Providing An Assured Monthly Income is the First Step Towards Addressing Agrarian Crisis

A decade after Avtar Singh committed suicide unable to bear the pressure to repay farm loan; his two sons took the same fatal route. Roop Singh, 40, and his younger brother Basant Singh, 32, jumped into the Bhakra canal in Punjab. They were residents of Patiala district in Punjab.

Two generations of the family were consumed by the scourge of mounting farm debt. While the two sons ended their lives in November 2017, their father had died some 10 years earlier, in 2008. Both the brothers together owned 2.5 acres of land and were cultivating another 30 acres on contract. But unable to generate any profits, the outstanding debt continued to swell. After all, how long can a farmer be expected to draw credit from multiple sources to repay the initial loan amount. The vicious cycle of mounting indebtedness eventually takes its toll.

There is hardly a day when reports of farmers committing suicide do not appear in Punjab newspapers. Punjab, the country’s food bowl, is no exception; the serial death dance across the country shows no signs of abating. The tragedy that struck these farming families symbolises the
agony that the entire farming community is living with. There is hardly a day when farm suicides are not reported from one part of the country or other. In the past 21 years, more than 3.20-lakh farmers have committed suicide; every 41 minute a farmer ending his life somewhere in the country. Those who have refrained from taking the extreme step are no better. They continue to somehow survive, living in acute distress, and hoping against hope. Several studies have shown that almost 58 to 62
per cent farmers sleep empty stomach.

Farmers are in reality the victims of an economic design. A recent report by CRISIL points to the denial of a rightful income as the major reason behind the agrarian crisis sweeping through the country. “While the average annual growth in Minimum Support Price (MSP) was 19.3 per cent between 2009 and 2013, it was only 3.6 per cent between 2014 and 2017,” the report states. This minimal increase in the MSP does not even correspond to the annual rise in DA for the government
employees. In order to keep food inflation under control, successive governments have denied farmers their rightful income. The entire burden of keeping food prices low has been very conveniently passed on to farmers. In other words, it is the farmers who are bearing the entire
cost of subsidising the consumers. Farmers are being deliberately paid less, kept impoverished. Still, what farmers don’t realise is that every time they take to cultivation, they actually cultivate losses.

The Commission for Agricultural Cost and prices (CACP) computes the net returns. Let’s try to see whether the net returns have increased. In Maharashtra, which has been faced with massive silent protests by Marathas, and which I believe is the primary reason for the discontent, the net return per hectare for paddy is Rs 966, which means if worked on a monthly basis it will come to less than Rs 300 a month. For Ragi, Maharashtra farmers actually incur a loss of Rs 10,674 per hectare; for Moong (minus Rs 5,873); for urd (minus Rs 6,663). Even for cotton, the net return is only Rs 2,949 per hectare. Considering that cotton is sown in June and its harvesting begins in October, with the
pickings going on to November, December or even January, the average income per month from cultivating cotton comes to a paltry Rs 700 per hectare. 

Viewed from the national level, the net returns for crops like paddy, sugarcane, maize, and cotton have actually declined in the past three years. For most of the dryland crops, the returns are in the negative. If the farmer is destined to harvest losses, I wonder what kind of technological and financial support can bail them out. Giving them more credit, even if it comes from institutional agencies/banks, has only pushed them further into a debt trap. As a former Prime Minister Chaudhury Charan Singh had once remarked: A farmer is born in debt and dies in debt.

The mandate for CACP, which works out the MSP for various crops, is not only to provide an assured price to farmers but also to ensure that it does not lead to inflationary pressures. The prices therefore are deliberately kept low, and in many cases are actually less than even the cost of production that the farmers have to entail. This economic design is not in any way peculiar to India, it is global. As John F Kennedy had once remarked: “Farmer is the only man in our economy who buys everything at retail, sells everything at wholesale and pays for freight both ways.” But what is not being realised is that farmers in US/Europe are being paid massive subsidies, including Direct Income Support. In
India, farmers only receive input subsidies which actually benefit the manufacturers.

