Topic – Issues related to direct and indirect farm subsidies and minimum support prices.
5) Critically analyze the options available for price stabilisation of agriculture commodities in the face of increased output.(250 words)
Why this question
India has been witnessing farming distress which is partly due to increased production and a weaker demand, which in turn brings down the prices of agricultural commodities. It is therefore essential to evaluate the options available to the government under these circumstances and which can be practically applied on the ground.
Critically analyze- Here we have to examine methodically the structure or nature of the topic by separating it into component parts, and present them as a whole in a summary.Based on our discussion we have to form a concluding opinion on the issue.
Key demand of the question.
The question wants us to dig deep into the issue and evaluate all the practical options available to the government in such circumstances. Based on our discussion we have to form an overall opinion on the issue.
Structure of the answer
Introduction– Write a few lines about the farming distress due to increased supply. E.g The “farm distress” in recent years has been partly on account of output increases well beyond the market demand at a price remunerative to producers. in the absence of effective price support policy, farmers are faced with a loss of income, depending on the price decline.
Body– discuss individually the options available to the government under these particular circumstances and discuss their benefits as well as cons/ limitations.
- MSP and Open Procurement. e.g faces the problem of procurement as not all the produce can be procured at such prices and in all places; it does not solve the supply side problem; distribution problem etc.
- Price deficiency compensation. E.g the market prices may continue to fall as the supply exceeds the “normal demand” and nearly all the produce may become eligible for the “deficiency payments” as the prices, in general, would have fallen for all the producers.
- Limited procurement. E.g the government will procure the “excess”, leaving the normal production level to clear the market at a remunerative price. Thus, procurement will continue until the market price rises to touch the MSP; The timing and speed with which the procurement is implemented are critical. It is important to determine the excess supply, which will indicate how much is to be procured. Therefore, an assessment of the likely production is essential for an effective market intervention. Equally important is the quick assessment of price trends, particularly in the period immediately after the harvest begins, to arrive in the key markets; Storage facilities for managing the procured grain are essential for the success of the system; however, it will not work if the MSP is fixed at a level to which the market price will never rise.
conclusion-Based on your discussion, form a fair and a balanced conclusion on the given issue.