Minimum Support Prices for Agricultural Produce

Agricultural policy monitoring and evaluation by OECD


From UPSC perspective, the following things are important :

Prelims level: OECD , various parameters mentioned

Mains level: Concerns of farmers other than MSP

The OECD (Organisation for Economic Co-operation and Development) has provided five sets of data on the issue of agriculture support and India trails on most counts:

The ongoing debate about farmers protest has brought to light some of the key support mechanisms for agriculture in India. And it is being argued that the government has preferred the welfare of Indian consumers over the Indian farmers.

Lets’ have a look at various OECD’s parameters:

(1) Producer Support Estimates (PSE)

  • These are transfers to agricultural producers and are measured at the farm gate level.
  • They comprise market price support, budgetary payments and the cost of revenue foregone.

(2) Consumer Support Estimates (CSE)

  • These refer to transfers from consumers of agricultural commodities. They are measured at the farm gate level.
  • If negative, the CSE measures the burden (implicit tax) on consumers through market price support (higher prices), that more than offsets consumer subsidies that lower prices to consumers.

 (3) General Services Support Estimates (GSSE)

  • GSSE transfers are linked to measures creating enabling conditions for the primary agricultural sector through the development of private or public services, institutions and infrastructure.
  • GSSE includes policies where primary agriculture is the main beneficiary but does not include any payments to individual producers.
  • GSSE transfers do not directly alter producer receipts or costs or consumption expenditure.

(4) Total Support Estimate (TSE)

  • The TSE transfers represent the total support granted to the agricultural sector, and consist of producer support (PSE), consumer support (CSE) and general services support (GSSE).

(5) Producer protection

  • Lastly, the OECD also provides data on “producer protection”.
  • The PP is the ratio between the average price received by producers (measured at the farm gate), including net payments per unit of current output, and the border price (measured at the farm gate).
  • For instance, a coefficient of 1.10, which China has, suggests that farmers, overall, received prices that were 10% above international market levels.

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