AN ECONOMIC ANALYSIS OF MINIMUM GUARANTEE PRICE FIXATION FOR FCV TOBACCO IN ANDHRA PRADESH – A BULK-LINE COST APPROACH

Abstract

The study provides the insights about the fixing of Minimum Guaranteed Price (MGP) for FCV tobacco based on bulk-line cost concept, which could be helpful in retaining the majority of farmers in cultivation, who contribute majority of total production. A total sample size of 450 FCV tobacco growers (@ 150 from each soil region framed as owner, tenant & owner cum tenant growers) were selected for the study spread over 19 auction platforms of Andhra Pradesh. The methodology used by CACP was employed to calculate cost of cultivation and income measures. The net return over cost C3 was negative with 0.90 in SLS, 0.97 in SBS, whereas positive with 1.11 in NLS region. The net returns with 0.99 return on rupee invested was realized by the total respondents of the study, which is almost equal to the total expenditure without real profit. To make the tobacco cultivation economically viable there is a need to fix up MGP at remunerative level to benefit number of growers. With the MGP fixed based on bulk-line cost method all FCV growers in all the soil regions obtained positive gross and net profits. The margins are more in NLS region followed by SBS and SLS. Hence, the policy makers should address the fluctuations in FCV tobacco prices by price support operations, like MGP especially in the event of declining of export demand