RESPONSE OF CROP ACREAGE TO PRICE IN HARYANA: AN AGRO-

ECO REGION LEVEL STUDY

Narender Kumar1, M.S. Jaglan2

The farmers in general respond to crop prices obtained during previous harvesting season

while taking decision on crop selection. The present study explores the relationship between prices of

selected crops during preceding year and their acreage in different agro-eco regions of Haryana. In

this regard, the study takes into account the farm harvest price of selected crops as apart from paddy

and rice other crops are not largely procured at minimum support price. The study is based on the

secondary data. The agro-eco regions as the systems of agricultural production have been demarcated

on the basis of proportion of crop area in total cropped area. The study brings out that the fluctuations in

price of non-procured crops are much higher than that of paddy and wheat. All the selected crops have recorded

significant increase in their price during the period 2004-05 to 2019-20. But it does not have good correspondence

with acreage of all the crops. It is only the cotton, paddy, and wheat which have recorded increase in the acreage.

Regression analysis reveals that not the acreage of all the crops has responded positively to the price. Cotton acreage

has responded very well to price, particularly in the Mixed Crop Region. Paddy acreage also shows significant

response to the price. Among Rabi crops, it is only the wheat acreage that shows positive response to the FHP.

Overall, rather than the price of previous year, it is the assured procurement of paddy and wheat at MSP that drives

the Haryana farmers across the agro-eco regions to choose these crops. Adoption of cotton as a Kharif cash crop

in the Mixed Crop Region is the main factor in expansion of area under this crop in the state.

Keywords: Farm Harvest Price, Minimum Support Price, Agro-eco region, Price response, Crop acreage
Introduction

The agricultural prices of crops in the free market keep on fluctuating and they are normally

low during harvesting seasons of the crops and high thereafter (Bharadwaj, 2023). Due to recent

changes towards agriculture in terms of liberalization of the Indian economy, the agricultural

price policy and price support system have come under scholarly scrutiny (Sudhakar and Wale,

2017; Bhattacharyya, 2003; Mehta et al., 2020). The price of the crop has been documented as

one of most significant factors in determining the acreage of crops. In developing country like

India, price policy plays an important role in agricultural development as they impact the input

and output prices significantly (Streeten, 2016, Punith Kumar and Indira, 2004). The market

price of such crops at harvesting time during previous year certainly influences their acreage

(Nerlove, 1956). As a price policy instrument, the price support scheme is designed to create

incentives for the development of a specific cropping pattern (Deshpande and Naika, 2002).

The price policy gamut in India revolves around minimum support price (MSP) which is a

policy instrument of Central Government aimed at providing remunerative prices to the farmers

for their crop produce and providing foodgrains to the consumers on affordable rates through

open market and public distribution system (Parikh and Singh, 2007). Farm Harvest Price (FHP) is

the price of the agricultural commodities at the time of their harvesting which is determined by grain

traders through bidding in the mandis (agricultural commodity markets) (Chand, 2012). It could be higher

or lower than MSP. Higher FHP than MSP is normally an indicator of greater demand of an agricultural

commodity and vice-versa. Central Government of India declares MSP for 26 crops every year on

the recommendation of Commission of Agricultural Costs and Prices (CACP). These crops

include fine cereal crops (paddy and wheat), coarse cereals (ragi, barley, jowar, bajra and maize),

pulses (gram, arhar/tur, moong, urad and lentil), oilseeds (groundnut, rapeseed/mustard, toria,

soyabean, sunflower seed, sesame, safflower seed and niger seed), raw cotton, raw jute, copra,
de-husked coconut and VFC (Virginia flue cured) tobacco (CACP, 2019). Beside this CACP also

recommends Fair and Remunerative Price (FRP) for sugarcane. The government agencies mainly

procure rice and wheat on MSP for buffer stock and public distribution system. MSP is also a

mechanism of giving economic incentives to farmers for sowing new crops for crop

diversification and changing the cropping pattern.

The Green Revolution initiated in mid 1960s is seen as a major driving force inducing

shift in the cropping pattern in Haryana in the favour of wheat and paddy replacing the coarse

cereals and pulses, the dominant traditional crops (Panwar and Dimri, 2018; Grover at al., 2015).