The entire burden of keeping food prices low has been very conveniently passed on to farmers. In other words, it is the farmers who are bearing the entire cost of subsidising the consumers. While farmers were denied their rightful income, huge salary jumps were provided to other sections of the society. From a monthly salary of Rs 90 per month in 1970, the salary of school teachers for instance jumped by 280 to 320 times by the year 2015, a period of 45 years. In the same period, salary of
government employees went up by 120 to 150 times; and that of college professors by 150 to 170 times. Wheat price for farmers on the other hand has increased by a paltry 19 times in the same period.

Farm incomes remain almost frozen or bare enough to cover only the cost of production. Keeping food prices low is also in consonance with the dominant economic thinking aimed at drastically reducing the work force in agriculture.

This is what the World Bank had desired way back in 1996. It had expected 400 million people to be moved out from the rural to the urban areas in India by the years 2015. Since every World Bank loan comes with roughly 140 to 150 condionalities, each loan re-emphasised the urgency to move farmers out of agriculture. Former Prime Minister Manmohan Singh had time and again expressed the need to shift 70 per cent farmers. Former RBI Governor Raghuram Rajan used to say that the biggest reforms would be when farmers are moved out of agriculture, to meet the ever-growing demand of cheaper labour for the infrastructure industry. The National Skill Development Council already has spelled out plans to bring down the population in farming from the existing 52 per cent to 38 percent by 2022. For all practical purposes, debt and farming have now become synonym.

Seventy years after Independence, and 55 years after the Green Revolution was launched, economic freedom continues to elude farmers. Economic Survey 2016 made it abundantly clear. Accordingly,
the average income of a farming family in 17 States of India does not exceed Rs 20,000 a year. In other words, farming families in roughly half the country are surviving on less than Rs 1,700 a month. Knowing that it is not possible to rear a cow in the same amount, I shudder to think how
these families survive year after year. 

It is generally believed that expanding irrigation and raising crop productivity is the way to enhance farmers’ income. If irrigation and high productivity alone could raise farmers’ income I see no reason why Punjab, the food bowl of the country, has lately turned into a suicide hotspot. Punjab has 98 per cent cultivable area under assured irrigation and the crop productivity matches with the best in the world. With 45 quintals per hectare productivity of wheat and 60 quintals/hectare for rice, Punjab tops the global chart. And yet, Punjab is witness to a spate of suicides every week. Policy planners have refrained from looking beyond raising crop productivity as the answer to the worsening agrarian
crisis.

I am of the firm opinion that a tinkering here and there is not going to address the agrarian crisis. It needs a holistic approach, a paradigm shift in economic thinking. To begin with, the effort should be to make farming economically viable. After all, everything boils down to how much net income a farmer gets in his hand at the end. Therefore, three steps that immediately need to be considered are:

1) The Commission for Agricultural Costs and Prices, which works out the MSP for crops, should be directed to factor in 4 allowances in the MSP being paid to farmers – House allowance, Medical allowance, Educational allowance and Travel allowance. So far, the MSP only covers the cost of production. Compare with the government employees who get a total of 108 allowances.

2) Since MSP benefits only 6 per cent farmers, it needs to be understood that the demand for providing 50 per cent profit over MSP will benefit only these 6 per cent farmers. For the remaining 94 per cent farmers, who are dependent on the exploitative markets, the need is to redesign the CACP into a Commission for Farmers Income and Welfare, with the mandate to provide a minimum assured monthly income package of Rs 18,000 to a farmer’s family. 

