Price Incentives Variation in the prices of agricultural commodities is one of the root causes of risk and uncertainty in agriculture.

In many instances, it is the price which forces the farmers to decide about the combination of crops. Therefore, any variability in the price mechanism exerts a decisive influence on farm management decisions which in turn greatly boost risk-bearing ability. In recent years, more and more emphasis is being laid on minimum support price (MSP) and state advisory price (SAP) which bring dynamism in agriculture in terms of area allocation, production and growth of different crops. The price policy must ensure that marginal farmers constituting a large percentage of the farming community stand to gain the most. The price of agricultural commodities also depends on the prevailing priorities for achieving planned targets. At present, considerable attention is being paid to fix the support price for further boost to agricultural development. In fact, the relative hike in price has a significant effect on the reallocation of resources among agricultural commodities. This has been amply demonstrated by observation and empirical evidence concerning sugar cane in Uttar Pradesh, cotton in Punjab and jute in West Bengal (Subbarao, 1969). Variations in yield, technological changes in farming, and institutional and infrastructural factors seem to be beyond the control and visualization of farmers. These are in fact the basic causes of price variation, which ultimately affect the farmers decisions on which crops to grow and which to ignore. This is because a farm enterprise has to yield a net profit over all costs met in order to justify its continuance. The farmers main concern, therefore, is to secure a satisfactory margin between the cost of production and price which he is receiving for his products. Fixation of support price from year to year is necessary to provide protection and incentive to marginal farmers. But before doing so, the cost of production is to be taken into account because it is a prerequisite in price fixation. With an increase in prices of some agricultural commodities, the area under these crops would increase in the ensuing years. If the rise in crop price lacks uniformity and is of an ad hoc character, farmers will not be optimistic about making a judicious reallocation. Under such circumstances, farmers will obviously shift over to the cultivation of those crops which would fetch them more money. Unfavourable price structure can shatter a well established combination of crops. Consequently, this can jeopardize the entire agricultural economy of a

country. Numerous crops as barley, gram, maize, pulses, sorghum and pearl millet were once the important crops in the Punjab-Haryana plain. Throughout this tract these crops were raised only for domestic needs. But such cropping does not help now in view of the fact that advance announcement of support prices in the case of paddy and wheat is made for the farmers to plan their cropping structure. Credit Agencies Credit agencies or societies play an important role in the provision of finance to farmers, the submarginal and marginal farmers in particulars since these help them to adopt modern farm technology and possibly to develop land and water resources. Co-operative credit societes have played a key role in the agricultural developmental programmes in the country. Their major function is to link credit facilities with agricultural production on the one hand and with marketing and supply stores on the other. The cooperative movement in India was introduced as a result of rural indebtedness and the first legislation was the Cooperative Credit Societies Act of 1904 which led to the establishment of credit societies. The objective of these societies at that time was restricted to advancing nominal amounts as loans to farmers to enable them to meet limited household contingencies and to help them by making ordinary advances for redeeming their mortgages, which were seldom related to agricultural production. Even in the achievement of this limited objective the performance of credit agencies like co-operatives, was not encouraging in spite of a large membership and an adequate working capital. Such a performance was inadequate in respect to village-wise and population-Wise coverage. In post-independence period, credit facilities are linked to the production programmes of the farmers. The efforts were generally directed towards advancing loans for agricultural production. Still this programme could not achieve its objectives because it covered only a small proportion of rural households. advanced only a very small proportion of the total borrowings of the rural community and the advances had hardly any relation to agricultural production. The role of present-day credit agencies or societies is different and clearly spelt out unlike what was in the pre-independence period. The objectives have been completely changed in the context of national needs and the assessment of production needs of the entire

