Failure to get a fair price forces farmers to burn the produce.

Pic courtesy: National Herald

At a time when wholesale price inflation has touched the highest in three decades, there is distressing news on the farm front. Within a span of a week, three farmers have burned their standing crop or the harvested produce at three different locations across the country. The crops are different, but the reason for putting it on fire is the same – failure to get a fair price that covers the actual cost farmers had incurred in its cultivation.

On Dec 11, an angry Chakalu Venkateswarlu, hailing from Kurnool district in Andhra Pradesh, put on fire the 25 bags of onions (each weighing 50 kg) that he had brought to the Kurnool Agricultural Market Yard, when he found the best price being offered to him was Rs 500 per quintal (Rs 5 per kg). Realising that such a low price did not even cover his cost of production, transportation cost and the mandifee, the frustrated farmer preferred to sprinkle petrol on his produce and put it on fire.

Four days later, another farmer from Dhone mandal in Andhra Pradesh, put his 3 acres under banana plantation to fire when the prices in the wholesale market effectively crashed to Rs 2 to Rs 3 per kg. Mallikarjuna claims that he had spent about Rs 5 lakh in cultivating bananas, but when the prices fell so low at the time of third harvest, he felt defeated. All that he had earned from marketing his crop was not more than Rs 1.5 lakh. Out of exasperation therefore he was left with little choice but to burn the plantation.

In Madhya Pradesh, a couple of days later, an irate Shankar Sirfira, a farmer from Deoli, burnt 160 kg of garlic that he had brought to the Mandsaur market yard. In the video clip that went viral on the social media, he was heard saying that he had spent Rs 2.5-lakh on cultivating garlic but all he got in the market was Rs 1-lakh. This did not even cover the cost of cultivation. He said all he wanted from the government was to ensure a fair price to farmers.

The three painful incidents that I have highlighted above may appear to be isolated but are a reflection of the deeper agrarian distress that prevails. There are tens of thousands of farmers cultivating the same crops who are lashed with the same ferocious blow from markets but whose despair, dismay and hopelessness goes unrecorded. When prices crash, economists blame it on supply demand disequilibrium but fail to see the human suffering it unleashes. Not only in India but globally too, the volatility of the markets has destroyed livelihoods, and increasingly forced farmers to abandon farming, sell of their lands and migrate to the cities looking for menial jobs. 

This is no less than mayhem. Take the case of America, where the farm gate prices have been on a steady decline since 150 years thereby gradually pushing farmers out of agriculture. With a hollow disquiet prevailing in the countryside, not only have farm suicides increased but so has mental distress. In the US alone, from where we borrow the failed market reforms in agriculture, as many as 915,725 farm workers and their families are being treated for depression at the Migrant Health Centres that have been set up nationwide. This is happening at a time when hardly 1.5 per cent of the US population now remains in farming. While there may be complex reasons behind the mental health challenges that farmers and farm workers are faced with, fluctuating commodity prices remains on the top.  

But for policy planners and media especially business journalists’ mayhem occurs only when equity indices plunge, when stock markets ends at a lower level. This is how the economic design is cast. While a dominant section of the mainline economists rue the slide in stock markets, they spare no effort in welcoming the low farm prices that eventually leads to increased farm indebtedness, pushing more and more farmers to migrate to the urban centres.  

No wonder, the daggers are already out against any possible move to provide farmers with a guaranteed income by way of a legal sanctity for Minimum Support Price (MSP) for 23 crops for which the prices are announced every year. Some senior economists, who themselves get a guaranteed salary packet linked to inflation every month, are the ones to talk about the virtues of free markets for farmers, which they believe would lead to price discovery. Although I have earlier talked in these columns of how the markets in case of highly commercial products like chocolate and coffee have left millions of primary growers of cocoa beans and coffee bean in Africa and Latin America to live in misery, the case of banana value chains squeezing farmer’s income is no less of an eye-opener. A study shows for every Euro worth of purchase by European consumers, banana producers in Latin America, from where the fruit is imported, receive only 5 to 9 per cent of the end price.

It is the primary producers who play a strenuous role, working the hardest, and yet their share of income in the agricultural value chains is the lowest, not even covering the cost of production. And let’s not forget. For the three commercially important crops – coffee beans, banana and cocoa beans – there is no MSP, nor is there any APMC mandis that we can point our fingers to. It is the big multinationals operating in a competitive environment that actually thrives on sucking farmers’ wealth. Imagine, if the global agricultural chains had set an example by guaranteeing a minimum economic price covering the cost of production plus a reasonable share of profits, farming too would have been a profitable enterprise.

Instead of leaving it to exploitative market forces, as the international evidence has conclusively shown, the time is ripe for India to usher in a new set of ingenious farm reforms that begins by first ensuring a living income for farmers. Guaranteeing an economically-viable livelihood to 50 per cent of the country’s population is the way to bridge the great economic divide. #

Source: Don't let exploitative market forces run riot. The Tribune. Dec 23, 2021. https://www.tribuneindia.com/news/comment/dont-let-exploitative-market-forces-run-riot-353356

READ MORE - Failure to get a fair price forces farmers to burn the produce.

