In recent years, the Modi – government has increasingly faced the wrath of farmers all over the country with the last year alone having seen over half-a-dozen protests. On October 2, 2018, in a major show of strength, thousands of farmers from Uttar Pradesh [UP], Haryana, Punjab, Uttarakhand had congregated on Delhi border with close to dozen demands. These included:-
Implementation of Dr MS Swaminathan headed Nation Commission on Farmers recommendations;
Purchase of all of farmers produce at notified minimum support price [MSP];
Greater role to farmers producer organizations [FPOs] in food procurement;
Waiver of all outstanding farmers loans;
Payments of all outstanding arrears to sugarcane farmers;
Enforcement of minimum wage for all farm workers;
Giving pension to all farmers above the age of 60 years;
Making provision for free electricity for running pump-sets;
Reducing GST [goods and services tax] on all agricultural inputs/implements;
Letting them run diesel tractors of more than 10 years age;
Reducing the price of diesel and petrol
A holistic look at above demands shows that farmers want a good price from the sale of their produce, pay less for the inputs used by them in crop production, want income support and above all, waiver of loan, if any. Team Modi immediately accepted most of the demands sans a few such as reduction in GST on agricultural inputs which requires approval by the GST–Council.
In the union budget for 2018-19, the finance minister, Arun Jaitely had announced the government’s decision to implement the recommendations of the Dr Swaminathan commission to give MSP equivalent to 1.5 times the production cost. This was followed by notification of MSP for 23 crops for the Kharif season [April-September, 2018]. Now, the government has notified steep hike for Rabi [October 2018-March 2019] season.
The grant of higher MSP will cost the centre a whopping over Rs 60,000 crore annually. On October 4, 2018, Jaitely announced reduction in central excise duty [CED] on diesel and petrol by Rs 1.5 per litre each and a further cut of Rs 1 per litre each by public sector undertakings [PSUs] oil marketing companies [OMCs]. While, the CED cut will make a dent of Rs 21,000 crore annually, the PSUs will have to absorb Rs 14,000 crore.
Besides, the state have been asked to reduce the VAT rates on diesel and petrol [these are applied on ad valorem basis or a percentage of the ex-dealer price plus dealer commission] in such a manner as to bring about a cut of Rs 2.5 per litre each. That would mean a further revenue loss of Rs 35,000 crore annually.
Add to the above, the hit to be taken by the centre and state governments due to state support in clearing the arrears of sugarcane farmers, supply of free electricity, lowering of GST, pension to farmers of above 60 years age etc. Further, if the government were to consider waiver of all outstanding farm loans [about Rs 300,000 crore], then, the burden on the exchequer will reach gargantuan proportions.
The government spends huge sums every year on giving subsidies on fertilizers [Rs 70,000 crore], food [Rs 170,000 crore], LPG and kerosene [over Rs 50,000 crore] most of which is either given as production subsidy as in fertilizers or consumption subsidy – as in case of food, LPG and kerosene.
Despite all these reliefs, farmers continue to remain in an impoverished state perennially. This is because the extant systems of procurement, marketing and distribution of their produce are heavily loaded against them. This results in a scenario whereby they get only a fraction of the price paid by the consumers.
A research done by a national TV channel yields startling revelations. In a pack of potato chips sold to consumers @ Rs 20/-, the cost of potato paid to the farmer is just about 11 paise or 1/200th. Likewise, in a pack of cornflakes sold for Rs 450/-, the cost of corn paid to farmers is only Rs 15/- or 1/30th. By any stretch of imagination, the difference cannot be explained by the cost of handling, storage, transportation and processing.
The middleman and the food processing company are making exorbitant profit at the cost of both the consumers and the farmers. With the realization from sale of farm produce pegged at such a low level, the farmer is barely able to cover his cost of production [despite massive subsidy on inputs and even free/subsidized power]. His income is bound to be low forcing him to take loans even for his consumption needs. His plight gets aggravated due to a flaw in our formal credit system.
A committee set up by Modi – government to identify ways to double farmers’ income by 2022 has in its report on “Status of Farmers’ Income: Strategies for Accelerated Growth” [second volume] has stated “landless and marginal farmers depend more on the informal sources for credit for asset creation as compared to the medium and large-size landholders”.
For marginal farmers [holding size 0.1 to 1 hectare], investment funded by informal source is 52.1% wherein the money comes at interest rate as high as 36%. On the other hand, the medium and large farmers avail most of the loans from the banks @ 7%. The recipients of these loans also on-lend to actual cultivators at high rates and make huge profit on interest arbitrage alone.
It will be a travesty of truth to argue that the government is responsible for farmers’ plight. The root cause lies with the traditional middleman and its contemporary form [corporate including MNC] who take away a big slice of the amount that should go to farmers. Any state help including huge subsidies meant for the latter only ends up filling the coffers of the former.
Team Modi is trying to galvanize state machinery to buy farmers produce at the MSP. But, it is attempting the impossible. Apart from sheer gigantic nature of the task, there are elements within the system to defeat. So, beyond a point, it won’t work.
The government needs to change course. It should dismantle license raj and shed controls to give more options to farmers for selling their produce and do it in a hassle-free manner. That will force middlemen to shed their greed and pay good price.
Above all, there is need for change in our social ethos whereby people are valued for what they do to the poor. For instance, how about rating corporate on the basis of what price they give to farmers especially to marginal/poor?