Upload
dinhhanh
View
220
Download
1
Embed Size (px)
Citation preview
Understanding Price Variation in AgriculturalCommodities in India
Shoumitro Chatterjee, Princeton and Devesh Kapur, UPenn
India Policy Forum, July 2016
0-0
Why should we care?
Important for development of India.
Consumers pay different prices in different regions.
Farmers in different locations face different prices.
They make crop choices and input choices given these prices.
Important to understand farm productivity and farmer welfare.
0-2
Outline
Creation of new Agriculture Markets.
Decomposition of Variance
Conceptual Framework
MSP and Government Procurement
Mandis and Market Power
Future Work and Policy Questions
0-3
Acts Governing Agriculture Trade in India.
Food Adulteration Act, 1954
Essential Commodities Act, 1955
Standards of Weights & Measurement Act, 1976
Prevention of Black Marketing & Maintenance of Supply ofEssential Commodities Act, 1980
Consumer Protection Act, 1986
Bureau of Indian Standards Act, 1986
Agriculture Produce (Grading & Marketing) Act, 1986
0-4
Variance Decomposition (Shapley Shorrocks)
37%: District Specific Time Invariant effects.
Market Structure, Access to Irrigation, Productivity
20%: Location invariant aggregate time shocks.
Global Demand
4%: Rainfall Shocks
39%: Location and Time varying factors.
Connectivity and Procurement of Grains
0-7
Variance Decomposition (Shapley Shorrocks)
37%: District Specific Time Invariant effects.
Market Structure, Access to Irrigation, Productivity
20%: Location invariant aggregate time shocks.
Global Demand
4%: Rainfall Shocks
39%: Location and Time varying factors.
Connectivity and Procurement of Grains.
0-8
Data Sources
Time period 2005-2014. Commodities – Paddy & Wheat.
Monthly Wholesale price and quantity data. (Govt. of India’sAgmarknet Project).
Seasonal yields and production data at the district level. (Min-istry of Agriculture, GOI)
Monthly Rainfall - gridded data from Willmott and Matsuura(2012).
Population at sub-district level from Census of India 2011.
Farmer level data from NSS - Situation Assessment of Agricul-tural Households 2012-13.
District level monthly grain procurement - Food Corporation ofIndia.
0-11
Govt Procurement of Paddy and Wheat
Through Food Corporation of India and State Agencies
“Government policy of procurement of Food grains has broadobjectives of ensuring MSP to the farmers” – FCI Website.
Extensive Operations with about 20000 centers for Wheat and40000 centers for Paddy.
What does the data tell us?
0-12
Understanding Spatial Variation in Procurement:Some Hypothesis.
Presumably linked to spatial variation in procurement centers.
What drives this variation?
Path dependency - spatial variation of green revolution.
Fiscal Constraints.
Political Economy.
0-15
What is the effect on market prices?
(pcdt −mspct
mspct
)= α+ β1 {procurementcdt > 0}+ γd + γt + εcdt
0-17
Analysis 1: Using within state variation
lnpricecmdt = α+∑b∈B
β1b (#mandi)mb+∑c∈C
β2c ln raindt×1 {crop = c}
+ β3Local Demandm + β4 ln yieldcdt + γc + γs + εcmdt
0-23
Results
ln pcmt = βcompm + γc + γs + γt + εcmt
ln pcmt − ln pcm′t = β (compm − compm′) + γss′ + εcmt
compm =∑
j∈M(m)
dist−1mj
0-28
Conclusions & Policy Questions
Core objective of MSP is not being met.
Large spatial variation in procurement and is likely to have sig-nificant welfare and distributional consequences.
Policy goal should be to provide more options to the farmers.
Regulations in APMC acts have created market power for man-dis which has clear price effects.
0-29
Conclusions & Policy Questions
Reforms under Model APMC Act –
Levies taxes on transactions outside the mandis.
Some states went back on reforms.
Has failed to attract private players.
NAM – welcome change but effects remain to be seen.
0-30