The reforms Indian agriculture needs

Pic courtesy: rediff.com 

Farmer protests show no signs of ending. For almost ten months now farmers have been protesting at the New Delhi borders. While the protesting farmers are not giving up on their basic demand calling for the repeal of the three central laws, the Centre remains adamant saying that it is willing to accept amendments to the three laws but complete withdrawal is out of question. 

As the stalemate continues, a question that is being repeatedly asked is if the three laws are not acceptable for farmers, then what kind of agricultural reforms would be required. After all, even before these laws were introduced Indian agriculture was (and is still) passing through a terrible crisis. Just withdrawing the laws would mean returning to a status quo which in any case is not going to help the farming community struggling to somehow survive.   

That Indian agriculture is passing through an appalling crisis was never in doubt. But the latest report of the Situational Assessment Survey 2018-19 which looked into agricultural households and incomes in rural India only comes as an acknowledgement of the worst fears. This comprehensive study, based on an extensive survey, clearly shows that the income of an agricultural household from crop cultivation alone has been on a steady decline. In fact, an average farm household in 2018-19 earned more from wages than from crop cultivation.  

This survey report should in fact tell us why farmers are braving weather extremes to stay put at New Delhi borders. After all, as I have always maintained, the compound anger the protesting farmers carry is the result of continuous neglect and apathy they have lived with. Agriculture has been deliberately kept impoverished to keep economic reforms viable. That’s how the economic design was cast. In other words, the entire burden of keeping food prices low has been borne by farmers, which means in real terms, farmers alone have been subsidising the country. 

These are the same farmers’ whose hard work and labour results in a record harvest year after year, allowing the government to pat itself on the back, taking credit for a record production. In 2018-19, farmers produced 187.75 million tonnes of milk, 174.63 million tonnes of paddy and 102.19 million tonnes of wheat. In addition, farmers produced 320.47 million tonnes of horticultural crops, including fruits, vegetables, spices and plantation crops. But despite the bountiful harvests, farmers have remained at the bottom of the economic ladder. To keep food inflation low, and to hasten migration to the cities which are need of cheap labour, agriculture has been very conveniently sacrificed. 

For macro-economists, agricultural growth helps raise the quarterly as well as the annual GDP figures. So much so that even during the lockdown, when economy contracted, agriculture remained the only saviour registering a positive growth throughout. Agriculture, in other words, had lived up to its reputation of being the mainstay of the economy. But that is where the appreciation and acknowledgement ends. Mainline economists and policy makers have remained not even remotely concerned of the continuing plight of the farming community.   

Despite all the subsidies and programmes that are announced from time to time, which gives a false impression of agriculture being hugely supported, the latest Producer Subsidy Equivalent estimates prepared by the Organisation for Economic Cooperation and Development (OECD) shows that in reality India had negatively taxed its farmers in the past two decades. 

This brings me back to the question as to what kind of reforms does agriculture need. After all, agriculture continues to be in the throes of a serious crisis and has been crying for attention. The immediate need is to pull farmers out of the poverty trap by making farming a viable proposition. This is possible only if policy makers are willing to take some bold steps to realise the Prime Minister’s vision of Sabka Saath Sabka Vikas.

Since this question is asked again and again, and even at the cost of sounding repetitive let me reiterate that the three pillars of reforms that Indian agriculture desperately need are:  

1) Make Minimum Support Price (MSP) a legal right for farmers. Just like Spain brought in a law in Feb 2020 to make trading below the cost of production illegal for agricultural, horticultural, livestock and animal husbandry, it is high time India too brings in a legal provision making trading below the MSP to be illegal, and prescribe suitable penalties for defaulters. At present, while MSP is announced for 23 crops every year, effectively it is implemented for only two crops – wheat and paddy. This provision has to be extended for all the crops for which prices are announced. It does not however mean that the entire farm produce has to be procured. It only means setting a benchmark price below which farm gate prices for farmers are not allowed to fall. This has to be accompanied by a direct income support programme for marginal farmers with less than 1 hectare landholding. 

2) Expand the network of APMC regulated mandis. At present, we have approximately 7,000 APMC mandis. Although a lot of discrepancies have emerged in the way APMCs are managed, the need is to make corrections and not to throw away the baby with the bathwater. In fact, to minimise distress sale and ruthless exploitation by trade, markets need to come closer to the farm. India therefore needs 42,000 mandis if a market has to be provided within 5 km radius. Private sector should be invited to set up mandis to operate under the same APMC marketing norms. This will inculcate healthy competition. 

3) Replicate the Amul dairy cooperative model for fruits, vegetables, pulses and oilseeds to begin with. Instead of inviting corporate into agriculture, strengthen the cooperatives. This will need appropriate public sector investments, and structural changes in agricultural marketing set up. And let’s not forget. When consumers buy milk from dairy cooperatives, nearly 70 to 80 per cent is the share of farmer in the end consumer price. In America, where free markets operate in agriculture, only 8 per cent is farmers share in the end consumer price. What we need is perfecting a system that provides 70-80 per cent of the end consumer price to farmers. #

Source: Making farming viable key to pull farmers out of debt trap. BizzBuzz. Sept 17, 2021. https://epaper.bizzbuzz.news/Home/MShareArticle?OrgId=17924a99c3e 

READ MORE - The reforms Indian agriculture needs

Why is MSP important for farmers?

