Open AccessCash Settled Commodity Option Contracts as an Alternative to Minimum Support Price: A Mechanism to Alleviate Farmer Distress
Author(s) -
Y. Sree Rama Murthy
Publication year - 2020
Publication title -
information management and business review
Language(s) - English
Resource type - Journals
ISSN - 2220-3796
DOI - 10.22610/imbr.v11i4(i).3010
Subject(s) - commodity , cash , government (linguistics) , economics , business , work (physics) , price support , mechanism (biology) , finance , microeconomics , mechanical engineering , linguistics , philosophy , epistemology , production (economics) , engineering
Cash settled commodity options is a possible alternative to create a mechanism so that minimum support prices work in reality and do not remain a paper exercise. This paper argues that the government should create a commodity options market for all minimum support price (MSP) commodities. Further option contracts should be cash settled. The government should participate by selling put options at or above the minimum support price, so that farmers can exercise the option if they find that market prices are below the minimum support price.