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Balancing Indian Agriculture: Income vs. Price Support



  Jan 12, 2024

Indian Agriculture: Income Support vs. Price Support Mechanisms




Distinction Between Income and Price Support:

In agricultural policy, income support refers to direct payments to farmers that are independent of the volume of production or current market prices. This could be a fixed sum per acre or based on historical yields or production. On the other hand, price support involves mechanisms such as Minimum Support Price (MSP), where the government guarantees a minimum price for farm produce, directly influencing market prices.

The Bhavantar Bharpai Yojana (BBY) Scheme in Haryana:

The BBY is an innovative price deficiency payment scheme introduced in Haryana, India. It aims to shield farmers from market price volatility. Under BBY, when the sale price is lower than the MSP, the government compensates the farmer for the difference. This ensures that farmers do not suffer due to price drops while allowing markets to function without direct government intervention in procurement.

Performance and Impact of BBY:

The BBY scheme has seen varied impacts across different crops. For instance, in the case of Bajra and Mustard, the scheme has adjusted the financial support provided based on the market conditions and the actual sale prices achieved by farmers. For Sunflower, the support has seen an uptick, indicating a more significant gap between market prices and the MSP.

Advantages of Price Deficiency Payments:

Such schemes are considered more market-friendly compared to traditional MSP procurement. They allow for a dynamic response to market conditions, aiming to support farmers’ incomes without leading to excess production or distorted market signals that can arise from guaranteed MSP purchases.

Guaranteeing MSP:

The debate around guaranteeing MSP centers on creating a legal framework that ensures farmers receive a minimum price for their crops. While this could provide income security for farmers, it also risks significant fiscal implications and market distortions due to government intervention.

Future Outlook:

The agricultural policy landscape is continuously evolving to find the right balance between supporting farmers’ livelihoods and maintaining market efficiency. Schemes like BBY represent an attempt to reconcile these objectives by providing targeted support that complements the market dynamics.

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