At a time when I see an euphoria among mainline economists over the new set of agricultural reforms, media reports say the Commission for Agricultural Costs and Prices (CACP) has observed that only 12 per cent of the country’s paddy cultivators were able to sell their produce at the guaranteed Minimum Support Price (MSP) in the 2018-19 kharif marketing season. Imagine, if the remaining 88 per cent farmers were also able to sell paddy at the MSP the rural economy would have seen an upswing. 

The uneven picture of paddy procurement is not very different from that of wheat procurement in the rabi marketing season where bulk of procurement operations is confined to Punjab, Haryana and now Madhya Pradesh. This is primarily because by and large the network of regulated markets has remained confined to the traditional Green Revolution belt of the north-western region. Against the requirement of 42,000 regulated mandis in five km radius, there exists close to 7,000 mandis only under the Agriculture Produce Market Committee (APMC) Act. Nor has the MSP price delivery been expanded to cover more regions and more crops. 

This reflects a historic asymmetry in procurement operations, with a high of 95 per cent in case of paddy being procured in Punjab, and over 70 per cent in Haryana whereas the share of procurement in Uttar Pradesh (3.6 per cent), West Bengal (7.3 per cent), Bihar (1.7 per cent) and the north-eastern States have remained miniscule. With most farmers getting a distress price, farm incomes have remained very low in these States. This prompted the CACP to suggest: “Therefore, concerted efforts should be made to extend the benefits of procurement to small and marginal farmers in general and eastern and NE States in particular.” 

The importance of this recommendation can be gauged from the fact that deprived of the right price; truckloads of paddy from UP (and earlier from Bihar) are being transported to be sold in Haryana where farmers at least get an assured MSP. This is not the first time when paddy and wheat from UP and bajra from Rajasthan is being brought to be sold in Haryana, which has a robust marketing infrastructure network. With procurement operations remaining restricted in most States, majority farmers have remained dependent on markets. If markets were as efficient as is being made out, and provided farmers with a higher price, the question that needs to be asked is why does agriculture continue to be in the grip of a severe agrarian crisis? 

The tearing hurry with which agriculture market reforms have been pushed, without even consulting farmers for whom these laws are designed for, have seen huge farm protests continuing in Punjab and Haryana. Providing for ‘one country, one market’ by removing the inter-state and intra-state barriers in agriculture trade; making trading outside the APMC market boundaries to be free of any taxes so as to bring in competition; the government, the industry and the mainline economists claim these laws will attract private investments, and the markets will provide farmers with higher prices. Farmers can sell anywhere in the country where he can get a higher price. 

Although APMC markets and the provisions of MSP have remained untouched in the new laws, agitating farmers say that the real intention is to gradually dismantle the APMC mandi network and in the process get away from the delivery of MSP to farmers. With several committees earlier pointing to MSP becoming a barrier in price discovery their fear is certainly not unfounded. Also, the APMC mandis have been blamed for monopolising trade and the licensed middlemen in the mandis accused of exploiting farmers. There is no denying that over the years APMC mandis have seen certain distortions emerging but farmers say the need is to reform the mandi structures and not to render these markets redundant in the next few years. 

Leaving farmers to face the vagaries of markets has not been of help anywhere in the world. Knowing that unregulated markets will further exacerbate the farm crisis, protesting farmers are demanding a right-based security net. The demand is for another law that makes MSP a legal right for farmers. Since MSP is announced for 23 crops every year, but is effectively implemented for two crops only – wheat and paddy, where procurement takes places (also to some extent for cotton, mustard and some quantities of pulses), farmers want no trading to be allowed below the MSP. 

The real freedom for farmers will be if all paddy and wheat farmers (and for that matter farmers growing other crops) throughout the country are assured of getting MSP wherever and to whosoever they sell. Even for contract farming, the price to be worked out should not be less than the MSP announced. Given that the private companies are promising to provide a higher price to farmers in any case, this should not be a problem. #

MSP Procurement: Real freedom for farmers. Deccan Herald. Nov 27, 2020

https://www.deccanherald.com/opinion/main-article/msp-procurement-real-freedom-for-farmers-920272.html?fbclid=IwAR3VVaBRnSywjfvEDwRB09Z0pP950PZAdkGp_qus_iVRILQ2mIyRw7YaI_A

READ MORE - Why is MSP important for farmers?

Aren't mainline economists lazy?

Will markets give him the right price? 

If making Minimum Support Price (MSP) a legal right for farmers “will spell disaster in the markets, and private players will hesitate to enter into the market,” the fundamental question that protesting farmers are asking – how will the central agricultural laws then bring farmers a higher income – remains unanswered. No one is telling where in the world have markets alone succeeded in providing farmers with higher income. Nor are mainline economists daring to point out the flaws in the market reform strategy that has relentlessly pushed small farmers out of agriculture.         

Although most mainline economists, barring some honourable exceptions, and corporate activists had always treated Minimum Support price (MSP) as a barrier in price realisation for farmers and have been advocating for doing away with the monopolistic control of Agricultural Produce Market Committees (APMCs) so as to provide farmers with greater choices to market their produce, the economic rationale being suggested for dismantling a time-tested regulated marketing system falls short of any sound reasoning. To say that catering to only cereal production is ‘lazy farming’ and an outcome of ‘parochial thinking’ (as a State Bank of India research paper states) is rather unfair and speaks volumes of the inability of dominant economics to think out of the box. If Punjab farmers were indeed ‘lazy’ there is no way the State could achieve record yields of cereal crops – 51.73 quintals per hectare for wheat and 61.49 quintals per hectare for paddy – which are amongst the highest in the world.