farming community. These are now playing a major role in the transformation of subsistence agricultural economy into a commercial one. The credit societies of today are large-scale organizations in the form of co-operatives or banks with a universal coverage of rural households, advancing adequate funds to the farmers for larger investments on land, and as far as possible the loans are being linked to agricultural production. The criteria for advancing good credit which the agencies are now following are: (i) it must be adequate in terms of amount so that it is commensurate with farm production requirements for adoption of modern farm technology, (ii) it must be advanced at a nominal rate of interest and its recovery be linked with production. and (iii) the credit limit must be linked to the production programme of the farmer rather than to the size of his holding. Further, it may be fixed subject to the repaying capacity of the individual farmer and production needs of different crops. This credit policy has ushered in the green revolution in Punjab and Haryana. Although short-term loans are given for current agricultural operations by various societies, agencies or banks, and long-term loans are essential for the development of land. In this respect the Punjab and Haryana have been the pioneers as the land mortgage banks were established in the erstwhile Punjab as early as in 1958. Their main aim was to advance loans on a long-term basis for the development of agricultural land. Various organizations played a significant role as promoters of the green revolution in India, particularly in Punjab and Haryana. These made arrangements for supply of fertilizers, pesticides and insecticides, agricultural implements and other essential services to farmers. Ground-spraying and aerial-spraying units were established by organizations so as to provide plant protection facilities on a large scale and at low cost. Consequently, agricultural production in these states has picked up. Political Policies The results of political decisions on the agricultural landscape are evident in every country of the world. Sometimes political decisions play a far more decisive role as compared to socio-economic factors in many land-use patterns. In fact, government intervention depends on the prevalent conditions in the country. Under certain circumstances, the government may stop the farmer from selecting a particular cropping system. In socialist countries even the combination of crops and their precise rotation is dictated by the government. Besides, it is the state which fixes the location and the extent of area to be

devoted to particular crops. Such political restrictions, if any, come under political determinism. On the whole, government policy according to Morgan and Munton (1971), depends largely on the level of agricultural development and its importance within the parameters of the national economy. Keeping this in mind, the countries of the world can be grouped into three main categories as follows: Underdeveloped countries, whose economy depends mainly on the export of primary products. The main aim of their governments is to ensure self-sufficiency in food production for domestic use and to stimulate the production of cash crops with a view to exporting them. Unfortunately, in many cases, the rapid growth of rural population and unfavourable terms of trade with overseas countries have frustrated their proposed plans. It seems as if they are fighting a losing battle. Industrially developed nations, which protect their agricultural industry not because these are not in a position to import cheap food but because these are unable to reduce their domestic agricultural production for many political reasons. Some of these reasons can be identified as follows: (i) these want to keep the agricultural income at a socially desirable level, (ii) these want to achieve self- sufficiency in agricultural output, (iii) these wish to keep food prices low for the urban industrial consumer, and (iv) these wish to maintain the efficiency of agricultural production. Highly developed nations, which face problems caused by food surplus and increased production capacity. The rapid increase in output is the result of the recent technological progress. This imbalance can, however, be brought under control with cropland occupancy quotas recommended by the government. Most countries formulate the agricultural policies and take decisions at different levels such as regional, national and international. As a result, they have to formulate three different policies. These are regional, national and international policies. Regional Policies Some nations have regional policies for agricultural development programmes depending on the various physico-socio-economic factors influencing the agricultural

patterns within different regions. Within a developing area farmers often receive special treatment. An interesting example of this type according to Morgan and Munton (1971) is to be found in Southern Italy (Mezzoguiorno) where a special fund(Cass) was created in 1950 to accelerate agricultural development. In the United States, there are numerous equally well documented regional changes in the agricultural landscape patterns resulting from government regional policies. Many new land-uses have been introduced in uncultivated areas, transformi ng radically the regional economy. This may be ascertained by facts like a rapid increase in livestock raising in the southeast, extension of soyabean into the lower Mississippi Valley, and political restrictions imposed on tobacco cultivation in the most favourable tract of the southeast. As a result, even cotton cultivation has been shifted from the southeast to the southwest, where the crop can be produced more efficiently and in greater quantities (Gregor, 1970). At times, the political effect on regional agricultural patterns penetrates so deeply that it poses serious problems. For instance, the erstwhile West Punjab (Pakistan) and East Bengal (Bangladesh) were ideally suited for cultivation of cotton and jute crops respectively. But the pricing and exporting policies of the two respective cash crops were not justified by regional policies. Eventually, the relations between the two regions of the then Pakistan became so strained that the country was divided into two separate countries in 1971. National Policies The nationalist approach of many governments towards their agricultural industry makes their internal policy decisions of paramount importance to the aspirations and expectations of farmers. The most significant is the extent to which government can reduce price uncertainty and allay fears as to the future status of agriculture within the nations priorities (Morgan and Munton. 1971). After independence India felt an acute shortage of agricultural produce which was mainly due to the loss of the granaries as a result of the countrys partition. Thereafter, a rapid growth of population further worsened the situation. The government, therefore, had to promote agricultural development and make all out efforts during the first Five Year Plan. Grotewold and Sublett (1967) have provided an illuminating view of the many differences between the cropping patterns of England and Western Germany (Germany) which appear to have resulted from the latters greater restriction imposed on imports of agricultural commodities.

