Pic courtesy: Gorakhpur NewsLine
This is the English version of an interview I gave to the web portal hindi.newsclick.in The link of the Hindi interview is at the end. Please scroll.
According to you what exactly is the biggest problem confronting Indian agriculture?
Ans: For several decades now I have seen how agriculture has been deliberately kept impoverished to keep economic reforms viable. To ensure that food inflation remains under control as well as to ensure that the industry gets its raw material at a cheaper price, farm prices have been kept low. When a farmers undertakes crop cultivation what he does not realise is that he is actually going to cultivate losses. As a result of this, he is left with no option but to draw more credit, and thereby live under debt for all times to come. That is why I have always said that the answer to the severe agrarian crisis does not lie in the crop field, but in economics.
To illustrate, let me share a study that we did some years back. In 1970, the Minimum Support Price (MSP) for wheat was Rs 76 per quintal. At that time, the salary of school teachers was as low as Rs 90 per month. In the next 45 years, in 2015, the MSP for wheat increased to Rs 1,450 per quintal which was a jump of 19 times in a period of 45 years. In the same period, the salary of government employees (only considering the basic pay and DA) increased by 120 to 150 times. The salary of College/University professors/lecturers increased by 150 to 170 times; and the salary of school teachers increased by 280 to 320 times. This tells us very clearly that if farm incomes had increased in the same proportion as other sections of the society, agriculture wouldn’t have faced the kind of crisis that exists today.
Q: If farmer’s income had increased in the same ratio as that of employees and professors don’t you think food would have become too expensive? How would an average household manage its monthly food bill with such high food prices?
Well, it is clear that farmers are paying the real cost of keeping food prices low. In other words, to ensure that food inflation does not increase, are we not penalising farmers by deliberately paying them a low price? Have we ever thought that a farmer too has a family; he has to educate his children; meet their health expenses and so on. He also needs a respectable income to sustain a decent livelihood. According to the Economic Survey 2016 the average income of farming families in 17 States of India, which is roughly half the country, stands at Rs 20,000 a year. This comes to less than Rs 1,700 per month. You can’t even rear a cow in Rs 1,700 in month. Have we ever thought how do these families survive?
By denying farmers their rightful income, we have pushed farmers in a debt trap. It is time we pull them out of indebtedness, and give them a breather in the shape of a monthly income package that they deserve but have been denied. After all, a farmer too needs an assured income every month and it becomes our duty as consumers to ensure that we also stand with the family that struggles so hard to put food on our table.
Q: You said a farmer too needs an assured income. How is that possible?
Several years back, some 10 to 12 years ago, when I first said that farmers need direct income support there was a strong opposition from economists. They couldn’t understand why I was asking for a direct income support for farmers. My argument was that since farmers have been denied their rightful income all these years it is important to compensate them for the losses incurred. Farm incomes have remained frozen or in the negative for more than two decades now and it is time to correct the income imbalance that has prevailed. Take for instance a study conducted by OECD (Organisation for Economic Cooperation and Development) which comprises the world’s richest trading block. This study in collaboration with New Delhi-based organisation ICRIER has found out that Indian farmers have lost Rs 45-lakh crore between the years 2000 to 2016-17. This was an extraordinary crisis afflicting agriculture but huge crisis being faced by farmers never became a national issue. There was a need for an economic stimulus package for farmers like the industry is given very often but no one talked about.
This tells us how severe is the economic crisis that farmers face. This often happens because of the price fluctuations farmers face. Every now and then we hear of reports of farmers throwing tomato, potato and onions on the streets. There are reports of farmers not getting the right price in the mandis. Price of almost all agricultural commodities continue to prevail low as compared to the Minimum Support Price. To illustrate, maize farmers in Shivani district in Madhya Pradesh have been sitting on a Makka Satyagrah demanding their maize crop to be procured at MSP. But what they are able to sell at is hardly between Rs 950 to Rs 1100 per quintal against the MSP of Rs 1,850 per quintal. These farmers have calculated the loss farmers in the district suffered to the tune of Rs 600-crore. Similarly, a farmer leader from Wardha in Vidharba has calculated the loss cotton farmers across the country have suffered at Rs 26,000-crore this year on account of being denied the rightful price.
It is therefore important to provide farmers with an assured monthly income. This can be by way of an assured MSP price or by adding direct income support or by bringing in some other measures. My suggestion has been to set up a Commission for Farmers Income & Welfare which should ensure that each farmer is able to get an income of Rs 18,000 per month, which equals the basic salary of the lowest level Government employee. I don’t mean the Government should issue a cheque of Rs 18,000 per month to every farmer. But it has to work out a mechanism to ensure that’s the amount what every farmer should earn in a month.
How does the Govt believe that amending Essential Commodity Act and bringing in amendments for contract farming will promote agriculture?