Instead of acknowledging their stellar role, to call cereal growing farmers as ‘lazy’ actually stems from a myopic and insular thinking. As economist, Kate Raworth, author of the widely acclaimed Doughnut Economics: seven ways to think like a 21st century economist, often says that an outdated economic model of 20^th century cannot be expected to address the social and ecological problems of this century, it is high time neoliberal economists start looking beyond what is prescribed in textbooks to think and act differently. In other words, it is not farmers who are lazy but instead there exists a dominant class of ‘lazy economists’ – some economists who find it convenient to simply go by ideological prescriptions without even realising that an extraordinary crisis inflicting agriculture requires extraordinary solutions that may be beyond the reach of the invisible hand of the markets.

Even in America, free markets in agriculture are actually thriving on massive federal agricultural subsidy support. According to a non-profit -- Environment Working Group (EWG) -- the US gave $ 425 billion in farm subsidies support under various heads, including crop insurance, disaster management and conservation programmes, since 1995. And yet, despite these monumental subsidies, American farmers are indebted to the tune of another $ 425 billion. This clearly shows that even the visible hand of government subsidies has failed to make markets work efficiently for farmers.

Globally, Producer Support Estimate (PSE) broadly provides a comparable estimate of budgetary as well as various forms of subsidy support to farmers. Developed by the Organisation for Economic Cooperation and Development (OECD) the PSE provides an assessment of the share of gross farm receipts at the farm gate. Accordingly, while Indian farmers receive a negative support (or in other words are actually being taxed) by roughly minus 5.7 per cent, farmers in Norway, Switzerland, Korea, Japan, China, US, EU, Canada, Brazil, Mexico, Indonesia, Philippines, Turkey, Russia, Israel, Costa Rica and Colombia are in receipt of huge subsidy support. Norway tops the chart with a phenomenally high subsidy support of (+) 60 per cent. If this index provides an idea of the extent to which agriculture is supported in the rich countries, how can mainline economists refuse to see that markets need massive subsidies to remain afloat?    

Returning to India, amidst the raging farm legislation row, and despite loud claims being made that markets are more important for farmers than MSP, reports say most crops are actually selling at prices that are on an average 20 to 30 per cent below the MSP announced. Using the government’s own data, an interesting analysis by The Hindu showed that between Sept 14 and Oct 14, nearly 68 per cent of the market transactions for 10 select crops in 600 wholesale markets were at prices lower than MSP. In case of bajra, maize and soybean, in more than 95 per cent transactions the modal price was much below the MSP. Modal price is the average of the transactions that takes place during the day for a specific crop.

This is not the first time that modal price have remained below the MSP. Year after year, the story remains the same. More often than not, the modal price (despite its high sounding name) turns out to be no better than a distress price that markets dictate. With procurement largely remaining confined to wheat and paddy, where farmers get the benefit of an assured MSP, for most other crops farmers are left at the mercy of markets. If the markets were so efficient there is no reason why truckloads of paddy were to be transported all the way from Bihar, where APMC Act was set aside in 2006, to be sold in Punjab for several years now. This year too, as per media reports more than a million tonne of common grade of paddy have been brought from Bihar (and also Uttar Pradesh) at a price between Rs 1,000-1,100 and sold in Punjab at an MSP of Rs 1,868 per quintal. If MSP is the highest price paddy farmers can get, shouldn’t mainline economists acknowledge the importance and need for providing farmers with an assured price?    

This clearly shows that Bihar’s 2006 experiment in ushering free markets – without first framing appropriate policies, incorporating different approaches and strategies, to address the real needs -- failed to prop up agriculture. It’s a classic case of a lost decade and a half during which time millions of economically viable livelihoods were lost. It is also a classic example of how 'lazy economists' failed to seize the opportunity to make a real difference. If only Bihar had learnt from Punjab, and laid out an extensive network for public procurement, the resulting socio-economic transformation would have been phenomenal. #

The lazy economist way. The Tribune. Nov 5, 2020. https://www.tribuneindia.com/news/comment/the-lazy-economist-way-166069?fbclid=IwAR0KzlwVOFOqQkGQi5D9dNqW15nZCrAkyZ30YdiKE5BBgm8vRBoXRTuvqDs

READ MORE - Aren't mainline economists lazy?

Agriculture Bills: Why are farmers protesting?

Picture courtesy: oneindia.com 

It was some 12 years back, I read a shocking report in New York Times detailing how a small dairy farmer, distressed over falling milk prices, first shot each of his 51 cows and then shot himself. Severe agrarian distress in American agriculture, a citadel for open markets in agriculture, was something unheard of. Reports now say that farm suicide rate in rural America is 45 per cent higher than the urban areas. US farmers now are saddled with a bankruptcy of $ 425 billion.

