Fisheries Economics

2.4.2. Price determination

Price for a commodity is determined in many ways depending on the nature of the market. In a socialist or closed economy government intervenes and regulates prices in the interest of the people and economy. In a capitalist economy the market forces are considered to operate freely and prices for the commodities are determined by the free interplay of demand and supply in the various kinds of markets.

When buyer and seller meet, negotiate and transact over an agreed price, then marketing becomes complete. Price is indicated as the point of intersection of demand and supply curves. The price at which demand equals supply is called market equilibrium price at which the entire supply is sold. In other words, the market is said to be cleared at the market equilibrium price.

Price is dynamic. It is always associated with quantity, place and time without which price is meaningless. When price for a commodity is high, producers tend to produce more which may bring down price due to the operation of law of demand, other things remaining equal. But, prices do vary which imposes difficulties in production planning. Hence, the government is concerned with price stabilisation. The problem is more pronounced in the primary sector producing perishable goods such as fish. Therefore, the government adopts policy interventions (i) to stabilise price of all commodities, particularly essential and necessary commodities in primary sector and (ii) to prevent fluctuations in the income of farmers. In order to tide over these problems the farmers and fisherfolk could collectively regulate the supply which would help to stabilise not only prices of their products but also their incomes. It is easier said than done. Minimum price support policy is employed for this purpose by government.

Norway is a pioneer in fisheries development with focus on the development of its fisheries industry and welfare of its fisherfolk. Fishermen collect together to form marketing federations which will be the principal supplier of fish. The federations have been authorised by law to determine a minimum price below which no seller could buy. The minimum price is determined so as to include the cost of production and a reasonable profit to the producers. Then, the fish is auctioned outright and the price at which the fish is sold is always equal to or above the minimum price. This mechanism benefits consumers as well since they could plan their household expenditure which indeed benefits the sellers also.

Since the producers in our country are largely unorganised, the government adopts the following measures for ameliorating their conditions:

i) Subsidy to farmers,

ii) Demand promotion,

iii) Crop and output restriction (indirectly),

iv) Support price and government purchase and

v) Subsidised producer – consumer price differential.

With globalisation becoming more invasive and pronounced, the subsidy regime would be phased out in the long run. Improving production efficiency and marketing would become necessary to make farming and fishing business profitable and sustainable. Our preparations to face the emerging free international trade under the World Trade Organisation (WTO) regime seems to be woefully inadequate and unless a proper policy is formulated and implemented for this purpose, it may be too late in protecting the interests of our farmers and fisherfolk.

In the case of agriculture, the government is actively involved in price regulation and stabilisation efforts. Unfortunately fisheries sector remains highly unorganised and the government needs to do more to alleviate the problems of fisherfolk in marketing the fish landed by them.