Direct and indirect farm subsidies and minimum support prices

Statement 1 is incorrect. Urea is highly soluble in water as result nitrification and de-nitrification reduces its efficiency. If urea is coated with neem the loss can be minimized as coating of urea makes it a slow release fertilizer, making available to plants for a longer duration.
A reduced solubility of urea also keeps contamination of ground water under control and the coating reduces ammonia volatilization and controls atmospheric pollution.
Statement 2 is correct. A study conducted by the Department of Agriculture; Cooperation & Farmers Welfare (DAC&FW) had found the effects of Neem Coating of Urea as:
–Improvement in soil health.
–Reduction in costs with respect to plant protection chemicals.
–Reduction in pest and disease attack.
–An increase in yield of paddy, sugarcane, maize, soyabean and Tur/Red Gram.

All of the above are determinants of MSP. It is based on the recommendations of the Commission for Agricultural Costs and Prices (CACP).
The idea behind MSP is to give guaranteed prices and assured market to the farmers and save them from the price fluctuations. It insulates farmers from the unwarranted fluctuation in prices caused by the variation in supply (largely influenced by the monsoon), lack of market integration, information asymmetry and other elements of market imperfection plaguing the agricultural markets.
In formulating the recommendations in respect of the level of minimum support prices and other non-price measures, the Commission takes into account Cost of production, Changes in input prices, Input-output price parity, Trends in market prices, Demand and supply, Inter-crop price parity etc.

The Commission for Agricultural Costs & Prices (CACP) is an attached office of the Ministry of Agriculture and Farmers Welfare is mandated to recommend minimum support prices (MSPs) to incentivize the cultivators to adopt modern technology, and raise productivity and overall grain production in line with the emerging demand patterns in the country.
CACP submits its recommendations to the government in the form of Price Policy Reports every year, separately for five groups of commodities namely Kharif crops, Rabi crops, Sugarcane, Raw Jute and Copra.
As of now, CACP recommends MSPs of 23 commodities, which comprise 7 cereals (paddy, wheat, maize, sorghum, pearl millet, barley and ragi), 5 pulses (gram, tur, moong, urad, lentil), 7 oilseeds (groundnut, rapeseed-mustard, soyabean, seasmum, sunflower, safflower, nigerseed), and 4 commercial crops (copra, sugarcane, cotton and raw jute).
The Cabinet Committee on Economic Affairs (CCEA) of the Union government takes a final decision on the level of MSPs and other recommendations made by CACP.

Statement 1 is incorrect. Under the Agriculture Infrastructure Fund, banks and financial institutions will provide one lakh crore in loans to cooperative societies, farmer producer companies, self-help groups, entrepreneurs, startups and infrastructure providers. The objective is to provide medium to long-term debt financing for setting up of post-harvest infrastructure and community assets for marketing of farm produce.
Statement 2 is correct. The Agriculture Infrastructure Fund is a medium – long term debt financing facility for investment in viable projects for post-harvest management infrastructure and community farming assets through interest subvention and credit guarantee.
The duration of the scheme shall be from FY2020 to FY2029 (10 years). Under the scheme, Rs. 1 Lakh Crore will be provided by banks and financial institutions as loans with interest subvention of 3% per annum and credit guarantee coverage under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme for loans up to Rs. 2 Crore.

Both statements are correct.
India accounts for 2.4% of the world’s geographical area and 4% of its water resources, but has to support 17% of the world’s human population and 15% of the livestock. To increase productivity, timely and precise field work is necessary. To make it possible, agricultural machines take an important role.
Sub Mission on Agricultural Mechanization (SMAM) is being implemented in all the states, to promote the usage of farm mechanization and increase the ratio of farm power to cultivable unit area up to 2kW/ha.
The Mission objectives are as follows:
-Increasing the reach of farm mechanization to small and marginal farmers and to the regions where availability of farm power is low;
-Promoting ‘Custom Hiring Centres’ to offset the adverse economies of scale arising due to small landholding and high cost of individual ownership;
-Creating hubs for hi-tech & high value farm equipments;
-Creating awareness among stakeholders through demonstration and capacity building activities;
-Ensuring performance testing and certification at designated testing centers located all over the Country.
About 80% of the land holdings in India are operated by small and marginal farmers. These farmers cannot invest in costly farm machinery and depend on hiring of implements to carryout agricultural operations in their fields.

