Prices of different agricultural products play a major role in deciding cropping pattern and production of crops. Unless the farmer is not guaranteed remunerative prices, he will not have incentive to produce. Recognizing the importance of ensuring remunerative prices,the practice of declaring minimum support price(MSP) for different crops in advance before the start of the sowing season has been in vogue in India since the introduction of Green Revolution in late 1960’s. Real benefit to farmers will accrue only when they actually get the declared assured minimum price and for this to happen active presence of public procurement agencies (PPA) through effective market intervention is necessary. Even though government of India announces MSP for 22 different crops, the benefit of the scheme is not reaped by the farmers uniformly across crops and across regions in the country. Overall, the benefit of MSP is confined to major food crops like wheat and paddy and that too the benefit is confined mostly to farmers in states like Punjab, Haryana, Andhra Pradesh only. The results for other food grains- pulses and oil seeds are rather mixed and success is mainly dependent on the initiative taken by individual state governments.

While intervention by PPA’s depends on the political will of governments, farmers’ own proactive initiative in developing Institutions including Cooperatives could be the best solution in assuring remunerative prices on a sustainable basis in the long run. AMUL in Gujarat and its clones in different states are classic examples of farmer-owned and farmer-managed cooperatives ensuring fare and remunerative prices to dairy farmers over the past many decades. Further, these dairy cooperatives by creating required backward and forward linkages control the value chain of milk and thereby are in a position to influence the market price through the supply side. The relative stability of milk prices in the country can be attributed to the impact farmer-owned institutions like dairy co-operatives are able to exercise over the market. Lack of such farmer-owned institutional arrangement is perhaps the main reason for the price volatility observed in respect of most other crops including commercial crops in the country.

The present work attempts to test the above assumption that farmer-owned and farmer managed institution like a cooperative is the best guarantee against price volatility in the market by comparing the empirical data, spanning 17 years from 2001-02 to 2017-18, on the prices of some select commercial crops with that of milk prices in Kerala. The commercial crops covered include coconut, rubber, coffee, tea, cardamom and cashew nut. While coconut and rubber are under MSP, the prices of remaining four crops are determined solely by market forces. The study conclusively reveal that milk prices have displayed greater stability in comparison with other commercial crops of the state, with both crops enjoying price support and those crops having no such price support. Interestingly, the three tier dairy cooperative structure in Kerala has achieved what they have with their combined procurement accounting for only 11.34% of the total milk production in the state. Based on the above finding, the authors
recommend for replication of AMUL Model to other commercial crops of Kerala with necessary modification for ensuring the benefit of stable price support to the farmers.