The Indian agriculture scenario is known for continued impoverishment of the farmers arising due to vagaries of nature on the one hand and poor realization from selling their produce on the other. Ironically, low price paid to the farmers does not translate in to low price for consumers either; instead, the latter pay high price.
If, both farmers and consumers are losing then, without doubt, it is the middleman who is making gain. The middleman/trader exploits every conceivable situation, be it surplus production or shortage to his advantage. Recent developments in Madhya Pradesh [MP] in regard to supply and prices of onion and tomato bear ample testimony to this harsh reality.
Early this year [January-February], farmers in the state were on the roads/highways protesting over their low income, high debt and increasing suicide. Their main concern was poor realization from sale which did not even cover the cost of production. The issue resonated in the parliament as well.
In this backdrop, the Shivraj Chouhan government took several decisions purportedly aimed at giving relief to farmers. One of these was procurement by state agencies of all of onion offered by farmers at an assured price of Rs 8 per kg and give it to the poor at Rs 2 per kg [a similar decision was taken in respect of tomato]. What really happened on the ground is shocking.
In round I, traders purchased onion from farmers at a mere Rs 2 per kg and sold it to state agencies viz. MP State Cooperative Marketing Federation [MPSCMF] at Rs 8 per kg thus pocketing differential of Rs 6 per kg. The procurement being far in excess of latter’s capacity to store and official machinery not geared for its timely supply to the poor, this led to thousands of tons onion lying in the open.
The onset of south-west monsoon and heavy rains sent alarm bells ringing. Keen to avoid the embarrassment of rotting stocks and inviting public ire, the state administration was desperate to get rid off. So, it took recourse to auction. The traders were quick to grab this opportunity and in round II, picked up onion at throwaway price of Rs 2 per kg or even less.
Meanwhile, the damage caused by excessive rains in Gujarat/Rajasthan and acute deficit in Andhra Pradesh and Karnataka led to shortfall in supply leading to spike in price in major markets. In round III, traders minted money by selling that stuff @ Rs 20 per kg [even as consumers were paying Rs 35-40 per kg at the retail level].
The entire narrative smell off a scam even as the government has announced an enquiry. While, one has to wait for its outcome, here are a few baffling questions. First, when the agencies bought onions @ Rs 8 per kg, did they not know that persons they were buying from were traders [not farmers]? Second, were they not aware that the quantity they were buying could not be accommodated within available storage space? Third, did they not have a sense of likely demand-supply scenario?
But, the big issue MP government [in fact, all states who commit themselves to increasing farmers’ income even while protecting consumers interest] must address is this: It is not enough to formulate policies for increasing farm production and promise availability of food at low price. What is equally important is putting in place requisite infrastructure for buying farmers’ produce at the right price and reaching it to consumers.
In this regard, almost all the states are vulnerable though the extent of vulnerability may vary from state-to-state. If, even in a state like MP which has consistently recorded double digit agricultural growth for more than a decade and is one of the top performing states as per ranking by union government, infrastructure for procurement, handling, transportation and storage is weak, it points towards some serious policy gaps and lack of political will.
It shows that neither the state governments on their own volition have cared to make necessary investment in this area nor they have created a policy framework conducive for attracting investment. Actually, the problem is much deeper.
This has to do with a cozy nexus between politicians and traders [in many cases, the former also happen to be deeply entrenched in this business] that has existed and flourished for generations. A trader has a fundamental interest in ensuring that he minimizes his payout to farmer for the food he buys from him/her. He can succeed in this game plan if farmer is left high and dry by state agencies.
So, he collaborates with the politicians in the ruling establishment to ensure that state procurement agencies remain weak and de-motivated. The duo also makes sure that the infrastructure for handling, storage and distribution remains undeveloped/under-developed so that even if a policy for effective and timely procurement is laid down, it cannot be executed on the ground.
Conversely, even if infrastructure is adequately developed, there is no guarantee that agencies will deliver by way of timely market interventions to protect interests of farmers and consumers. True, Modi is ever keen to inculcate among employees of government – both central and state level – a culture of keeping national interest over personal gains. But, the risks remain.
Hence, there is an urgent need to rope in private players to invest in handling, storage and distribution even as government focuses on building roads, rails etc. This will require a metaphorical shift in policies to unshackle the food sector to make way for unfettered entry of private players in all segments of the value chain including retail. Foreign direct investment [FDI] in retail food should be permitted without any riders.
These changes need to be viewed from the prism of giving both farmers and consumers more choices so that the former get the best price for their produce and latter are not made to pay more than what is ‘reasonable’ and ‘affordable’. This will happen only when there are more players enabling greater competition in the supply chain.
Hope, team Modi and its alliance partners who have footprint on more than 70% of India’s population will go for this big leap forward in reform process.