ABSTRACT
Agricultural price policy basically involves intervention in agricultural produce markets with a view to influencing the level of, and fluctuations in, prices and the price spread from farm gate to the retail level. The formulation of agricultural price policy is complicated by the multiplicity of functions that price performs. The objectives, thrust and instruments of agricultural price policy have undergone conspicuous shifts during the last 50 years. Upto the mid-1960s, the main instruments of policy were controls/restrictions on food grain sales, food imports and distribution of food grains at pre-specified prices that were normally below the market prices. After the mid-1960s, when new seed-fertiliser technology became available, price policy was assigned a positive role of augmenting the availability of food grains by increasing domestic production. The emphasis of the policy was on achieving the twin objectives of assuring remunerative prices to the farmers and providing food grains to the consumers and raw material to the industry at reasonable prices. The framework of the policy was modified in 1980 and its emphasis shifted from maximising the production of food grains to ensuring a diversified production pattern consistent with the overall needs of the economy. Again in 1986, the emphasis of policy shifted to building into the system factors, which in the long run would influence the prices of farm products and make the farm sector more vibrant, productive and cost effective. Further, in the wake of liberalisation, price policy assumed a significant role as a means of providing a safety net to farmers exposed to the workings of the market in the form of state intervention in the agricultural product markets as well as a component of the safeguard measures. In sum, the context of price policy has changed substantially over the years and so also has the role and effectiveness of price policy as a tool to influence the agricultural economy.