Pradhan Mantri Fasal Bima Yojana (PMFBY) aims at supporting sustainable production in agriculture sector by way of –
-providing financial support to farmers suffering crop loss/damage arising out of unforeseen events
-stabilizing the income of farmers to ensure their continuance in farming
-encouraging farmers to adopt innovative and modern agricultural practices
-ensuring flow of credit to the agriculture sector.
Statement 1 is correct. Risks leading to crop loss are to be covered under the scheme:
-Yield Losses (standing crops, on notified area basis)
-Prevented Sowing (on notified area basis) due to adverse weather conditions
-Post Harvest Losses (individual farm basis): available upto a maximum period of 14 days from harvesting for those crops which are kept in “cut & spread” condition to dry in the field after harvesting, against specific perils of cyclone / cyclonic rains, unseasonal rains throughout the country.
-Localized calamities (individual farm basis)
Statement 2 is incorrect. Scheme provides for a uniform premium of 2% to be paid by farmers for all Kharif crops and 1.5% for all Rabi crops. In case of annual commercial and horticultural crops, the premium to be paid by farmers is 5%.

Long Term Irrigation Fund (LTIF) was operationalized in the National Bank for Agriculture and Rural Development (NABARD) during 2016-17 for fast tracking the completion of the identified Medium and Major Irrigation projects, spread across different states.
Under LTIF, NABARD provides loan towards Central Share as well as State Share with a tenor of 15 years. The Central Share is provided to National Water Development Agency (NWDA), an agency working under the aegis of Ministry of Jal Shakti, whereas the loan towards State Share is availed by the State Governments.

The Government’s price policy for agricultural commodities seeks to ensure remunerative prices to the growers for their produce with a view to encourage higher investment and production and to safeguard the interest of consumers by making available supplies at reasonable prices with low cost of intermediation.
• The price policy also seeks to evolve a balanced and integrated price structure in the perspective of the overall needs of the economy.
• Towards this end, the Government announces, Minimum Support Prices (MSP) for 25 major agricultural commodities each year in both the Crop seasons after taking into account the recommendations of the Commission for Agricultural Costs and Prices (CACP).
• CACP recommends MSP for twenty two (22) crops and Fair & Remunerative Price (FRP) for sugarcane.
• Apart from Sugarcane for which FRP is declared by the Department of Food &Public Distribution, twenty two crops covered under MSP are Paddy, Jowar, Bajra, Maize, Ragi, Arhar, Moong, Urad, Groundnut-in-shell, Soyabean, Sunflower, Seasamum, Nigerseed, Cotton, Wheat, Barley, Gram, Masur (lentil), Rapeseed/Mustardseed, Safflower, Jute and Copra.
• In addition, MSP for Toria and De-Husked coconut is fixed by the Department on the basis of MSP’s of Rapeseed/Mustardseed and Copra respectively.

Besides, announcement of MSP, the Government also organizes procurement operations of these agricultural commodities through various public and cooperative agencies such as Food Corporation of India (FCI), Cotton Corporation of India (CCI), Jute Corporation of India (JCI), Central Warehousing Corporation (CWC), National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED), National Consumer Cooperative Federation of India Ltd. (NCCF), and Small Farmers Agro Consortium (SFAC).
Besides, State Governments also appoint state agencies to undertake PSS operations. While deciding the MSP for various agricultural commodities, the recommendations of CACP, the views of Central Ministries and State Governments and such other relevant factors which are important in the opinion of the Government are considered.
The CACP, while recommending the Minimum Support Price keeps in view
• the need to provide incentives to the producers for adopting improved technology and for developing a production pattern broadly in the light of national requirements
• the need to ensure rational utilization of land, water and other production resources and
• the likely effect of the price policy on the rest of the economy, particularly, on the cost of living, level of wages, industrial cost structure etc.
NAFED, Central Warehousing Corporation (CWC), National Consumer Cooperative Federation of India Ltd. (NCCF), Small Farmers Agro Consortium (SFAC) are the central agencies for procurement of oilseeds & pulses.
However, NAFED is also an additional central agency for procurement of cotton, in addition to Cotton Corporation of India (CCI) under the DAC.

The agricultural credit flow target for 2019-20 has been fixed at 13,50,000 crore and till 30th November, 2019, a sum of 9,07,843.37crore has been disbursed.
• The regional distribution of agricultural credit in India is highly skewed.
• It is observed that credit is low in North Eastern, Hilly and Eastern States.
• The share of North Eastern States has been less than one percent in total agricultural credit disbursement.

Farm subsidies form an integral part of the government’s budget.
• In the case of developed countries, the agricultural or farm subsidies compose nearly 40 per cent of the total budgetary outlay, while in India’s case it is much lower (around 7.8 per cent of GDP) and of different nature.
• The World Trade Organization (WTO) has put some ceilings on the amount of direct and indirect subsidies being provided by the various developing and developed nations due to the fact that these subsidies distort the free market forces which have their own implications.