3) Public sector investments must come in urgently for constructing APMC mandis, and also for storage godowns. At present, there are only 7,700 APMC mandis. What India needs is to set up 42,000 mandis for every 5 kms radius. And like in Brazil, where it is mandatory for a market
yard to procure anything a farmer brings, APMC mandis should be quipped to do the same. #

The article was first published in the State of India's Environment 2018. 
https://www.downtoearth.org.in/blog/agriculture/it-s-time-we-shift-farmers-economic-burden-62229?fbclid=IwAR11LZLo9TYdHKTpljocjIHGxougPjmkf0HRWlBNGE4HU-rrC029mKRV37g

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To create private markets, Maharashtra deregulates APMC Act

A typical mandi scene -- Pic courtesy Hindu Business Line

It is not unusual for wheat and paddy grown in adjoining areas of Uttar Pradesh to find its way into Haryana mandis. But at the peak of the paddy procurement season this year, a lot of paddy procured in Bihar has been transported all the way to be sold in Punjab and Haryana. As per news reports, more than 2.5-lakh bags of paddy from Bihar have been seized in a month-long drive conducted by the Punjab and Civil Supplies department. In addition, another 2-lakh bag of previous year’s rice meant for PDS supplies in Bihar have also been seized.

In neighbouring Haryana, more than 1.25-lakh bags of rice meant for PDS supplies in Bihar have been seized from Karnal and its adjoining areas in raids conducted during September and October. In an interesting development, The Tribune(Oct 26) reported Karnal district alone having purchased more than double the anticipated production even though the paddy procurement season was half way through. This was essentially because of a well-oiled nexus that exists between traders in Bihar, Uttar Pradesh and Haryana whereby cheaper paddy/rice purchased from as far as Bihar is made available for procurement at a higher price in Haryana.

The reason is simple. While Uttar Pradesh lacks a well-knit system of a mandis network under the Agricultural Produce Market Committee (APMC) Act, Bihar had revoked the APMC Act way back in 2006. In the absence of APMC mandis, farmers in Bihar are constrained to sell wheat and paddy in open market at prices that are far below the Minimum Support Price (MSP). That is why traders find it profitable to transport paddy (and also wheat) from a pretty long distance and that too after having incurred an additional transportation cost. While paddy sells at anything between Rs 800 to 900 per quintal for low quality grade, and a maximum of Rs 1,300 to Rs 1,500 per quintal for good quality in Bihar, paddy MSP for normal quality in Punjab and Haryana is substantially higher at Rs 1,750 per quintal.

While Bihar was the first State to have repealed the APMC Act, Maharashtra has now become the second State after Bihar to have amended the APMC Act. A few months after it had brought in a notification making it obligatory for the trade not to purchase agricultural commodities below the MSP, in a complete turnaround it has now promulgated an Ordinance on Oct 25 deregulating all produce, including foodgrains, oilseeds and flowers, from the APMC Act. The new directive allows farmers to sell their produce outside the regulated APMC markets in the State. Earlier too, in June 2016, it had passed an amendment deregulating fruits and vegetables from the APMC Act but there are no studies telling us whether the move has helped farmers in any way. We have only seen reports of farmers dumping veggies on the streets in the absence of market prices even covering the cost of production.   

“The first step is to pass an Ordinance. The rules will be notified within 15 days,” Sadabhau Khot, the state minister for agriculture and market reforms told a media channel, adding “the idea is to create private markets with similar facilities as APMCs, while ensuring healthy competition.” While I am not sure how much the APMC amendments will help Maharashtra farmers in price discovery, it will certainly be interesting to watch how soon the trade opens marketing channels to make available Maharashtra paddy for procurement in Punjab and Haryana. When Bihar revoked the APMC Act some 12 years ago, the expectations were the same. The basic idea was that removing the monopolistic control of APMC markets will allow private investments, motivate the corporate sector to undertake direct marketing and provide for more efficient markets. Nothing like this happened. In fact, Bihar has turned into a test case to know how best agriculture can be turned exploitative.

