COMMISSION OF AGRICULTURAL COSTS AND PRICES
The Agricultural Prices Commission was set up in January, 1965 to advise the Government on price policy of major agricultural commodities with a view to evolving a balance and integrated price structure in the perspective of the overall needs of the economy and with due regard to the interests of the producer and the consumer.† Since March 1985, the Commission has been known as Commission for Agricultural Costs and Prices.†
The Commission is composed of a Chairman, a Member Secretary, two official members and three non-official members. The non-official members are representatives of the farming community. They are usually persons with long field experience and active association with the farming community.
Assurance of a remunerative and stable price environment is considered very important for increasing agricultural production and productivity since the market place for agricultural produce tends to be inherently unstable, which often inflict undue losses on the growers, even when they adopt the best available technology package and produce efficiently.† Towards this end, minimum support prices (MSP) for major agricultural products are fixed by the government, each year, after taking into account the recommendations of the Commission for Agricultural Costs and Prices (CACP).
While formulating these recommendations, the Commission analyses a wide spectrum of data, covering the costs of cultivation/production, trends and spread of input use, production and productivity of the crop concerned, market prices, both domestic and global inter-crop price parity, emerging supply-demand situation, procurement and distribution, terms of trade between agriculture and non-agriculture sectors, and so on.† Since the price policy involves certain considerations of long-run consequences, the Commission also looks at the yield-raising research being conducted by institutions like ICAR.† The basic data are generally collected from the Directorate of Economics and Statistics, State Governments, Central Ministries and the nodal agencies concerned with the implementation of agricultural price policy. Besides, the Commission undertakes field visits for close interaction with farmers in different parts of the country and also have wider consultation with senior officers, researchers and managers of relevant organizations.
TERMS OF REFERENCE
The terms of reference of the Commission, were framed as under:-
1. To advise on the price policy of paddy, rice, wheat, jowar, bajra, maize, ragi, barley, gram, tur, moong, urad, sugarcane, groundnut, soyabean, sunflowerseed, rapeseed and mustard, cotton, jute, tobacco and such other commodities as the Government may indicate from time to time with a view to evolving a balanced and integrated price structure in the perspective of the overall needs of the economy and with due regard to the interests of the producer and the consumer.
2. While recommending the price policy and the relative price structure, the Commission may keep in view the following:
i) The need to provide incentive to the producer for adopting improved technology and for developing a production pattern broadly in the light of national requirements:
ii) The need to ensure rational utilization of land, water and other production resources:
iii) The likely effect of the price policy on the rest of the economy, particularly on the cost of living, level of wages, industrial cost structure, etc.
3. The Commission may also suggest such non-price measures as would facilitate the achievement of the objectives set out in 1 above.
4. To recommend from time to time, in respect of different agricultural commodities, measures necessary to make the price policy effective.
5. To take into account the changes in terms of trade between agricultural and non agricultural sectors.
6. To examine, where necessary, the prevailing methods and cost of marketing of† agricultural commodities in different regions, suggest measures to reduce costs of marketing and recommend fair price margins for different stages of marketing.
7. To keep under review the developing price situation and to make appropriate recommendations, as and when necessary, within the framework of the overall price policy.
8. To undertake studies in respect of different crops as may be prescribed by Government from time to time.
9. To keep under review studies relating to the price policy and arrangements for collection of information regarding agricultural prices and other related data and suggest improvements in the same, and to organize research studies in the field of price policy.
10. To advise on any problems relating to agricultural prices and production that may be referred to it by Government† from time to time.
From time to time, the terms of reference of the Commission have been modified and expanded to keep in step with the changes in agricultural scenario of the country. From the year 1994-95 onwards, Niger-seed and Sesamum were included under the Minimum Support Price (MSP) Scheme of CACP, in addition to the edible oilseeds already covered by the Commission. Similarly, during 2001-2002, the government enhanced the terms of reference of the Commission by including one additional commodity, namely, lentil (masur). The number of crops covered by the MSP scheme have thus increased to 25.