In India, as per the Shanta Kumar committee report, only six per cent farmers in the country are able to sell at the guaranteed MSP and the remaining 94 per cent farmers are dependent on the markets.. Studies have shown that only an average of 36 per cent of farmers produce was sold in the mandis and the remaining was sold outside to private trade. The question that crops up is that if the markets were so efficient, Indian agriculture shouldn’t have been in the grip of a severe agrarian crisis. In other words, like in America, markets failed to prop up farm incomes in India.  

Aimed at transforming agriculture, and increasing farmer’s income in the process, the contentious farm legislations that have been passed by parliament are expected to bring in private investments in agriculture. But the continuing farm protests in Punjab and Haryana, and now across the country, reflects the apprehension and skepticism farmers carry arguing that liberalising Indian agriculture will actually create private monopolies, and drive out the small farmers. With capital investments flowing in without any regulations and in the absence of any rights-based safety net enshrined for farmers, they fear that in reality the new laws are aimed at providing a complete freedom for the companies.

At the heart of the debate is the raging battle for retaining the Minimum Support Price (MSP). Although the government has time and again assured farmers that MSP and the regulated Agriculture Produce Market Committee (APMC) mandis will stay, it has allowed purchase by private traders outside the premises without paying any market fee. To explain, it means that in Punjab, which has a vast network of APMC mandis linked with village link roads, trading inside the mandis will invite six per cent tax for traders (including rural development fee) but outside the mandis anyone having a PAN card can buy from farmers directly without paying any tax. Farmers fear such a system will make APMC mandis redundant over the years, which in turn also means that MSP too will go away. The fear is not completely unfounded. Over the years, several committees have talked of MSP being a barrier in price discovery and the need to dismantle APMC markets.

The slogan of ‘one country one market’ therefore in reality turns out to be ‘one country two markets’ – one inside the regulated mandis, and another outside its premises. The claim that such a system will allow farmers to get a higher price outside the mandis and if they don’t, they can always come back and sell it at MSP within the mandis is something that farmers have been contesting. Since the government announces MSP for 23 crops, it procures only wheat and paddy and some quantities of cotton, soyabean, pulses, mustard etc. Experience so far has been that the market prices of the 23 commodities for which MSP are announced are often much lower and in the absence of an assured procurement there is no choice for the farmer. Take the case of maize; the ruling market price is between Rs 800 to Rs 1,000 per quintal whereas the MSP is Rs 1,850 per quintal. Farmers have been selling maize at a distress price.

An earlier experiment in bringing in open markets in agriculture in Bihar too has failed to attract private investments, and in the process failed to provide farmers with higher prices. In 2006, there was excitement all around when Bihar repealed the APMC Act. Economists were upbeat saying Bihar will turn out to be the harbinger of a new market-driven revolution in agriculture, but it has been 14 years and nothing like that happened. We are still waiting for the miracle to happen. A 2019 study of the National Council of Applied Economic Research (NCAER) on ‘the experience of Bihar after the abolition of APMC Act in 2006’, had warned: “It is easier to dismantle institutions than build them. The consequences could be very serious for the farm sector and the farming community.” 

Over the years, a number of discrepancies have emerged in the functioning of the APMC mandis. There is cartelisation and at some places even mafias have sprung up. There is definitely a need to therefore reform these regulated markets, remove the political influence and bringing in professionalism in its operations. Considering there are close to 7,000 APMC mandisin the country, the challenge is to set up a total of 42,000 mandis, ensuring that a mandi is made available within five km radius. In any case, even if private mandisare to be set up, there is a need for regulations.

After all, let us not forget that the legendary Sir Chhotu Ram, known to be the man behind Punjab’s mandi system, enacted the Punjab Agricultural Produce Markets Act, 1939, making it mandatory for traders to be registered in the regulated mandis. As Revenue Minister of the erstwhile Punjab province during the days of the British Raj, his basic concern was to free farmers from exploitation in the hands of unscrupulous traders and middlemen. Eighty years later, the policy effort seems to de-regulate trade leaving it open to free markets. While it is alright to blame small traders and middlemen operating in the mandis for the flaws that have crept in, how one can be sure that the big players with larger financial clout will not be in for a bigger ill-treatment, abuse and misuse of the market freedom?

The real freedom for farmers will therefore happen when farmers know, for sure, that wherever they sell, within the mandi or outside the mandi, in Amritsar or in Bangaluru, they will at least get MSP. The need therefore is to bring in a 4^thOrdinance which makes MSP (for all 23 crops for which prices are announced) a legal right for farmers, ensuring that no trading happens below it. At the same time, make MSP the price below which no contract farming can take place. Since agribusiness companies and the policy makers are claiming that farmers are being misled and they in reality will get higher prices, making MSP a legal right will help build confidence and trust among the farming community. #

READ MORE - Agriculture Bills: Why are farmers protesting?

Make MSP a legal right for farmers -- My interview

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.

https://hindi.newsclick.in/We-have-focused-on-food-consumers-and-not-on-food-producers?fbclid=IwAR25eFd_ZJqgkZllLdMDu1yMvlYpw6WZC7orKTCuB8GlCbCbv2rKNeV8-x8

READ MORE - Make MSP a legal right for farmers -- My interview

Best reforms would be if the APMC mandi network is expanded

Pic courtesy: Indian Express

The year was 2006. There was excitement in the air. Throwing out the Agricultural Produce Market Committee (APMC) Act, Bihar had undertaken futuristic agricultural market reforms. With no mandis coming in the way, sarkarieconomists and policy makers were exuberant at the immense possibilities of providing more income into the hands of the farming community thereby turning Bihar into a land of prosperity.