“The amendments have been made in accordance with the Centre’s Modal Agricultural Produce and Livestock Market Act 2017,” the minister stated. In fact, this is where the problem lies. The inter-ministerial task force (in 2002) that initially recommended the APMC Act to be amended did not ascertain the social fallout of withdrawing an assured market for small farmers but was driven by the industry’s prescription. Contract farming, direct marketing and public-private partnership is only aimed at dismantling an excellent social framework which so assiduously helped build food security. Even the Food and Agriculture Organisation of the UN has questioned the need to repeal the assured markets saying that its social determinants first need to be evaluated. The main argument that APMC mandishave become stronghold of cartels is certainly correct, but that’s an issue of failure of governance. Instead, dismantling the mandiinfrastructure and replacing it with still bigger cartels of private players under the PPP mode is not the way forward, and will only lead to making the available infrastructure for corporate agriculture. In other words, we are fast moving towards privatisation of profits and socialisation of costs.   

Nevertheless, deregulation of APMC Act in Maharashtra comes at a time when a few weeks back the Centre had committed to procure 25 per cent of the agricultural commodities for which a higher MSP is being announced. Although the rules have still to be notified, and the finer print is awaited, but it is quite obvious that the amendments will reduce the delivery of MSP to farmers. This is exactly what the FICCI and CII had been demanding for long, wrongly saying that a higher MSP comes in the way of farmers realising a much higher price. Punjab and Haryana face tremendous pressure to dismantle the existing APMC infrastructure. In fact, the Commission for Agricultural Costs and Prices (CACP) too had come out with a study some years back ranking the State’s as per their market friendliness. Incidentally, Bihar topped the market-friendly index, and Punjab, with its widespread network of mandis, purchase centres and rural connectivity was placed at the bottom.

At a time when only 6 per cent farmers get the benefit of MSP prices, and when 94 per cent farmers are in any way dependent on markets, how does a breakdown of a parsley available public sector market infrastructure lead to increasing competitiveness? Moreover, it leaves behind a huge cost for country’s food security. It was in 2007-08 that the then Agriculture Minister Sharad Pawar had allowed private companies to bypass APMC mandis and buy wheat directly from farmers. With pvt companies cornering as much wheat as possible, it resulted in such a massive shortfall in public procurement that the country had to eventually resort for nearly 8 million tonnes of wheat imports in two years, at roughly double the MSP that was being paid to domestic farmers.#

Tender Mercies in Open Markets. The Tribune. Nov 14, 2018
https://www.tribuneindia.com/news/comment/tender-mercies-of-open-markets/682538.html

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When electoral promises shower, ask where is the money left for agriculture

The only time farmers appear on the economic radar screen of the country is when elections are around the corner. I have seen this happening for nearly 30 years now, and all political parties irrespective of their colour and ideology have been following the same approach. The forthcoming elections in the three major agrarian states of Madhya Pradesh, Rajasthan and Chhattisgarh too follow the same trend, and all political parties are vying with one another to lure the farming community.

In the run up to the 2019 general elections, two demands which have now become central to every protest that happens across the country pertains to writing-off farm loans and the implementation of the government’s own promise of providing Minimum Support Price (MSP) plus 50 per cent profit as per the recommendation of the Swaminathan Commission. While every political party is promising to waive all outstanding farm loans, in reality only a fraction of the bad loans is being written off. Irrespective of the party in power, majority farmers in Uttar Pradesh, Punjab, Maharashtra and Karnataka have been left high and dry. Nor I am expecting all bad loans in agriculture to be waived in the three predominantly agricultural states going to elections.

Coming to the second demand, while there is a definite need to implement the Swaminathan Commission’s pricing formula in letter and spirit, the fact remains that even if the enhanced price was announced accordingly it would benefit only a small percentage of the farming community. As per the Shanta Kumar high-powered committee, only 6 per cent farmers get the benefit of procurement prices. In other words, the MSP plus 50 per cent profit that is being demanded, even if it is implemented, will benefit only those farmers who are already getting procurement prices. What about the remaining 94 per cent farmers who do not have enough marketable surpluses or are deprived of procurement operations because of the lack of adequate infrastructure? In Madhya Pradesh, for instance, there are 94-lakh farming families, and in 2017 wheat harvesting season only 10.5-lakh farmers were able to sell at the procurement price. What about the remaining 83-lakh farming families?

