12. Mention the methods of agricultural price stabilization. Briefly describe the price policies in India to stabilize agricultural prices with their objectives and illustrate the current method of calculation of Minimum Support Price (MSP) by CACP. (Not more than 150 words)

Points to Remember:

Methods of agricultural price stabilization: Buffer stocks, price supports, market interventions.
Indian price policies: MSP, procurement, export/import controls.
CACP’s MSP calculation: Cost of production + reasonable margin.

Introduction:

Agricultural price stabilization aims to protect farmers from volatile market prices and ensure food security. India, with its large agrarian population, employs various methods to achieve this. Fluctuations in agricultural prices significantly impact farmers’ incomes and national food security.

Body:

Methods of Agricultural Price Stabilization: Governments use several methods, including buffer stock schemes (government holds reserves

to release during shortages), price supports (guaranteed minimum prices), and market interventions (export/import controls, subsidies).

Price Policies in India: India’s primary price stabilization tool is the Minimum Support Price (MSP), a guaranteed price for certain crops. The government procures crops at MSP to support farmers’ income and maintain food security. Other policies include export and import duties to manage domestic prices.

Calculation of MSP by CACP: The Commission for Agricultural Costs and Prices (CACP) calculates MSP based on the cost of production (A2+FL), which includes all paid-out costs and imputed value of family labor, plus a reasonable margin to ensure profitability for farmers. The margin considers factors like risk,

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inflation, and market trends.

Conclusion:

India’s agricultural price stabilization policies, primarily MSP, aim to balance farmers’ income and consumer affordability. While MSP has been instrumental in supporting farmers, challenges remain in its effective implementation and reaching all farmers. Improving the efficiency of procurement, expanding coverage to more crops, and refining the MSP calculation methodology considering regional variations are crucial for enhancing the effectiveness of these policies and ensuring sustainable agricultural development. A holistic approach focusing on market linkages, infrastructure development, and diversification of farming practices is essential for long-term price stability and farmer welfare.

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