Since the beginning of economic reforms in early 1990s agricultural prices have dominated the discourse on agrarian issues and farmers welfare. Farrpers from all parts of the country are seeking direct intervention by government to ensure remunerative prices for farm produce. There is even a suggestion to declare purchase of farm produce below MSP as illegal! There are several reasons for rising focus on agricultural prices and farmers' demand for government intervention in prices of agricultural produce. Some of these reasons are listed below:i. There is large price spread between farm gate and retail prices due to excessive number of intermediaries. Marketing channels are fragmented and not showing integration seen in other commodities.ii. Gluts and shortage are hitting frequently resulting into price crashes and steep increase in prices. Prices are turning highly volatile. Unlike a business firm, farmers do not follow income smoothening - ie saving a part of income when prices are high to be used when prices are low.iii. Agriculture is becoming more and more commercial. Area under commercial crops is increasing. Share of purchased inputs in total inputs is rising and share of hired labour in total labour is also on a rise. This shift from subsistence to commercial agriculture necessitatesreasonable prices for farm produce to check losses.iv. Farmers reliance on loans to meet production and consumption expenditure is rising which require stable and adequate income to repay the loans.v. Farmers' needs and aspiration are rising like other sections of the society whose per capita income is rising by more than 6 per cent a year. Growth in farm income is not even half of it and agricultural households are meeting the gap between income and household expenditure with borrowings - in a large number of states loan is much higher than the cost of input and hired labour. In Punjab it is higher than even value of crop output. There is no escape from debt without substantial increase in income.vi. Rural non farm jobs and sources of income are not expanding to reduce dependence on farming and to supplement income of farm families.vii. Technology progress shows stagnation in many crops/states due to which reliance on prices as a source of increase in income is rising.
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