While there is a definite need to implement the Swaminathan Commission’s pricing formula in letter and spirit, a higher price does not help unless every produce the farmer brings to the mandis is officially procured. Chhattisgarh, Madhya Pradesh and Rajasthan have failed to provide adequate procurement and defaulted time and again thereby building farmers’ anger. Even under the newly rolled out PM-AASHA scheme, the government has made it clear that only 25 per cent of the marketable surplus will be procured. What about the remaining 75 per cent? Who will bear the loss a farmer incurs in selling his produce at a lower price in the market?

The debate therefore has to move beyond the two demands. Little effort has been made to understand the economic design that hardly leaves any policy space for farmers. To illustrate, soon after the UP Chief Minister Yogi Adityanath announced the farm loan waiver, Finance Minister Arun Jaitley had made it clear that the States will have to find their own resources for farm loan waivers. But between April 2014 and April 2018 more than Rs 3.16 lakh crore of corporate bad loans have been written-off the Finance Minister never asked any State government to take the burden. While both the industry and farmers take loans from the same banks, the question that should be asked by farmer leaders is why the industry bad loans do not become State’s responsibility? And just like the industry, why doesn’t RBI direct the nationalised banks to waive the outstanding farm debt also? Why pass on the burden to State governments?

At the heart of the problem is the Fiscal Responsibility & Budget Management (FRBM) Act, 2003 that restricts the current annual borrowing limit to 3 per cent of the Gross State Domestic Product (GSDP). Look at the budgetary provisions and it becomes obvious that there is little money left for agriculture. Let me explain. In Chhattisgarh, as per the revised budgetary estimates, 93 per cent of the state’s own revenue goes to pay for salaries, pension liabilities and interest payments. Just salaries and pensions eat away bulk of the budget. In Madhya Pradesh, the figure is 87 per cent and in Rajasthan it hovers around 116 per cent. If such is the huge burden of government salaries and pensions, there is hardly any resource left for the rest of the population, including farmers. If it is not for Centre’s contribution, all that the three State governments in reality are left with is to keep its employees and pensioners happy, who constitute only a fraction of the total population. For instance, in MP, of the 8.1-crore projected population in 2017-18, there are only 7.5-lakh government employees, including 4.50-lakh in permanent employment.

Where is the money left for farm loan waivers and for undertaking procurement operations? Unless the farm movements are able to understand the dynamics of fiscal management, the political parties will continue to get away with hollow promises made in their manifestos. They need to seek details from political party leaders on how the new party, if elected, will be able to find adequate resources for what they promise for agriculture. It has to begin by seeking an amendment to the FRBM Act, 2003, and demanding the setting up of a State Farmers Income Commission, with the mandate to provide every farming family an assured monthly income of Rs 18,000. This entails working out the present average income in each district, and then ensuring the gap with the minimum guaranteed income is paid by income transfer. #  

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Where does a farmer figure in electoral politics?

Courtesy: BBC.com

Superstar Amitabh Bachchan couldn’t believe his ears. On the hot seat in front him on the Kaun Banega Crorepati show sat a small farmer from Maharashtra, farming in 4-acres of land. When asked how much would he be earning in a year, Anant Kumar replied something like this: “Not more than Rs 50 to 60,000 a year, and he spends half of it on buying seed, and can only feed his family one meal ..”

The question was repeated again. After listening to the plight of the annadata, Amitabh Bachchan appealed to the nation to come and help farmers. While I appreciate the concern shown by the legendary film star I wonder what would have been his reaction had he known that Anant Kumar is no exception. What he said is largely true of Indian agriculture. Several studies have shown that more than 58 per cent farmers go to bed hungry every night. Ironically, the people who produce food for the country are sleeping hungry.