In the absence of regulated mandis, economists had predicted a lot of private investments to flow in thereby helping in the setting up of modern private market yards and purchase centres. Since there would be no APMC mandis there would also be no Minimum Support Price (MSP), which means private players would be able to give farmers a higher price. That is what was said at that time.  

Fourteen years later, Bihar still leads the pack of States that form the BIMARU States. There is hardly a year when unscrupulous traders have not transported truck loads of wheat and paddy to be sold in Punjab and Haryana mandis. The reason why traders found it economical to transport wheat and paddy all the way from Bihar was primarily because the prices private trade offered back home was much less. Against a procurement price of wheat at Rs 1,925 per quintal this year, wheat farmers in Bihar were not getting more than Rs 1,500 to 1,600. No wonder, while Punjab and Haryana farmers have gained from the delivery of MSP year after year, farmers in Bihar continued to suffer. The argument that Bihar farmers could sell to anyone, anywhere within the State failed to pull them out of poverty.

There are two ways of looking at this. First, in the absence of an assured MSP being given to farmers year after year, the average income of a rural household in Bihar remains low at Rs 7,175 per month. Compare this with the average in Punjab, which according to a study by NABARD stands at Rs 23,133 per household. Much of it is because of a higher price realisation from the MSP system. This year alone for the wheat harvesting season, Punjab farmers received a total of Rs 26,000-crore by way of wheat MSP. This has bolstered the rural economy of Punjab. Secondly, a majority of the lakhs of migrant workers who underwent the trauma of walking home or cycling home, or travelled by buses and trains to return home, comprised workers from Bihar. Imagine if instead of dismantling APMC mandis Bihar had in turn laid a strong network of mandisand village roads like in Punjab, perhaps the number of migrants from Bihar would have been far less. If agriculture was profitable in Bihar I see no reason why rural population from Bihar would have migrated in such a big proportion.

The Bihar experiment with agricultural market reforms has failed. If the APMC mandis are gradually dismantled in Punjab, and government subsequently withdraws from procuring wheat and paddy at MSP, will Punjab farmers also become like Bihar farmers? Although Agriculture Minister, Narender Singh Tomar, has clearly said that the series of reforms being introduced through the three Ordinances will not touch MSP and APMC mandis, senior Cabinet Minister Nitin Gadkari has said that MSP is higher than domestic market prices as well as international prices, and the government will need to find a viable solution. This is exactly what the CII and FICCI have been demanding for several years now.

Even though the Minister for Agriculture has said that the government does not intend to dilute the provisions of MSP, the fact that the despite the claims government has in reality come up with ‘One Country, Two Markets’ system whereby traders and private players buying outside the APMC market yards will not have to pay any tax whereas those trading inside the premises will pay 3 per cent manditax and 3 per cent towards rural development fund (total of 6 per cent in Punjab) actually is discriminatory against the APMC network. As the Chamber of Association of Maharashtra and Trade (CMIAT) has said that in the absence of a level-playing field, the APMC mandiswill gradually become redundant over a period of time. This is something that Punjab and Haryana, with a robust APMC mandinetwork, have to be worried about.

Further, let us not forget that a few months back citing the recommendation of the Commission for Agricultural Costs and Prices (CACP) the Prime Minister Office had written to the Punjab government asking why should the open-ended procurement of wheat and rice not be discontinued, which means the government is keen to reduce procurement thereby also reducing the outgo on MSP. The Chief Economic Advisor had recently called for restricting food procurement for only 20 per cent population as compared to providing rations for 67 per cent population under the National Food Security Act. Reducing procurement automatically means reducing the payment of MSP to farmers.

Over the past few decades, Punjab has built a strong network of APMC mandis. With roughly 1,840 mandis, sub yards and purchase centres spread across the state, along with 70,000 kms of village roads, the vast agricultural marketing infrastructure is certainly neighbour’s envy. Instead of opening these mandis to private competition, the challenge should be to set up private market yards in Bihar, Uttar Pradesh and other deficit areas. In 2019, only 3,000 tonnes was procured in Bihar, and in Uttar Pradesh only 7 per cent procurement is undertaken. In Punjab, 128-lakh tonnes of wheat have been procured this season.

In any case, Shanta Kumar Committee tells us that only 6 per cent farmers across the country get the benefit of MSP. In other words, 94 per cent farmers are dependent on the markets. If markets were so efficient, I see no reason why agriculture distress should be so huge. If markets were so efficient farmers wouldn’t have been demanding a higher MSP and also seek more crops to be included under the MSP regime. Considering that India has only about 7,000 APMC mandis, the best reforms would be if the APMC mandinetwork is expanded to 42,000 mandiswith the aim to provide a marketing platform in every 5 kms radius. At the same time, trading should be mandatory on the MSP announced. Even in eNAM mandis MSP should become the modal price. This is the reform that the country’s farmers need.  # 

READ MORE - Best reforms would be if the APMC mandi network is expanded

Diluting the APMC, MSP regimes isn't a good idea

A general impression has been created by mainline economists that the main reason behind agrarian distress is the denial of freedom to farmers to sell to anyone, anywhere. This is essentially an argument seeking to demolish the massive procurement operations being undertaken for crops like wheat and paddy in regulated APMC (Agricultural Produce Market Committees) mandis. Minimum Support Price (MSP) too has been touted as a monopolistic price which deprives farmers of what the economists call as price discovery. Markets alone are being projected as the way forward to provide farmers with a better price.

