Showing posts with label CACP. Show all posts
Showing posts with label CACP. Show all posts

Tuesday, October 6, 2020

Post Independence, markets have failed Indian farmers

 


Reiterating what a former US Agriculture Secretary Earl Butz (at the time of Richard Nixon) had once given a call: “Get big or get out,” Sonny Perdue, US President Donald Trump’s Agriculture Secretary too recently said: “In America, the big get bigger and the small go out. I don’t think in America, (as) for any small business, we have a guaranteed income or guaranteed profitability. “ 

Wherever agriculture is being opened to markets, the big capital has successfully managed to push out the majority farming population and concentrated its control over food. That’s how the markets behave, with its own set of logic and ethics. As the big get bigger, the small farms struggle to survive. In America, after decades of market reforms in agriculture, only 1.5 per cent of its population has somehow managed to survive on the farm. Despite providing for $ 867 billion support under the Farm Bill 2018 over the next 10 years for agriculture, nutrition and conservation programmes, rising suicide rate, worrying trends of depression in rural areas, declining milk and farm commodity prices, and the mounting bankruptcy in farming – estimated at $ 425 billion -- will make it tough for the family farms to survive the transition.

With the suicide rate being 45 per cent higher in rural areas as compared to urban America, low prices and mounting debt has pushed much of the rural population into the grips of stress and depression. What happened in America is no exception. It has in fact become an international agricultural design, with agribusiness gaining strongholds over the food value chains across the globe, in reality their competitive strength depending on the huge subsidies received. In Europe, farming too is in a severe crisis despite an annual subsidy support of $ 100 billion, of which nearly 50 per cent goes as direct income support. Low prices and mounting debt has gradually pushed small farmers out of business. In UK alone, 3,000 dairy farms have closed down in the past four years. In France, a study had shown that nearly 500 farmers commit suicide on an average in a year. 

Compare this with India, where 3.64-lakh farmers have officially committed suicide in the past 25 years as per the National Crime Record Bureau statistics. Despite 94 per cent farmers being dependent on markets all these years (as per the Shanta Kumar committee report), Indian agriculture is still in the throes of a terrible agrarian distress. Interestingly, an NSSO report in 2014-15 had shown that nearly 54 to 84 per cent farmers (depending on crops) in the kharif marketing season had sold their produce outside the mandis to private traders. In other words, farmers had the freedom to sell anywhere. They were not in the clutches of the mandis. The question therefore that needs to be asked is if markets were so efficient, why farmers should be increasingly abandoning agriculture and migrating to the cities. If markets were so benevolent, there is no reason why agriculture shouldn’t have been the engine of economic growth. I am not sure whether the markets have now undergone a heart transplant given the exuberance being shown, promising higher price discovery for farmers.  

But this is how markets operate. It pushes people away from agriculture primarily to provide cheap workforce for the industry. The big get bigger in the process and the small go out. For India, the Washington-based International Food Policy Research Institute (IFPRI) has a similar proposition – ‘move up or move out’. For several decades, mainline economists in India had been arguing on similar lines. Numerous committees and reports had pointed to the need to move towards market-friendly agriculture. Minimum Support Price (MSP) was blamed to be the culprit, coming in the way of real price discovery. In one form or the other, the emphasis had been on dismantling the vast network of Agriculture Produce Market Committee (APMC) regulated mandis in Punjab and Haryana.   

To strengthen the argument, even the Commission for Agricultural Costs and Prices (CACP) had come out with a table ranking States in terms of market-friendliness. Bihar was among the states that topped the chart, and Punjab was at the bottom. 

Punjab is at the bottom of the chart because 87 per cent of wheat and rice (as per CACP) is procured by the Food Corporation of India (FCI) or by public sector agencies on its behalf at a guaranteed MSP. In Bihar, less than 1 per cent of the wheat harvest is procured. If this is market-friendliness, economists need to explain what is so good about it. In Punjab and Haryana, comprising the food bowl, farmers receive Rs 80,000-crore a year by way of price support. As far as I can remember, barring a few instances farmers have not received a price higher than the MSP in open markets. Market prices have always remained lower than the MSP announced for wheat and paddy, the two crops that are being procured. Similarly for the 23 crops for which MSP is announced every year, open market prices have generally been lower. That’s the reason why agriculture continues to be in a serious crisis.   