There are various factors that influence the crop acreage i.e. proportion of total cropped area

devoted to a particular crop in the state. They include the price at harvest time, market

availability, demand of crop in market and crop procurement by the government. The studies

reveal that increase in the price of an agricultural commodities have resulted in changing the

cropping pattern and transfer of resources for enhancing the production of certain crops (Ritu et

al., 2020, Singh and Jaglan 2021).

In Haryana the effective execution of MSP policy ensured the procurement of paddy and

wheat marketing of the crops and consequent expansion of these fine cereals all across the state

where means of assured irrigation were available (Abdulaziz et al., 2021). The continuous

increase in MSP of wheat and paddy along with availability of mandis for their procurement at

MSP has ensured increase in their acreage and geographical expansion in the state (Ali et al.,

2012). The crops other than wheat and paddy despite having MSP, are not procured by the

government agencies (Kumar and Jaglan 2022). MSP or no MSP the market prices of previous

year are expected to influence the perception of a farmer towards selection of a particular crop

for cultivation. And a farmer generally goes with a particular crop keeping in view its price during

previous year.
Objectives of Study

The present study attempts to assess the influence of previous year FHP on the acreage of

main crops over the period and across the agro-eco regions in the state of Haryana. It takes into

account FHP instead of MSP because except paddy and wheat the prices of the agricultural

commodities at the time harvesting matter most to the farmers. The present study has two-fold

objective. It aims at assessing the trend of gap between FHP and MSP of main crops and to

examine the impact of previous year price on the acreage of main crops in different agro-eco

regions of Haryana.

Study Area

Haryana is one of agriculturally developed state of India where about 65 percent of

population directly or indirectly depends on this sector of economy for livelihood. Agricultural

land constitutes 80.3 percent of the total geographical area of the state. The total food grain

production of the state is 180.9 lakh tonnes which mostly come in the form of wheat (122.63 lakh

tonnes) and paddy (48.8 lakh tonnes) as together these two crops account for about 95 percent of

total food grain production in the state (Statistical abstract of Haryana 2019-20). Despite being a

small and overwhelming dominance of these two cereals, the state has marked regional

differences in agro-climatic conditions and resource allocations. Accordingly, the state has been

divided into three agro-ecological regions following the uniform production and environmental

restrictions criteria of Indian Council of Agricultural Research Project (Saxena et al., 2001).

These agro-eco regions are namely Wheat-Rice Region (eastern and northeastern parts), Wheat-

Rice-Cotton Region (northwestern parts) and Mixed Crop Region (south and southwestern parts)

(Figure 1). The crop area and total cropped area data used for delineating cropping pattern based

agro-ecological regions pertain to the agricultural year 2019-20. Wheat-Rice Region is largest in

area and covers about 45 percent of total geographical area of state, followed by Mixed-Crop

Region (about 30 percent) and Wheat-Rice-Cotton Region (about 25 percent).

The present study is based on the secondary data. The data regarding crop area (2004-05

to 2019-20) have been collected from the Statistical Abstract of Haryana, Department of

Economic and Statistical Analysis, Government of Haryana. The data related to farm harvest

price (FHP) (2004-05 to 2019-20) have been obtained from AGMARKNET and Directorate of

Marketing and Inspection, Ministry of Agriculture and Farmer Welfare, Government of India.

Information regarding to minimum support price (MSP) of crops for crop years 2004-05 to 2019-

20 have been obtained from Commission on Agricultural Costs and Prices, Ministry of

Agriculture and Farmer Welfare, Government of India.

Analytical Tools and Techniques

The compound annual growth rate (CAGR) has been calculated to depict annual average change

in FHP and crops acreage from 2004-05 to 2019-20. The CAGR of crop prices and area under crops has

been computed using the formula:

Where N is number of years.

Research is based on secondary data of FHP and MSP for the period 2004-05 to 2019-20. The

difference between FHP and MSP has been taken to show how effectively MSP policy is

working. Deviation of FHP from MSP, both negative and positive, has been computed to

examine whether market price of crops is higher or lower than the MSP.

