Minimum Support Price

This is the price fixed by the government to protect the producer – farmers against excessive fall in price during bumper production years. In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price. Minimum support prices for different agricultural crops viz., Foodgrains, oilseeds, fibre crops, sugarcane and tobacco are announced by the Government of India before the start of the sowing season of the crop.

Procurement prices

Procurement price of a commodity refers to the price at which government procures the commodity from producers/manufactures for maintaining the buffer stock or the public distribution system. These prices are announced by the Government of India on the recommendations of the Commission for Agricultural Costs and Prices before the harvest season of the crop. At these announced prices, govt. procures the foodgrains (wheat, paddy and coarse grains) in the needed quantity either for maintaining the buffer stock or for the distribution through fair price shops. Procurement prices are fixed generally at a level, which is somewhat higher than the level of minimum support prices but lower than the prevailing market prices.

The procurement prices are lower in relation to the actual market prices and as such farmers and traders are not willing to sell their stocks voluntarily to the government In such circumstances, the government procures food grains at the announced procurement prices either by imposing a levy on the farmers, or on the traders or through other methods.

Procurement prices are announced before the sowing season. As a result, the procurement price itself becomes the support price at which the govt. purchased all the foodgrains offered for sale. Procurement prices also become the minimum support prices because the govt. was bound to purchase the foodgrains offered by the producers for sale.

Source:
Compiled by,

Dr.T. ALAGUMANI, Ph.D.,
Professor
Department of Market Extension
Directorate of Extension Education
Tamil Nadu Agricultural University
Coimbatore-641003