For almost a decade now, serious attempts have been made to systematically dismantle the procurement structures, built assiduously over the years to achieve food security. Former Chief Minister of Punjab, Prakash Singh Badal, had a number of times said how in the name of liberalising farmer markets he was increasingly coming under pressure from economists and policy makers to dismantle the APMC market network. Capt Amarinder Singh’s government too has time and again appealed to the Centre not to phase out the one-ended crop procurement system which has provided farmers with income security. A high-powered committee had earlier recommended splitting the Food Corporation of India (FCI) and shifting its focus to food exports and commodity trading. Like the story of camel and tent, allowing private players in the APMC regulated markets is now being suggested by free-market evangelists to bring in competition.

Five weeks into the lockdown and all promises of markets being the saviour have come crashing down. It is only the surplus food reserves that have come in handy at these difficult times. Imagine, if the food reserves had been curtailed to meet the demand of only 20 per cent population as some economists had envisaged. Would the markets have stood up to meet the challenge? Also, take a look at the dairy industry, which has a sizeable private sector presence. At a time when the dairy prices have slumped following a crash in demand, and with private dairies refusing to buy any extra milk, it is only the cooperative milk dairies that are buying surplus milk to be converted into milk powder and cheese. Amul alone is procuring 50 lakh litres a day. So are state cooperatives like Verka in Punjab and Vita in Haryana. Maharashtra has been procuring 10 lakh litres of surplus milk every day at an assured price of Rs 25 per litres to offset the losses farmers are suffering. Kerala Cooperative Milk Marketing Federation is providing free milk to migrants as a solution to reduce the glut in procurement. Wonder why the private dairies couldn’t do the same.

Coming back to normal times, the idea of encouraging competition by liberalising the agricultural markets is the underlying objective of market reforms. But what remains unexplained is that why the private players should be only eyeing the well-laid out market infrastructure of the regulated APMC markets? Considering that only 6 per cent farmers receive MSP (as per the Shanta Kumar high-powdered committee) the remaining 94 per cent of India’s farmers are in any case dependent on markets. Instead of forcing amendments to the APMC Act seeking entry of private players, the best way to upset the strong cartels that operate in the APMC markets is to set up parallel private market networks in the areas where the regulated mandis do not exist. After all, 94 per cent farmers do not have access to regulated markets. Take the case of Bihar, which had revoked the APMC Act in 2006. The idea was to attract private sector investments in marketing infrastructure where efficient markets were expected to provide for better price discovery. Unfortunately, nothing like that happened. So much so that unscrupulous traders are illegally transporting quite a sizeable quantity of wheat and paddy after every harvest to Punjab and Haryana, which at least provide an assured MSP.  

In any case, there are 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 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 said earlier, since 94 per cent farmers are dependent on free markets, their economic conditions should have improved over the years. However, Economic Survey 2016 tells us that the average income of a farm family in 17 states of India, which means half the country, is less than Rs 20,000 a year. Even in America, from where we borrow the failed economic prescriptions for agriculture, markets have left farmers in the lurch. According to the Chief Economist of US Department of Agriculture real farm incomes have been on a decline since 1960s. What had saved farming all these years was the economic support through massive subsidies. Further, despite 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 commodity futures, I wonder why in the US with the biggest commodity stock exchanges, farmers should be carrying a debt of $ 420 billion. If commodity trading hasn’t worked for US farmers (and for European farmers where direct income support is still in vogue) how it will be a panacea for Indian farmers has never been explained. In any case, at the time of global food crisis in 2007, when 37 countries had faced food riots several experts had pointed to commodity trading for being primarily responsible for food crisis the world encountered. While poor went hungry, agri business companies had made a killing on the exchange.  

The reason why India escaped the global food crisis was (and even now at the time of an ongoing lockdown) is because it had not linked its agriculture to the commodity trading system and at the same it had enough food stocks to tide over the crisis, thanks to APMC. Whether we like it or not, the fact remains that despite MSP not covering the cost of production for most crops, it is the only instrument that provides for price discovery. Dilute the MSP regime, and prices for agricultural commodities would register a fall. Any effort to dismantle the procurement system therefore is fraught with unforeseen dangers. The need is to improve the working of the APMC mandisrather than turning these redundant. #

Diluting the APMC, MSP regimes isn't a good idea. Hindu Business Line. May 12, 2020.
https://www.thehindubusinessline.com/opinion/diluting-the-apmc-msp-regimes-isnt-a-good-idea/article31556671.ece?fbclid=IwAR2zKSCsIqQ_YTcp1UkkkAsT-f3KHeIRWEHe4Y5YM6ReMCu15u1a3Tk-ZM4 

READ MORE - Diluting the APMC, MSP regimes isn't a good idea

Dismantling food procurement will have serious repercussions.

