Ramesh Singh Test: Agriculture & Food Management- 2 - UPSC

The objectives are:

• (i) to enhance the market supply of foodgrains;

• (ii) to exercise a moderating influence open market prices; and

• (iii) to offload surplus stocks.

Under the Open Market Sale Scheme Domestic, the government now adopts a policy of differential prices to encourage the sale of older stock first-sticking to the following policy stance:

• (i) Keeping the reserve price above MSP, but reasonably below the acquisition cost or economic cost of wheat, so that the buyers remain attracted to purchase of wheat from the mandis during the harvest season and the market remains competitive.

• (ii) Maintaining that the market price during the lean season does not increase much and inflation remains under check.

• The developed countries (the USA and Europe) spend huge amounts of their annual budgets on the agriculture, farm and fisheries subsidies.

• Direct farm subsidies are helpful as they provide the right levels of purchasing power to the farmer and can significantly help in raising the standards of living of the rural poor.

• They also help in checking the misuse of public funds as they help in the proper identification of the beneficiaries.

• These are the farm subsidies which are provided in the form of cheaper credit facilities, farm loan waivers, reduction in irrigation and electricity bills, fertilizers, seeds and pesticides subsidy as well as the investments in agricultural research, environmental assistance, farmer training, etc.

• These subsidies are also provided to make farm products more competitive in the global market. The subsidies provided on the fertilizers as 'input' subsidies are in the form of indirect subsidies.

• 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 because these subsidies distort the free market forces which have their implications.

• India's agricultural market is presently regulated by the Agricultural Produce Market Committee (APMC) Act enacted by the state governments.

• There are about 2,477 principal regulated Agri markets and 4,843 sub-market yards regulated by the respective APMCs in India.

• Thus, India has not one, not 29 (number of states) but thousands of agricultural markets.

• The upstream stage of the production process involves searching for and extracting raw materials—it does not do anything with the material itself, such as processing the materials.

• In upstream, firms simply find and extract the raw material.

The is a perceptible decline in the ratio of IPU to IPC mainly due to:

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  (i) lack of proper operation and maintenance,

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  (ii) the incomplete distribution system,

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  (iii) non-completion of command area development,

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  (iv) changes in cropping pattern, and

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  (v) diversion of irrigated land for other purposes.

• Amber Box -All subsidies which are supposed to distort production and trade fall into the amber box, ie, all agricultural subsidies except those which fall into the blue and green boxes.

• These include government policies of minimum support prices (as MSP in India) for agricultural products or any help directly related to production quantities (as power, fertilizers, pesticides, irrigation, etc).

• The Swiss Formula belongs to the classification of formulas known as having a harmonising impact.

• Since such a formula prescribes a higher/steeper cut on higher tariffs and lower cuts on lower tariffs it is seen to harmonise the rates by bringing the final rates closer and bridging the gap.

• The formula was proposed by Switzerland in the Tokyo round negotiations of GATT (1973-79).

But Switzerland opposes using this method in the current agriculture negotiations-it prefers the Uruguay Round formula.