Minimum Support Price and Procurement Mechanism for Smallholder Paddy Farmers: An Effective Tool for Farm Price Risk Mitigation

Abstract

The decentralised paddy procurement system in the State of Kerala, India is a market support mechanism for farmers offering a procurement price comprising the Minimum Support Price (MSP) issued by the central government and the State Incentive Bonus (SIB). The study was an attempt to assess the farmers' perceptions on the effectiveness of the paddy procurement in the State, using six key parameters: market perception, price risk mitigation, institutional support, influence on crop choice and decision-making, procedural formalities, and state policy intervention. A survey was conducted among 160 farmers from the major rice growing tracts of the State, using a structured interview schedule and Likert-type scale measurement. The findings indicate that price risk mitigation (84.16) and state policy intervention (86.62) achieved very high effectiveness scores, demonstrating the effective role of MSP in paddy marketing and the related benefits for farmers through strong government interventions at state level. Market perception (74.18), influence on crop choice and decision-making (74.35), and institutional support (62.64) were also rated as highly effective. However, procedural delays and quality-related disputes emerged as key limitations of the procurement system, warranting policy attention. The study highlights that while the procurement scheme provides market stability mitigating the price risks, addressing procedural bottlenecks is crucial for enhancing its overall effectiveness.