The real price discovery for farmers is by MSP only. The need therefore is to make MSP a legal right of for farmers and ensure that no trading takes places below the MSP, not only for wheat and paddy but for all the 23 crops for which MSP is announced. 

Although the government says MSP and APMC markets will remain intact under the new marketing reforms being ushered in, farmers fear that APMC mandis will gradually become redundant. With APMC markets heading towards a collapse, the new sets of reforms are aimed at encouraging corporatisation of agriculture, with big business moving in agriculture, storage and marketing. As the experience of US/Europe shows, when unregulated markets become dominant, small farmers are the first to be pushed out of agriculture. Given that 86 per cent farmers have less than five acres of land holdings, the message is clear: get big or get out. #

*Ensure no trading takes below MSP. The Tribune. Sept 24, 2020 https://www.tribuneindia.com/news/haryana/ensure-no-trading-takes-place-below-msp-145671#:~:text=In%20Punjab%20and%20Haryana%2C%20comprising,by%20way%20of%20price%20support.&text=The%20need%20therefore%20is%20to,for%20which%20MSP%20is%20announced.


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Wednesday, January 1, 2020

Dismantling food procurement will have serious repercussions.

HARVEST GOLD: A grain market on the outskirts of Amritsar. (Photo: Prabhjot Gill)

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.

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Sunday, March 31, 2019

How agriculture has been kept impoverished.




Soon after the Economic Survey 2016 brought out a startling fact – that the average farm income in 17 States of India, which means roughly half the country, was less than Rs 20,000 a year, a newspaper reported of the ongoing squabble between officers of the Supreme Court and the defence services over washing allowance they get as part of the income package. The defence service employees were reportedly questioning why the officers in Supreme Court were getting a higher washing allowance of Rs 21,000, while the entitlement of armed forces officers stood a little less at Rs 20,000.

That makes me wonder: don’t farmers have clothes to wash?

If the average income of a farm family in half the country equals just one of the 108 allowances (in total, for all the services put together) that the government employees get as part of the 7thPay Commission, the prevailing income disparity becomes too gnawing. More so when a careful perusal of the NSSO (National Sample Survey Office) data that the Economic Survey 2016 had quoted shows how glaring is the income divide. The NSSO had deviated from the usual practice of computing farm incomes on the basis of what the farmer sold in the market to actually for the first time work out farm income on the basis of marketable surplus a farmer sold in the mandi and adding to it what he saved for his family consumption, which means it is the average of the total value of farm output in roughly half the country.

The shocking details of almost non-existent farm incomes that the Economic Survey 2016 provided failed to evoke any outrage. Perhaps it was because Prime Minister Narendra Modi had at the same time promised to double farmers income by 2022 thereby overshadowing the income reality. On various media channels, I often happened to be the only panellist citing the farm income statistics to drive home the point how income inequality was woven in the predominantly market driven economic structure. That an average farm income of Rs 20,000 a year would translate into less than Rs 1,700 a month, rarely drew an outpouring of anger at the way farming was being deliberately kept impoverished. This is further substantiated by the latest agricultural growth estimates of the Central Statistics Office showing the nominal gross value added (GVA) in agriculture in October-December 2018, to have dropped to its lowest in 14 years, clearly showing how the farm incomes have further plummeted. It failed to shake up the nations conscious. Even if the nationalism debate had not kept the nation preoccupied, I doubt if the drastic slump in farm incomes would have evoked a swift policy response. Instead, the plight and systematic decimation of agriculture over the years has for all practical purposes been taken for granted.

A study by the Organisation for Economic Cooperation and Development (OECD) in collaboration with the Indian Council for Research on International Economic Relations (ICRIER) has computed the total loss farmers have suffered, between 2000-1 and 2016-17, from being denied the rightful price at a staggering Rs 45-lakh crore. Add to it the findings of Niti Aayog which estimates that in the five year period, between 2011-12 and 2015-16, real farm incomes have increased by less than half a percent every year, 0.44 per cent to be exact, the farm distress is compete. It further admitted that the near-zero income of farmers in the last two years (after 2016) has forced the government to launch a direct income support scheme (PM-Kisan) which makes a provision for directly transferring Rs 6,000 every year to the bank accounts of small farmers.

