If, despite strong resentment among farmers – an important constituency that decides a party’s prospects in elections – Modi got a resounding mandate to rule for another term, it showed their faith in the ability of this prime minister to deliver on his promises – most important being doubling their income.
Of course, one can’t rule out the role of PM – KISAN [announced in the interim budget for 2019-20, under it, the centre gives cash support of Rs 6000/- to all small and marginal farmers every year] in bolstering its prospects. But, this is not an amount big enough to bring about a lasting transformation in their living. In order to achieve that, the most crucial requirement is assurance of minimum support price [MSP] that farmers should get on a sustainable basis.
Modi – government had announced in the budget for 2018-19 its decision to implement the long-pending Dr Swaminathan committee [2006] recommendation for fixing MSP at a level equal to one-and-a-half times the production cost. Further, it extended the price support to cover 23 crops up from just about 4-5 crops. But, these have failed to deliver thus far.
According to an analysis done by the rating agency CRISIL, during 2017-18 out of 14 major crops which account for over 80% of the total area sown, for eight – especially pulses and oilseeds – the ruling market price was less than the MSP. It is this low price realization from sale of the produce that lies at the root of low farmers’ income year-after-year. In fact, it even nullifies the yield raising impact of increase in irrigation and improved technologies which successive governments have focused on.
According to the 70th round of survey by the National Sample Survey Organization [NSSO], during 2012-13, only 32.2% of the paddy farmers and 39.2% of wheat farmers were aware of the MSPs. Furthermore, only 13.5% of paddy farmers and 16.2% of wheat farmers were able to sell their produce to the government agencies. These startling revelations point towards more deep rooted problems afflicting the farmers and agriculture.
The MSP has been in vogue for several decades. This is the minimum or the bottom below which the farmers’ realization can’t be allowed to go. Underlying the announcement of MSP is a commitment that in case, the farmer fails to sell his produce at this price, the government will come forward to help him/her achieve it. If, majority of the farmers are not even aware of it [or shall we say, the concerned authorities have not even made efforts to make them aware] – a fundamental requirement to actually benefit them – how will they actually benefit.
Further, in the absence of legal backing to MSP, the government tries to ensure this by directing its agencies to purchase the crop produce offered for sale by the farmers. That sounds like asking for the impossible. Even if the entire machinery of the state and its agencies is deployed for the task [Team Modi has increased its efforts manifold], a big chunk would still remain uncovered. No wonder, only a fraction of the farmers are able to sell to state agencies – as shown in the NSSO data.
Assume for a moment, the state and its agencies are able to augment their infrastructure for procurement, handling and storage to a point whereby they can accommodate all of the produce offered by farmers for sale. This won’t be a viable arrangement either. What will they do with the mountain of stock? The agencies will be forced to dispose it at a huge loss as already seen in the case of wheat, rice for decades in the past and for pulses and oilseeds in recent times. They can’t keep it in warehouses indefinitely as that would add to carrying cost besides unnecessarily blocking space.
The idea of giving legal backing to MSP [this was demanded by farmer lobbies during their recent agitation in the run up to elections] is also bizarre. This will require giving cash equal to the shortfall in price realized from sale vis-à-vis the MSP [call it, mandatory deficiency payments] to each and every farmer leading to further steep increase in the already high food subsidy bill. Moreover, it will make our policy makers complacent in regard to more credible alternatives to help farmers realize a better price.
Even as the policy makers refuse to look beyond administrative measures, a viable solution requires structural reforms. At present, farmers can sell their produce only at markets [commonly known as ‘mandis’] set up under APMC [agriculture produce market committee] Act wherein the licensed traders – enjoying full patronage of the politicians and bureaucrats – operate like cartels. They pick up the farm produce from the farmers at throwaway price which bear no connection whatsoever with MSP. That majority of the farmers are not even aware of MSP makes things worse.
Even farmers producer organizations [FPOs] – an umbrella organization of individual farmers with every member-farmer holding a share in proportion to the land size – which operate like professionally-run private companies [also recognized under the Companies Act] and are expected to have much better clout can’t penetrate through the glass houses erected by these traders.
There is dire need to dismantle the APMCs, open up the available infrastructure to more players and develop alternative platforms to give more options to the farmers for selling their produce. The plethora of taxes and levies imposed in these mandis should be eliminated to help them improve their realization. These reforms need to be implemented in a wholesome manner.
The government should also incentivize private enterprises including foreign companies to contribute to farmers income. The extant policy of allowing 100% FDI in food retail needs to be unshackled. The requirement that a foreign retailer has to buy 100% from Indian farmers only is self-defeating. Likewise, minimum investment condition is out of sync with the policy thrust on liberalization. These riders need to go.
Sans these reforms, farmers will remain in misery perpetually!