This policy is a tool to influence the price of agricultural product. It is on incentive to the producer to produce a particular product according the desired quantity.
Importance of Price Policy :-
The price of agricultural product fluctuate more quickly as compared to the industrial product. So these changes in prices affect the income, standard of living of the farmer and rural population. Even these also affect the trade of other goods.
Example :- In India and Pakistan if the prices of cotton or wheat falls any year, it also affects the trade and other business badly. The farmers aggregate demand falls, which affects the whole economy.
The govt. in this situation interfere so that prices may not fluctuate beyond a particular limit. Because if the price of any particular product falls any year, then next year farmers never cultivate that product. It creates shortage next year in the market. So agricultural price policy has greater importance in the developing countries of the world.
Objectives of Price Policy:-
The objectives of agricultural price policy may differ from country to country. These depend upon the stages of development in a country. Anyhow, following are the important objects of agricultural price policy :
1. To meet the domestic consumption requirement govt. promotes balanced increase in production.
2. To provide price stability in the agricultural product.
3. To meet the national targets by the planners.
4. To provide the wheat to consumer to reasonable price.
5. To provide raw material to the industries at reasonable price.
6. To increase the production and exports of agricultural product.
Methods of Adopting Agricultural Price Policy :-
To regulate the prices of product govt. taken the following measures :
1. Administrative Price :-
Govt. tries to maintain a favorable prices acceptable to both farmer and producer. But generally both the parties remain unhappy. If govt. increases the price of agricultural product, then consumer suffers. As govt. of increased the price of wheat to encourage the farmer, public criticized the govt. badly. On other side if goods are prices low then farmers suffers and production is affected adversely. Govt. tries to protect the interest of the both parties.
The administrative prices consists upon the following the prices :
i. Support Prices :- Every year govt. fixes the support prices of important crops. The prices are announced before the sowing time, to encourage the farmers.
ii. Issue Prices :- To protect the consumer interest govt. provides specified quantity of goods to the consumer at the prices which are lower than market prices.
iii. Procurement Prices :- Govt. every year maintains a particular stock of a product. This stock is used at time to time of emergency and shortage for the purchase of the desired agricultural product govt. announces procurement prices. These prices are generally reasonable.
2. Changing in Demand and Supply :-
Some times govt. producers some portion of the product it reduces the supply in the open market then price level rises. Govt. allows the sellers to sell their product at market price. Sometime govt. exports the surplus product. It reduces the supply, price level rises. The farmer sell product at reasonable price.
3. Improvement in Facilities :-
The govt. can influence the price of the product by providing the facility of where house and roads and markets. Due to these facilities farmer can sell his product at reasonable price.
Most of the different countries have also revised its agricultural price policy keeping in view the problems of the farmers and consumers.
The price support policy is implemented through various departments. Food, Cotton and Rice export corporation. Agricultural marketing and storage limited, and ghee corporation are playing very effective role in this regard. Wheat, rice, cotton, sugarcane, sunflower etc. Prices are set through the price support policy.