Delivering its poll promise, the Central Government on Saturday notified a decision to extend the benefit of ₹6,000 per year under the Pradhan Mantri Kisan Samman Nidhi scheme to all 14.5 crore farmers in the country, irrespective of the size of their landholding.
• Notifying the decision, the Union Agriculture Ministry has written to all State Governments, asking them to identify beneficiaries subject to the existing exclusion factors.

•“All the state/UT governments are, therefore, requested to expedite 100 per cent enlistment of eligible beneficiaries as per the revised scheme so that farmers are able to avail the benefit of the scheme,” the Ministry said.
• Those excluded from the PM-KISAN include institutional land holders, farmer families holding constitutional posts, serving or retired officers and employees of State or Central government as well as Public Sector Undetakings and Government Autonomous bodies.
• Professionals like doctors, engineers and lawyers as well as retired pensioners with a monthly pension of over ₹10,000 and those who paid income tax in the last assessment year are also not eligible for the benefits.

All of the above are determinants of MSP. It is based on the recommendations
of the Commission for Agricultural Costs and Prices (CACP).
The idea behind MSP is to give guaranteed prices and assured market to the farmers and
save them from the price fluctuations. It insulates farmers from the unwarranted
fluctuation in prices caused by the variation in supply (largely influenced by the monsoon),
lack of market integration, information asymmetry and other elements of market
imperfection plaguing the agricultural markets.
In formulating the recommendations in respect of the level of minimum support prices and
other non-price measures, the Commission takes into account Cost of production,
Changes in input prices, Input-output price parity, Trends in market prices, Demand and
supply, Inter-crop price parity etc.

The Commission for Agricultural Costs & Prices (CACP) is an attached
office of the Ministry of Agriculture and Farmers Welfare is mandated to recommend
minimum support prices (MSPs) to incentivize the cultivators to adopt modern technology,
and raise productivity and overall grain production in line with the emerging demand
patterns in the country.
CACP submits its recommendations to the government in the form of Price Policy Reports
every year, separately for five groups of commodities namely Kharif crops, Rabi crops,
Sugarcane, Raw Jute and Copra.
As of now, CACP recommends MSPs of 23 commodities, which comprise 7 cereals (paddy,
wheat, maize, sorghum, pearl millet, barley and ragi), 5 pulses (gram, tur, moong, urad,
lentil), 7 oilseeds (groundnut, rapeseed-mustard, soyabean, seasmum, sunflower, safflower,
nigerseed), and 4 commercial crops (copra, sugarcane, cotton and raw jute).
The Cabinet Committee on Economic Affairs (CCEA) of the Union government takes a
final decision on the level of MSPs and other recommendations made by CACP.

Statement 1 is incorrect. Government fixes minimum support prices (MSPs) of 22 mandated crops including paddy, wheat, for every agricultural year and fair & remunerative price (FRP) for sugarcane on the basis of recommendations of Commission for Agricultural Costs & Prices (CACP), after considering the views of State Governments and Central Ministries/Departments concerned & other relevant factors.
In addition, MSP for Toria and De-Husked coconut is also fixed on the basis of MSPs of Rapeseed & Mustard and Copra respectively.
Statement 2 is correct. While recommending MSPs, CACP considers important factors like cost of production, overall demand-supply conditions, domestic and international prices, inter-crop price parity, terms of trade between agricultural and non-agricultural sectors, the likely effect on the rest of the economy, besides ensuring rational utilization of land, water and other production resources and a minimum of 50 percent as the margin over cost of production in case of MSPs and reasonable margins over cost of production in case of FRP.

Statement 1 is correct. ‘Fair and Remunerative Price (FRP)’ of sugarcane announced by the Central Government is decided on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP) in consultation with the State Governments and after taking feedback from associations of sugar industry.
Statement 2 is correct. Price of sugar is market driven & depends on demand & supply of sugar. However, with a view to protect the interests of farmers, concept of Minimum Selling Price (MSP) of sugar has been introduced since 2018 so that industry may get atleast the minimum cost of production of sugar, so as to enable them to clear cane price dues of farmers.
Government fixes the Minimum Selling Price (MSP) of white/refined sugar for sale by sugar mills at the factory gate for domestic consumption. MSP of sugar has been fixed taking into account the components of Fair & Remunerative Price (FRP) of sugarcane and minimum conversion cost of the most efficient mills.