1
MAPD or MAND = 𝑛 Ʃ|𝐹𝐻𝑃ᵢ − 𝑀𝑆𝑃ᵢ|

If, FHP > MSP = Positive deviation (PD)

FHP < MSP = Negative deviation (ND)

Where, MAPD = Mean absolute positive deviation,

MAND = Mean absolute negative deviation,

MSP = Minimum support price and

𝑛 = Frequency of positive or negative deviations.

To assess the extent of these deviations from the MSP, the deviations were adjusted using the
value of MSP. The equations for the adjusted mean deviation, both positive and negative, was
as follows:

1 |𝐹𝐻𝑃ᵢ−𝑀𝑆𝑃ᵢ|
AMPD or AMND = 𝑛 Ʃ ( 𝑀𝑆𝑃ᵢ
) ∗ 100

Where, AMPD is adjusted mean positive deviation, and

AMND is adjusted mean negative deviation

Linear regression equation has been used to examine the impact of FHP on crop area.

The previous year FHP has been taken as independent variable and crop area as dependent

variable. Following equation has used for linear regression:

𝐴ₜ = 𝑎 + 𝑏𝑃ₜ_1

Where, 𝐴𝑡 = Area of food crops at (t)th period,

𝑃𝑡 = FHP of crop produce has been taken as Rs. per quintal at (t-1) th period.

Result and Discussion

Gap between MSP and FHP of Main Crops

Table 1 shows the comparison of FHP and MSP of various crop produce in Haryana during the

period 2004-05 to 2019-20. It is evident that FHP of paddy, and wheat is higher than MSP for all the years

of study period. It is interesting to note that annual mean positive deviation of paddy FHP from MSP is

₹9.1/q which is quite higher than that of wheat (₹2.1/q). The higher FHP of paddy may be attributed to its

procurement in large quantity by the government agencies for the central pool and its short supply in the

free market (Ritu at al., 2020). Furthermore, the market price of the superior grade paddy is always higher

than MSP. Among other crops not procured on MSP, cotton and gram have recorded quite high mean

positive deviation of FHP from MSP. Comparison of AMPD and AMND depicts that in general, the non-
procured crops have recorded higher fluctuations than paddy and wheat. The fluctuations in the FHP of

non-procured crops are the function of market demand. In case of cotton, 15 out of 16 years, FHP has

been higher than MSP. Similarly, mustard FHP has exceeded MSP 13 out of 16 years which may be

attributed to the fact that edible oil price was on higher side in domestic and international markets during

recent years. The FHP of largely un-irrigated crops, gram and bajra, was also higher than MSP in 14 out

of 16 years in the state. The comparison of MAPD and MAND reveals that positive deviation of FHP

from MSP is much higher than negative deviation for all these crops. Overall, there has been upswing in

crop prices in the state. It will be examined in the following section weather it had any impact on crop

acreage or not.

Table 1
Haryana: Gap between FHP and MSP of Crops during 2004-05 to 2019-20
Crops Negative Deviation Positive Deviation
Frequency MAND AMND Frequency MAPD AMPD
₹/q ₹/q ₹/q ₹/q
Bajra 2 -31.5 -2.9 14 50.3 4.6
Cotton 1 -39.0 -1.2 15 941.0 29.8
Paddy 0 - - 16 86.9 9.1
Gram 2 -96.5 -3.4 14 328.6 23.4
Mustard 3 -125.6 -4.6 13 361.0 13.2
Wheat 0 - - 16 26.5 2.1
Source: Computed by author, gap value 0 is considered as positive deviation.
Growth Pattern of Farm Harvest Price and Crop Acreage

Compound annual growth rate (CAGR) of FHP and crop acreage has been computed for the period

2004-06 to 2019-20 (Table 2). Paddy has highest CAGR of FHP (8.90 percent) followed by bajra (8.37

percent), cotton (7.95 percent), wheat (7.07 percent), gram (6.82 percent), and mustard (6.63 percent). It

is revealed that the prices of all the selected crops have increased significantly. But the acreage of all these

crops has not increased over the same period. At the state level the acreage of three crops, cotton, wheat,

and paddy, has increased over the period 2004-05 to 2019-20. But on the other hand, bajra, mustard and

gram acreage has had negative CAGR during this period. Interestingly, paddy acreage growth rate is

highest in Mixed-Crop Region (6.05 percent) followed by Wheat-Rice-Cotton Region (5.13 percent).
These two agro-ecological regions have had low proportion of area under this crop in comparison to

Wheat-Rice Region where it has reached almost the saturation level. It indicates that paddy cultivation

has expanded in the semi-arid regions of Haryana during last one and half decades.

