| | Agricultural price policy has come under serious attack recently for recommending support prices higher than what the costs of production warrant, supposedly leading to a distortion of the market, and, therefore, to food deprivation. With an in-depth analysis of costs and returns in rice and wheat, which are the most
state-protected crops and underlie the livelihoods of millions of farmers, this paper examines the effectiveness of agricultural price policy in enabling farmers to obtain sufficient profits to promote investment, technology and productivity and thereby to food security. The rising cost of production due to the overemphasis on getting input prices right is a major factor that has led to higher support prices. Another factor is the percolation of volatility in global prices through trade liberalisation. Because of this, wheat support prices had to be hiked steeply in recent years so that sufficient quantities are procured. This has distorted parity between the prices of rice and wheat.
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