Farmers' Earnings in Agricultural Produce: RBI

Facts for UPSC Mains

Farmers' Earnings in Agricultural Produce: RBI

Why is this important?

The Reserve Bank of India (RBI) conducted a nationwide survey to examine the share of farmers in consumer prices for rabi crops. The survey covered mandis and villages across 18 states, analyzing 12 rabi crops and incorporating data from farmers, traders, and retailers.

Key Findings of the Survey on Farmers' Earnings in Agricultural Produce

1. Farmers’ Share in Consumer Prices: Farmers received 40-67% of the final retail price for the major rabi crops surveyed.
2. Wheat Farmers: Wheat farmers received the highest share—67% of the consumer price. Additionally, 25% of wheat was sold at the Minimum Support Price (MSP), ensuring an assured market.
3. Rice and Other Cereals: Rice farmers’ share in retail prices stood at 52% in 2024, consistent with the share from previous years: 45% in 2022 and 49% in 2018.
4. Pulses and Oilseeds:
   • Lentil (Masoor) farmers received around 66% of the consumer price.
   • Gram (Chana) farmers received 60% of the final retail price.
   • Mustard farmers received 52%, slightly lower than the 55% share recorded in a 2021 study.
5. Perishable Crops: Farmers’ share in fruits and vegetables ranged from 40-63%, significantly lower than in cereals and pulses. The combined share of traders and retailers in consumer prices was more than 50% for most perishable crops (except tomatoes).
6. Lower Share in Perishable Products: Perishable crops, like fruits and vegetables, have a lower farmers' share compared to non-perishable crops (such as wheat and pulses). The reasons include short shelf life, seasonal production, varying quality, specialized logistics, fluctuating demand, climate dependency, and supply chain uncertainties.
7. Digital Transactions: While cash transactions still dominate in agriculture, electronic payments have seen a significant increase in the 2024 survey, compared to 2018 and 2022.
8. Supply Chain Challenges:
   • The unorganized supply chain, with multiple intermediaries, limits transparency in product movement, financial transactions, and pricing. This reduces the share that farmers receive in consumer prices.
   • The limited farmers' share discourages crop diversification away from cereals.

Read More: Middlemen Gain as Farmers Earn Less in Agricultural Produce: RBI

Drishti Mains Question:

• Assess the role of intermediaries in India’s agricultural supply chain and its impact on farmers' earnings.

UPSC Civil Services Examination, Previous Year Question (PYQ):

1. What do you understand by the Minimum Support Price (MSP)? How does MSP help farmers escape the low-income trap? (2018)

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