Table 2
Haryana: Compound Annual Growth Rate of Crop Acreage and FHP of Main Crops during
2004-05 to 2019-20
Regions Paddy Cotton Bajra Wheat Mustard Gram
Wheat-Rice 1.77 1.38 -7.10 0.49 -4.12 -15.86
Wheat-Rice-
5.13 -0.42 -5.25 0.80 -0.92 -3.56
Cotton
Mixed-Crop 6.05 6.50 -0.58 0.77 -0.36 -8.56
Haryana 2.69 1.33 -1.63 0.64 -0.72 -6.97
FHP for
8.90 8.37 7.95 7.07 6.63 6.82
Haryana
Source: Computed by author, figures are in percentage

During the period 2004-05 to 2019-20 the acreage of cotton has increased significantly only in the

Mixed-Crop Region of southwestern Haryana (6.50 percent). The wheat acreage has had a sluggish

growth in the state (0.64 percent) and there is not a significant variation in this regard across the agro-eco

regions. Gram acreage has recorded the most significant decline in the state (CAGR 6.97 percent). Apart

from other regions the gram acreage has also declined very sharply in the Mixed-Crop Region, the last

area of gram cultivation in the state. The CAGR of bajra acreage in Haryana is -1.6 percent. The highest

decline in the bajra acreage (-7.10 percent) has occurred in the Wheat-Rice Region. The CAGR of

mustard acreage (-0.72) is also negative in the state. The lowest negative growth rate of its acreage is found

in Wheat-Rice Region (-4.12 percent). It also shows a declining trend in its traditional growing areas, i.e.,

Wheat-Rice-Cotton Region.

Relationship between Farm Harvest Price and Acreage of Main Crops

Table 3 reveals the relationship between FHP and the crop acreage of the following year. Here,

FHP of the crop is taken as independent variable and crops acreage (area under crop) is as dependent

variable for the time series data (2004-05 to 2019-20. It is hypothesized that the farmers generally allocate
more land to the crop having higher FHP during previous year. It is evident that the coefficient of

determination (R²) value of kharif crops is significant at 1 percent level of significance. But, the acreage

of bajra is negatively correlated with the FHP. The beta coefficient value for this crop is -0.917, -0.822, -

0.578 and -0.765 for the Wheat-Rice Region, Wheat-Rice-Cotton Region, Mixed Crops Region and

Haryana as a whole respectively. But the paddy acreage has positive response to FHP of previous year

price and explains about 42 variations in paddy acreage in the state and there is not much difference in

this regard across the agro-ecological regions. Among the kharif crops price impact is highest on cotton

acreage. FHP explains about 56 percent variations in crop acreage in the state. Interestingly, it has no

response in the traditional cotton growing area (Wheat-Rice-Cotton Region). Cotton acreage increases

significantly in response to price rise in Wheat-Rice Region and Mixed-Crop Region where it is a

marginal crop. In general, the acreage of paddy and cotton is on the rise in the state at the expanse of bajra.

Table 3
Haryana: Cause-effect Relationship between FHP and Acreage of Kharif Crops during 2004-05 to 2019-20
Regions R² SE of R Standardized Coefficient
Beta
Bajra Paddy Cotton Bajra Paddy Cotton Bajra Paddy Cotton
Wheat-
0.828 0.412 0.673 12.17 55.21 10.76 -0.917 0.642 0.820
Rice
Wheat-
Rice- 0.676 0.419 0.015 12.74 43.06 33.69 -0.822 0.648 0.124
Cotton
Mixed
0.334 0.412 0.489 50.30 22.25 48.94 -0.578 0.642 0.700
Crops
Haryana 0.585 0.428 0.557 68.94 117.37 60.22 -0.765 0.654 0.746
Source: Computed by author

Table 4 show the result of linear regression between FHP of previous year and acreage of Rabi

crops during 2004-05 to 2019-20. The beta coefficient value of wheat is positive but it is negative for

gram and mustard. The price rise explains about 65 percent variations in wheat acreage of the state. The

price response of wheat acreage is particularly high in the Wheat-Rice Region (85 percent) followed by

Wheat-Rice-Cotton Region (53 percent). But price explains only 31 percent variations in the wheat

acreage of Mixed Crops Region. The negative values of beta coefficient of gram and mustard show that
in the wake of expansion of wheat acreage the area under these crops is getting marginalized in all three

agro-ecological regions of the state.