Further, each country aims at accomplishing greater national output and reducing the overall price. For instance, the collection and processing of dairy products involve high costs. These can be reduced by increasing the number and the size of the dairy plants. Cost can be further reduced provided the government takes effective steps to expand the milk-plants hinterland so as to command a greater number of dairy farms for collection purposes. Often a government makes a provision of subsidies so as to keep prices of agricultural produce at a desired level. It is one of the most favoured means to stimulate or retard agricultural production. Farmers will respond effectively provided the price-change announcement is made quite in advance prior to the sowing season: otherwise they are left with no option but to speculate. The fact is that uncertainty affects the efficiency of the farmers. If the government fails to heed this fact, the cropping pattern may keep on changing. Farmers always prefer to cultivate crops which are more remunerative. Sometimes the government fixes the procurement price of crops at a level that will ensure the farmers a reasonable price. In India, for example, the government announces the procurement price for different crops sufficiently in advance of the season to ensure reasonable returns so the farmers. Some nations face problems of over-production which may be owing to quite a few reasons. Since the mid- 1 950s, a major agricultural problem in the United States has been over-production according to Heady (1967). By 1959 wheat surplus alone had risen to 1.2 crore (12 million) bushels, more than a years crop production and twice the annual domestic consumption. This kind of food surplus can. however, be exported as food-aid to needy countries but such a compensation cannot be taken for granted. The government is, therefore, forced to withdraw land resources from food production. At the same time, this is also induced by the farmers who shift to grass or some other cultivation. This system, therefore, is based on the voluntary land-retirement and compensatory payment approach. With the voluntary approach most of the least-favoured agricultural regions of a country can be left out. However, at times agriculturally potential areas could be put to use other than the raising of foodgrains. Needless to say. it would be politically untenable for the government to endorse such a policy as it would result in largescale unemployment in some rural areas (Morgan and Munton, 1971).

With land reforms, the agricultural efficiency of a country increases manifold. Under land reforms the government introduces the policy to change the shape and size of the farms by implementing consolidation schemes and improving the tenurial system. By doing so the motives of economic development, social justice and political gains may be achieved. In countries where radical changes have been taking place accompanied by a rapid growth of populations, highly developed technology and change in socioe-conomic conditions, the government is motivated to heed to those phenomena. In Britain and America, economists advocate that farm units should be large enough in size so as to employ agricultural labour and capital resources more efficiently. On the other hand, in Latin American countries people demand that large estates be abolished to establish peasant proprietors to ensure social justice. Often the government fails to appreciate the dynamic nature of land reforms which, consequently, fail to fulfil their purpose. After having introduced the required structural changes there is always a need to give a fillip to the supply of cheap credit and dissemination of innovative information to farmers. Otherwise the agricultural output would decline to a large extent, as is evident from the Russias collectivization scheme of the twenties in the 20th century. The Bolivian agricultural reform of 1950 also shows that food production came down by as much as 50 per cent in the year following the land reform. It is suggested that the governments of the developed world can endeavour to increase the average size of a farm and to improve the tenurial system since these have abundant resources at their disposal. The governments of the underdeveloped world should also make similar efforts albeit gradually in view of the meagre resources at their disposal for the implementation of such programmes.