According to the Economic Survey 2016, the average income of a farming family in 17 States of India, which means roughly half the country, stands at a paltry Rs 20,000 a year. Niti Aayog tells that for past five years in a row – between 2010 and 2015 – the annual increase in the real income of farmers across the country had remained below half a percent, 0.44 per cent per year to be exact. And for the past 40 years, the income of farmers has remained more or less frozen when adjusted against inflation. Agrarian distress is at its worst.  

Primarily for this reason, farmers’ anger has spilled onto the streets. There is hardly a week when we don’t see a farmers protest in one part of the country or another. According to the National Crime Record Bureau, from 687 protests in 2014, these demonstrations increased to 2,683 in 2015, and then doubled to 4,837 a year later, in 2016. In other words, protests have multiplied 7 times in a period of three years, a clear reflection of the growing farmers’ anger. After the long march from Nashik to Mumbai and the recent Kisan yatra from Haridwar to New Delhi, some more big protests are planned, including a big march of adivasis and landless, the angry farm protests are only multiplying. The large scale farmer protests are an outcome of farmers’ anger over the crash in farm prices for three years in a row.

In the run up to 2019 parliament elections, there are still 5 more assembly elections to go. Among these are States like Madhya Pradesh, Rajasthan and Chhattisgarh, where the rural vote share is very large. These are also the States where farmers’ protests have been quite regular and predominant, with farmers even resorting to stopping vegetable and milk supplies to the urban centres in Maharashtra and Madhya Pradesh leading to gunning down of five farmers in police firing. But while the farmers’ anger is quite clearly visible the bigger question is whether it will force political parties to redefine their electoral agenda, bringing agriculture to be the mainstay of economic growth. Why is it that come elections, and all political parties irrespective of their colour and ideology, swear in the name of farmers promising them all they want? But once the elections are over, farmers disappear from the economic radar screen and are easily left abandoned.

I have seen this happening for at least 30 years now. At every election time, political parties seduce farmers with financial baits luring the farming community to vote for the ruling dispensation. For four years, they wield the stick and in the final year before elections a few carrots are dangled. Even these promises remain unfulfilled. Yogi Adityanath had promised to waive all outstanding loans in Uttar Pradesh but in reality waived a maximum of Rs 1 lakh per small farmer. In Punjab, Capt Amarinder Singh had promised to take on farmers debt and also write-off all loans – including from private banks and the nationalised bank – but when in power he has been able to waive only Rs 900-crore bad loans so far. The total outstanding loans exceed Rs 86,000-crore.  In Maharashtra, the total farm loan waiver has remained around Rs 16,000-crore, less than half of the promised Rs 34,000-crores.

It is true that farmer movements have failed to bring about a change, a change in perceptions and a change in economic policies. They have struggled a lot, but the movements are still struck around two major demands – waiving all farm loans and increasing MSP as per the recommendations of the Swaminathan Commission – which is certainly needed but unless the farm unions are able to study, analyse and articulate as to what all investments and financial support the governments provides to other section of the society and make a comparison, I don’t think it will be easy to drive home the point as to how the agrarian crisis is an outcome of public policy.

Economic policies are designed deliberately to make farming economically unviable. That’s the stick the governments have always applied. Except for a little sop here and there like the introduction of bhavantar bhugtan scheme in Madhya Pradesh or to announce a higher MSP for crops without making any provisions to procure it, no structural changes have come up. The malaise runs much deeper and would require a complete overhaul of policies to bring cheers to the farming sector. . In fact, the way the marking set up is being designed the push is clearly towards bringing in corporate agriculture. On top of it land laws are being conveniently amended to make it easy for the industry to usurp farm land at will. Agriculture in reality is being sacrificed to keep economic reforms alive.

Will the ensuing 2019 elections see a change? I am not sure. Unless of course the farmers realise that enough is enough. They have been driven to the wall and to quite an extent they have no one to blame but themselves. For 70 years, they have been taken for an easy ride by politicians of all colours, from all parties. The day the farmers rise above caste, religion and political ideology and vote as farmers, the political landscape will change. The economic policies will also change the day farmers vote as farmers. #

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