Effectiveness of Minimum Support Price Policy for Paddy in India with a Case Study of Punjab

The effectiveness of minimum support price (MSP) for paddy has been examined in different regions of India and its role and contribution towards production in surplus states like Punjab have been studied. Based on the secondary data spanning from 1980-81 to 2006-07, the deviations of farm harvest prices from the MSP have been used as a measure of ineffectiveness and the impact of prices and technology on rice productivity has been examined by using the simultaneous equation model. While the MSP policy has been very effective in surplus producing states like Punjab and Andhra Pradesh, it has not been so effective in the deficit states. In Punjab, the effective implementation of the price policy has helped in improving the production and productivity of rice. Non-price factors such as use of improved varieties, availability of assured irrigation at subsidized rates and high fertilizer-use have been found to be significant determinants of growth in rice production. The study has suggested that without losing sight of the environmental concerns, the Punjab model can be used for increasing the production of rice in other potential areas of the country.