’ Coverage under Market Intervention Scheme in Karnataka
By: P.K. Rajkumara, S.B. Mahajanashettia*, H. Basavaraj,
H.S. Vijayakumara and Y.N. Havaldarc (2008)
University of Agricultural Sciences
College of Agriculture
Dharwad. Slide 44: Coverage of farmers under MIS for onion crop Slide 45: Coverage of farmers under MIS for maize crop Slide 46: Constraints being faced by onion and maize growers in
availing MIS benefits (n=120) Slide 47: To examine the socio-economic characteristics of the growers, discriminant analysis was carried out with all the five explanatory variables, viz. AGE,EDU, DIST, PROD and TINC for both the crops. The estimated equations for onion and maize, respectively, were: Slide 48: Mean values of socio-economic characteristics for beneficiaries and non-beneficiaries of MIS for onion crop Slide 49: Mean values of socio-economic characteristics for
beneficiaries and non-beneficiaries of MIS for maize crop Slide 50: Conclusions
To study has revealed that the coverage of onion and maze farmers, especially small farmers, under MIS is not satisfactory, though the scheme is primarily meant to benefit them. The procedural complexities, delayed payments and the FAQ stipulations have been identified as the major hurdles for the farmers in availing the benefits of MIS. The proximity of the procurement centres has been found as an important factor in motivating the farmers to take advantage of MIS. The study has suggested that relaxations in procedural formalities, fast payments and setting-up of procurement centres in close proximity of production centres are some of the steps that would motivate a larger proportion of the farming community, in general and small farmers, in particular towards MIS. Slide 51: Case Study-II
Impact of Market Intervention Operation by The Co-operative Parastatal on Oilseeds Market Structure
Dr.S.M.Mundinamani, S.D.Dabali and S.B.Mahajanashetti Slide 52: The present study is an attempt to assess the impact of market intervention operation by the (Karnataka Co-operative Oilseeds Grover’s Federation Ltd.,(KOF) established during 1984 with a view to implement the NDDB’s project “Restructuring Edible oil and oilseeds production and marketing in Karnataka.
The project was implemented in 2 phases in 7 districts of Karnataka (Gadad, Bijapur, Hubli, Raichur, Challakere, Chitradurga and Davanagere) for period of 1984-1989 and 1990. Slide 53: Methodology:
For examining the impact of market intervention operation by the KOF on groundnut prices, the study period was bifurcated into two sub-periods namely, pre-market intervention operation period (1984 -90) and post- market intervention period (1990-1995).The data on monthly arrivals and prices were extracted from the records of the study markets for 11 years from 1984-85 to 1994-95.
The impact of market intervention on ground nut prices was studied with help of seasonal prices indices computed by 12 monthly moving average methods. Slide 54: RESULTS Slide 55: Conclusion:
KOF’s market intervention operation, however has played a significant role in stabilizing groundnut prices in peak period in all the study markets. The wide fluctuations in lean period prices could mainly be attributed to the absence of procurement by the KOF, and the dominance of private trading forces. The results of the study highlight the importance of KOF’s existence and its market intervention operation in the state. Efforts are needed to strengthen the working capital base of the KOF so as to enable it to undertake procurement operation in all seasons. Such a step would lead a price stabilization thought the year benefiting both producers and consumers.