Table 4
Haryana: Cause-effect Relationship between FHP and Acreage of Rabi Crops during 2004-05 to 2019-20
Regions R² SE of R Standardized Coefficient Beta
Wheat Gram Mustard Wheat Gram Mustard Wheat Gram Mustard
Wheat-
0.847 0.546 0.285 11.49 0.84 7.00 0.920 -0.739 -0.534
Rice
Wheat-
Rice- 0.529 0.533 0.045 18.52 5.09 22.16 0.728 -0.730 0.213
Cotton
Mixed
0.309 0.652 0.060 32.60 16.22 40.69 0.556 -0.807 -0.079
Crops
Haryana 0.646 0.661 0.020 50.68 20.42 65.83 0.804 -0.813 -0.043
Source: Computed by author

The question as why all the crops are not positively responding to FHP of preceding year

is partly answered by the Table 5 which depicts the procurement level of selected crops in

Haryana from 2004-05 to 2019-20. It is evident that wheat and paddy are being regularly

procured by the government. But other crops have been procured intermittently and in smaller

quantity. Regular and assured procurement of paddy and wheat and irregular and sporadic

procurement of other crops particularly bajra, mustard and gram seem to be a big factor in

allocation of land for different crops in Haryana. The procurement and not the price comes out

to be the most important factor in continuous expansion of acreage of paddy and wheat in all

the agro-eco regions of the state. Despite having a good correspondence between price and

acreage, the procurement policy of the government has definite bearing on the farmer's decision

in the selection of these two crops. On the other hand, more than FHP the adoption of cotton

as a Kharif cash crop in the Mixed Crop Region appears to be the main factor in expansion of

area under this crop in the state. This is corroborated by the fact that cotton acreage has no

response to price in Wheat-Rice-Cotton, the traditional cotton growing area in the state.
 Table 5
Haryana: Procurement of selected crops during 2004-05 to 2019-20
Years/Crops Paddy Bajra Cotton Wheat Gram Mustard
2004-05 1517000 130119 0 5115000 0 0
2005-06 2356000 4895 0 4529000 0 306275
2006-07 2047000 0 0 2230000 0 462450
2007-08 1785000 122718 0 3350000 0 0
2008-09 1822000 310478 0 5237000 0 0
2009-10 2636000 76996 21673 6924000 0 0
2010-11 2482000 73653 0 6347000 0 0
2011-12 2966000 17385 0 6928000 0 0
2012-13 3853000 0 0 8716000 0 0
2013-14 3587000 0 0 5856000 0 0
2014-15 3007000 0 79903 6508000 0 0
2015-16 4270000 5094 0 6770000 0 0
2016-17 5348000 6341 0 6754000 0 0
2017-18 5957000 31449 0 7425000 0 167000
2018-19 5882000 183110 0 8757000 0 268000
2019-20 6471000 310921 6222861 9360000 200 615000
Source: Computed by author, Figure are in metric tonne and cotton in bales.

Conclusion

This study assesses the impact of the price rise of selected crops (paddy, cotton, bajra, wheat,

mustard and gram) on their acreage in different agro-eco regions of Haryana over the period 2004-05 to

2019-20. It brings out that procurement crops (paddy and wheat) have always recorded higher FHP than

MSP but the gap between the two remains low. The fluctuations in FHP of non-procured crops are much

higher than that of paddy and wheat. The non-procured crops have recorded much higher positive

deviation of FHP from MSP. All the selected crops have recorded significant increase in their FHP during

the period 2004-05 to 2019-20. But it does not have good correspondence with acreage of all the crops. It

is only the cotton, paddy, and wheat which have recorded increase in the acreage. Among these crops

cotton and paddy area has recorded appreciable increase in the non-traditional areas. Bajra, mustard and

gram have recorded decline in acreage despite significant increase in their FHP. Regression analysis

reveals that not acreage of all the crops has responded positively to the FHP. Cotton acreage has responded

very well to FHP, particularly in the Mixed Crop Region where it is a new crop. Paddy acreage also shows

significant response to the FHP, but bajra has shown no response. Among Rabi crops, it is only the wheat
acreage that shows positive response to the FHP. Whereas, mustard and gram have shown no response to