Yes, the Government has brought in three Ordinances. These Ordinances pertain to agricultural marketing, price assurance and contract farming and removing the stock limits under the Essential Commodity Act. The idea that any farmer can sell to anyone, and anywhere, sounds very good but will it help farmers get a better price? Similarly, allowing farmers to sell anywhere in the country by removing all the inter-state barriers specially when 86 per cent farmers have less than 2 hectares land holding, and are unable to sell even within a district seems too optimistic. And finally, encouraging contract farming and hoping price contracts will give farmers a better price too needs to be first evaluated.
It is however good that the government has not diluted the APMC mandi system nor has it said anything about changing the MSP norms.
It was in 2006 when there was a similar kind of excitement. Bihar had gone in for agricultural market reforms and had thrown away the APMC Act. This was hailed as a major reform which was expected to turn Bihar into the future food bowl of the country. Economists had expressed the optimism that with APMC not coming in the way anymore, private investments will flow in, technologically advanced mandis will be set up by the private sector and farmers will get a better price discovery, which means they will get a higher price compared to the MSP the government announces. It has been 14 years since the APMC mandis were removed from Bihar. But all the claims have fallen flat, and nothing like the excitement that was projected at that time, has happened.
In the absence of any provate mandis that economists had talked about, it is some private traders who operate now. Farmers are realising low prices as a result of which every harvest we find unscrupulous traders transporting truck loads of wheat and paddy all the way to be sold in Punjab and Haryana where they at least get an assured MSP. If only in these 14 years, Bihar had instead laid out a vast network of APMC mandis like in Punjab, its agriculture would have been in a much better condition. There would have been less out migration from rural areas in Bihar if only agriculture had been strengthened.
According to NABARD 2015 study, the average farm income in Bihar remains low at Rs 7,175 per month. Compare this with the average in Punjab, which stands at Rs 23,133 per household. Much of it is because of a higher price realisation from the MSP system. It is therefore a missed opportunity for which Bihar continues to pay a heavy price.
But it is being said that these reforms will provide farmers with freedom to sell and thereby increase farm incomes ..
It is important to first understand how have these markets reforms or the freedom to sell has operated in America from where we are borrowing the agricultural marketing provisions. According to the Chief Economist of US Department of Agriculture (USDA) real farm incomes in America, if adjusted for inflation, have been on a steep decline since 1960s. Since there is no APMC market nor an MSP farmers have the right to sell anywhere and to anyone. But over the years American farmers are faced with a severe economic crisis. What had saved farming all these years was the economic support through massive subsidies. If agricultural markets were so efficient I see no reason why In 2018 OECD countries should have provided agricultural subsidies to the tune of $ 246 billion. Further, despite contract farming, commodity trading and the dominance of multi-brand retail, the American Farm Bureau Federation in 2019 said that 91 per cent US farmers are bankrupt and 87 per cent farmers say they are left with no other alternative but to abandon farming.
While India is trying to hook agriculture to contract farming and commodity futures, I wonder why in the US with the biggest commodity stock exchanges, farmers should be carrying a debt of $ 425 billion. If commodity trading hasn’t worked for US farmers and for European farmers where 50% of $ 110 billion agricultural subsidies come in the form of direct income support how it will be a panacea for Indian farmers has not been explained.
So what in your thinking should be the agricultural reform that Indian farmers should be looking at?
What Indian farmers need is a commitment from the government or the industry that they will get an assured price after every harvest. This is only possible if we were to strengthen the agricultural marketing infrastructure. There are at present less than 7,000 regulated APMC markets in India. What India needs is vast network of 42,000 markets if a mandi has to be provided in 5 kilometres radius. The opportunity therefore is huge, all it requires is the ability to take up the challenge and chart a promising direction by first investing in essential infrastructure like mandis, cold chains, storage, grading, transportation etc.
Now comes the issue of price discovery. If markets were so efficient, there is no reason why farmers should be committing suicide in such a large number. After all, as per the Shanta Kumar Committee only 6 per cent farmers in India get MSP. The remaining 94 per cent farmers are dependent on free markets. If markets were so efficient in India also, there is no reason why so many farmers should have committed suicide. Their economic conditions should have improved over the years.
It is therefore time to strengthen the APMC network, and ensure that MSP becomes a legal right in the sense that no trading should be allowed below MSP. I am not against setting up private markets nor am I against competition. Pvt mandis can be set up in Bihar or in eastern UP or where there is a need for a mandi. That will provide a better competition with APMC mandis. But since it is being said that selling to anyone, and anywhere will ensure better prices to farmers, which means a price higher than MSP, I am sure the private sector will not object if MSP is made a legal right for farmers. After all, the private players are already claiming farmers will get a higher price so why not make MSP mandatory in trading for all the 23 crops for which it is announced every year. This of course should be followed by setting up a Commission for Farmers Income and Welfare.
This will not only transform Indian agriculture to meet the vision of Sabka Saath Sabka Vikas but in the process will also become a global model, the world too needs. #
'हमने अन्न उपभोक्ताओं पर ध्यान दिया है अन्न उत्पादकों पर नहीं'. NewsClick. June 25, 2020.
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