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:-

Cost of production Changes in input prices Input-output price parity
Trends in market prices Demand and supply Inter-crop price parity
Effect on industrial cost structure Effect on cost of living Effect on general price level
International price situation Parity between prices paid and prices received by the farmers. 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 :-

  • Cost of cultivation per hectare and structure of costs in various regions of the country and changes there in;
  • Cost of production per quintal in various regions of the country and changes therein;
  • Prices of various inputs and changes therein;
  • Market prices of products and changes therein;
  • Prices of commodities sold by the farmers and of those purchased by them and changes therein;
  • Supply related information - area, yield and production, imports, exports and domestic availability and stocks with the Government/public agencies or industry;
  • Demand related information - total and per capita consumption, trends and capacity of the processing industry;
  • Prices in the international market and changes therein, demand and supply situation in the world market;
  • Prices of the derivatives of the farm products such as sugar, jaggery, jute goods, edible/non-edible oils and cotton yarn and changes therein;
  • Cost of processing of agricultural products and changes therein;
  • Cost of marketing - storage, transportation, processing, marketing services, taxes/fees and margins retained by market functionaries; and
  • 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 :-
  • The Commission identifies the main issues of relevance for the ensuing season (short, medium or long turn).
  • 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.
  • 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.
  • The Commission visits certain areas for on-the-spot observations and feed back from local level organisations and farmers.