Photo courtesy: IndiaToday

At a time when agrarian distress is quite pronounced, and while India ranks 102 among 117 countries in the Global Hunger Index 2019, the country’s granaries are overflowing. Against a surplus of 73.1 million tonnes of wheat and rice which was stacked with the government in July 2019, the food stocks are projected to swell by another 10 million tonnes or so to reach a record 84.7 million tonnes in July 2020.

Expecting to be saddled with an extra 46.3 million tonnes by July 2020, over and above what is prescribed under buffer norms, the Centre is asking Punjab, Haryana and other surplus States to curtail procurement.

While the Prime Minister’s Office wants to reduce the subsidy burden, and ostensibly reduce the cost of carryover stocks, the Commission for Costs and Prices (CACP) is seeking a review of the open-ended procurement policy under which whatever marketable surpluses of wheat and rice farmers bring to the mandis the government is committed to buy at the MSP. Seeking a restriction on procurement by setting limits for purchase, the CACP is also suggesting that the private sector be allowed to directly procure from farmers.

The last time the government amended the APMC (Agricultural Produce Market Committee) Act in 2006 to allow private companies to buy directly from farmers, it ended up turning the country into world’s biggest importer of wheat. The private trade swung into action to make brisk purchases, but didn’t disclose the quantity purchased and horded the grain. As a result, there was a shortfall in procurement at a time when there was no visible drop in production. To meet the food needs for public distribution, India had to import 5.5 million tonnes of wheat in 2007-08 at almost double the price it paid to domestic farmers. International prices had jacked up when India’s wheat import needs became known. This had evoked a lot of controversy, and the BJP (which was then in the Opposition) had demanded a CBI enquiry into what it called wheat import scandal.

Allowing private trade to buy wheat or paddy directly from farmers, bypassing the APMC regulated markets, therefore is fraught with dangers. At no stage can the government afford to ignore the ‘food security’ requirements and has to be ready with adequate buffer stocks, even if it is more than what is required, to meet any unforeseen shortages.

To the question of what to do with excess inventory, isn’t the failure to liquidate stocks when there exists plenty of hunger simply a reflection of food mismanagement? In 2006, when the first Global Hunger Index report was published, India’s ranking was at a dismal 96 among 119 countries, sliding further to 102 ranking in 2019. Several other studies have shown that rural India (and also urban poor) was spending less and less on food. A leaked report of the consumer expenditure survey – which has been junked by the government – clearly shows how food consumption in rural areas had steadily dropped by 10 per cent in the period 2011-12 and 2017-18. The piled up stocks therefore could have been very effectively used to meet the nutritional needs of a large section of the population. Here I agree with the recommendations of the CACP which suggests additional allocations to be made under the National Food Security Act (NFSA), Antyodaya Anna Yojna and other welfare schemes.

On the issue of curtailing open-ended procurement, what needs to be understood is that even if the MSP does not entirely cover the cost of cultivation, at least it provides an assured price. For the farmers, an assured price as well as an assured procurement is what protects them for the tyranny of the markets. That is why farmers’ demand for raising MSP and linking it with the Swaminathan Commission’s recommendations has been growing steadfast. But for quite some time, the dominant economic thinking is for dismantling the APMC regulated markets and doing away with MSP. The World Bank has been consistently demanding this, the World Trade Organisation (WTO) has been questioning the need for public stockholding, and even the Economic Surveys, as well as some mainline economists, have repeatedly pointed to how administered prices are coming in the way of what it calls as price discovery.

Let’s be clear. If there is one market intervention that ensures price discovery it is the MSP, if it is delivered properly. In a country where only 6 per cent farmers get the benefit of MSP, markets have failed miserably to provide a better price to 94 per cent of the remaining farmers and thereby help in price discovery. The introduction of e-NAMs (electronic national agricultural markets) too has failed to assure a higher price to farmers. Although the former Finance Minister Arun Jaitley had acknowledged that e-NAMs are the first step towards setting up spot markets, what is not being answered is why in the US agriculture continues to slide into deep crisis year after year despite having the world’s largest commodity exchange at Chicago, and another at New York? According to US Department of Agriculture (USDA) the growth in real income for American farmers has been on the decline since 1960s.

Strengthening the procurement system is therefore the answer. Instead of ascribing a quota system (at the farmer or the district level) for limiting wheat and paddy procurement, an effective procurement system needs to be evolved for alternate crops. For instance, if Punjab’s share in total procurement of wheat has to be reduced from the existing 37.1 per cent, an equally robust procurement system for crops like maize, millets, pulses and oilseeds have to be first ensured. This also holds true for paddy, which is blamed for the depleting ground water. Farmers do realise the need to diversify, but in the absence of an assured price and procurement, are not willing to make the shift. Rightly so. After all, volatility of markets is what hits farmers the most.

Give farmers a viable alternative, they would do the rest. But on the other hand, any move to systematically dismantle the food procurement system, based on the twin strategies of assured price and an assured market, which Dr M S Swaminathan had once referred to as the two planks of a ‘famine avoidance’ strategy, will have serious political ramifications. #

Give farmers a viable crop alternative. The Tribune. Jan 2, 2020.

https://m.tribuneindia.com/news/give-farmers-a-viable-crop-alternative-20342

READ MORE - Dismantling food procurement will have serious repercussions.