Information and Utilisation of MSP: Major Determinants

Abstract

The prices of agricultural commodities are inherently more volatile than non-agricultural commodity prices. The major reasons are the inelastic nature of supply to prices. Lack of market integration and information asymmetry also play a role. A very good harvest in one year will result in sharp fall in the prices of that commodity, and farmers will be discouraged from continuing production due to heavy loss. As a result of this, supply will go down in the next year and price will increase. Somewhat similar to this, we experience in the case of pulses. A severe deficit in supply led to soaring of prices in the year 2015–16. However, an increased price and other government interventions again encouraged the production of surplus. Even with an increase in production, the import dependency to meet the excess demand is growing. Additionally, an increase in production is still lagging behind the demand. To counter this, the government announces MSP for various crops including pulses in each year. MSP acts as an instrument in enabling government to guarantee minimum prices to farmers prior to the cropping season so that farmers are encouraged to allocate acreage under pulses cultivation. Thus, the provision of MSP provides an assured market for farmers. However, our analysis of the profile of sample households in Chap. 5 and the discussion in Chap. 9 showed that percentage of farmers who have information about pulses MSP and those who are availing MSP were very less. The farmers who sold crop to procurement agencies even when they had information about MSP and procurement agencies were also less. Therefore, the present chapter will make an analysis of factors influencing the information access to MSP and utilisation of MSP.