FHP. Overall, rather than the price of previous year, it is the assured procurement of paddy and wheat at

MSP that drives the Haryana farmers across the agro-eco regions to choose these crops. On the other

hand, more than FHP the adoption of cotton as a Kharif cash crop in the Mixed Crop Region

is the main factor in expansion of area under this crop in the state.

References

Abdulaziz, K., Kundu, K.K.; and Malik, D.P. 2021. Growth and economic profitability of rice cultivation

in Haryana. Asian Journal of Agricultural Extension, Economics & Sociology, 39 (11): 182-

190.

AGMARKNET, https://agmarknet.gov.in. Accessed on Dec. 17, 2022.

Ali, S.Z., Sidhu, R.S. and Vatta, K. 2012, The effectiveness of minimum support price policy for paddy

in India with a case study of Punjab. Agricultural Economics Research Review, 25: 231–242.

Bharadwaj, K. 2023. Production conditions in Indian agriculture. Rural Development, 269-288.

Bhattacharyya, B. 2003. Trade liberalisation and agricultural price policy in India since reforms. Indian

Journal of Agricultural Economics, 58 (3): 315-332.

CACP (Commission on Agricultural Cost and Price) 2019. Price policy for kharif and rabi crops the

marketing season 2019-20. https://cacp.dacnet.nic.in. Accessed on Dec. 15, 2022.

Chand, R. 2012. Development policies and agricultural markets. Economic and Political Weekly, 47 (52):

53-63.

Deshpande, Naika R. S. and Raveendra, T. 2002. Impact of minimum support prices on agricultural

economy: A study in Karnataka, Agricultural development and rural transformation unit

institute for social and economic change Nagarbhavi, Bangalore-560 072: 110-112.

Government of Haryana 2020. Statistical abstract of Haryana 2019-20, Department of Economic and

Statistical Analysis Haryana, 390-399.

crops to paddy in green revolution belt of north India. Agro-Economic Research Centre,

Department of Economics and Sociology, Punjab Agricultural University, Ludhiana.

Kumar, N. and Jaglan, M. S. 2022. Agricultural marketing system and its performance: a comparative

study of the states of north-western Indian plain”, Punjab Geographer, 18: 38-51.

Mehta, V. P., Malik, D. P., and Kumar, R. 2020. Impact of agricultural price policy on major food crops

in Haryana. Economic Affairs, 65 (2): 267-274.

Nerlove, M. 1956. Estimates of the elasticities of supply of selected agricultural commodities. American

Journal of Agricultural Economics, 38 (2): 496-509.

Panwar, S. and Dimri, A. K. 2018. Trend analysis of production and productivity of major crops and its

sustainability: a case study of Haryana, Indian Journal of Agricultural Research, 52 (5): 571-

575.

Parikh, J. and Singh, C. 2007. Extension of MSP: fiscal and welfare implication, Integrated Research and

Action for Development, 23-28.

Punith, K. L. M. and Indira, M. 2004. An analysis of the influence of agricultural policy on changing

cropping pattern in India, International Journal of Advanced Research in Management and

Social Sciences, 3 (3): 1-10.

Reddy, D.A. 2021. Policy implications of minimum support price for agriculture in India, Academia

Letters, 2406.

Saxena, R., Pal, S. and Joshi, P.K. 2001. Delineation and characterization of Agro-eco Regions, PME

Notes, NATP, ICAR, New Delhi.

Singh S. and Jaglan M.S. 2021. Cultivation of vegetable crops in Haryana: growth, spatial distribution

and concentration pattern, Punjab Geographer, 17: 57-71.

Sudhakar, G. and Wale, Z. 2017. Minimum support prices and its impact on agricultural economy,

International Journal of Economics and Business Management, 3: 38-46.