Determination of Minimum Support Prices
In formulating the recommendations in respect of the level of minimum support prices and other non-price measures, the Commission takes into account, apart from a comprehensive view of the entire structure of the economy of a particular commodity or group of commodities, the following factors:
i)††††††††† Cost of production*
ii)††††††††††† Changes in input prices
iii)††††††† Input-output price parity
iv)††††††† Trends in market prices
v)††††††††††† Demand and supply
vi)††††††† Inter-crop price parity
vii)†††††† Effect on industrial cost structure
viii)††††† Effect on cost of living
ix)††††††† Effect on general price level
x) International price situation
xi)††††††† Parity between prices paid and prices received by the farmers.
xii)†††††† Effect on issue prices and implications for subsidy
The Commission makes use of both micro-level data and aggregates at the level of district, state and the country.† The information/data used by the Commission, inter-alia include the following:
(i)†††††††† Cost of cultivation per hectare and structure of costs in various regions of the country and changes there in;
(ii)††††††† Cost of production per quintal in various regions of the country and changes therein;
(iii)†††††† Prices of various inputs and changes therein;
(iv)†††††† Market prices of products and changes therein;
(v)††††††† Prices of commodities sold by the farmers and of those purchased by them and changes therein;
(vi)†††††† Supply related information - area, yield and production, imports, exports and domestic availability and stocks with the Government/public agencies or industry;
(vii)††††††††††† Demand related information - total and per capita consumption, trends and capacity of the processing industry;
(viii)†††† Prices in the international market and changes therein, demand and supply situation in the world market;
(ix)†††††† Prices of the derivatives of the farm products such as sugar, jaggery, jute goods, edible/non-edible oils and cotton yarn and changes therein;
(x)††††††† Cost of processing of agricultural products and changes therein;
(xi)†††††† Cost of marketing - storage, transportation, processing, marketing services, taxes/fees and margins retained by market functionaries; and
(xii)††††††††††† Macro-economic variables such as general level of prices, consumer price indices and those reflecting monetary and fiscal factors.
As already mentioned, 25 agricultural commodities are currently covered under the mandate given to the CACP for advising the government in respect of the price policy.† The Commission is required to convey its recommendations to the Government well before the sowing season of the crop.† With a view to interacting with various interest groups, the Commission follows the sequence of steps indicated below:
(i)†††††††† The Commission identifies the main issues of relevance for the ensuing season (short, medium or long turn).
(ii) †††††† The Commission sends a questionnaire to Central Ministries, State Governments and other organisations related to trade, industry, processors, and farmers both in the cooperative and the private sector and seeks their views on certain issues and factual information on related variables.
(iii)††††††††††† Subsequent to step (ii), the Commission holds separate discussions with the State Governments, Central Ministries/Departments and other organisations.† The Commission also interacts with research and academic institutions and keeps track of relevant studies and their findings.
(iv)†††††† The Commission visits certain areas for on-the-spot observations and feed back from local level organisations and farmers.
Non price measures
While recommending the price policy, the Commission also suggests such non-price measures as would facilitate achievement of the objectives of the policy. In this regard, the Commission has been emphasizing, inter-alia, the following :
(i) Establishment/Strengthening of agencies for implementation of declared price support policy;
(ii) Extension of proven technology to areas where it still needs to be adopted;
(iii) Evolution of suitable technology for augmenting yield and production of crops;
(iv) Reform of market regulations and setting up new markets in areas where agricultural production has made sizeable improvement;
(v) Improvement in grading of agricultural produce and expansion of proper storage facilities;
(vi) Arrangement for timely and speedy transportation of agricultural commodities from surplus areas;
(vii) Buffer-stock operations to impart stability to domestic price stabilization;
(viii) Utilizing the medium of external trade for domestic price stabilization;
(ix) Fiscal measures including adjustments in duties/taxes/levies;
(x) Development of appropriate technology for processing of agricultural produce;
(xi) Improving the data base for formulation of price policy.