With agriculture in such a dismal state, it is futile to expect the non-farm sector to be performing well. Latest study shows that rural non-farm wages in the past five years too have dipped to its lowest. A CMIE study said of the 56.6-lakh job losses encountered in past 12 months, almost 82 per cent or 46-lakh are from rural areas. Rural India had somehow survived the unprecedented distress conditions, and this is nothing short of a miracle. Any other business with such explicit huge losses written all over would have collapsed by now, and in fact disappeared from the economic horizon.

Not only in the past 20 years, agriculture had remained at the receiving end even prior to that. According to an UNCTAD study, global farm gate prices when adjusted for inflation had remained almost static in the 20 year period, between 1985 and 2005. In other words, farm incomes have remained frozen for almost four decades. In such a dismal scenario, I shudder to think how farming families had been surviving all these years. Just to illustrate, an American farmer, Mike Callicrate, says that the price at which his father sold corn some 44 years back, on Dec 2, 1974, was $3.58 per bushel (equal to 25.40kg). In January 2018, he sold corn at $ 3.56, down two cents from what he earned 44 years ago. Overproduction had pushed down the farm gate prices as a result of which farmers were perpetually in debt. Take the case of milk. What the farmers realise in Europe is only 19 pence for a litre of milk, which has led to closing down of a large number of small dairy farms. “To be born in debt, and live all through in debt, is like virtually living in a hell,” remarked Declercq Gilbert, a 93-year-old farmer in Leshonnelles village about 15 kms from Mons near Brussels, when I met him last year.

Indian agriculture too had slogged with farm incomes remaining almost frozen. To get an idea as to how farm incomes had remained subdued in the past five decades, I had worked out the growth in Minimum Support Price (MSP) vis a vis the basic salaries for various section of employees. This will give us a clear idea as to how farmers have been denied their rightful price all these years. In 1970, the MSP for wheat was Rs 76 per quintal. Forty-five years later, in 2015, the MSP for wheat was Rs 1,450 per quintal, an increase of 19 times. For the same period, I examined the increase in basic salary plus DA (not adding other allowances) for different sections of employees. For government employees, the increase was 120 to 150 times; for college/university lecturer/professors it was 150 to 170 times and for school teachers the increase was 280 to 320 times. If only the wheat MSP was raised in the same proportion, which means if it had gone up let’s say 100 times in the 45 years period, farmers should have received at least Rs 7,600 per quintal. What they actually got was an MSP of Rs 1,450 per quintal in 2015. In other words, it is the farmers who are bearing the cost of subsidising the consumers. The entire burden of keeping food prices low has been very conveniently passed on to farmers.

Farmers dumping tomato, potato and onion on the streets have been a frequent phenomenon. For the past three years, numerous news reports point to farmers being denied the appropriate price in the mandis, often the drop in prices ranging between 25 to 40 per cent on an average. Using the latest CACP cost of production statistics for rabi and kharif seasons and comparing this with the average income per crop as worked out by the Dalwai Committee on doubling farmers income, Down to Earth magazine (Feb 16-28, 2019) has presented a damning analysis. Accordingly, against the production cost of Rs 32,644 per hectare for wheat, the income realised by farmer is only Rs 7,639, leaving a shortfall of Rs 25,005 per hectare. In case of paddy, the gap is Rs 36,410 per hectare; for maize, the loss a farmer incurs per hectare is Rs 33, 686; and for arharit is Rs 26,480 per hectare. 

Although only 6 per cent farmers as per the high-level Shanta Kumar committee gets the benefit of MSP, the fact remains that the announcement of MSP neither helps in setting a floor price nor does it guarantee an assured price for farmers. This is primarily because 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. Macro-economic policy therefore has a lot to do with the prevailing farm crisis. The prices have been deliberately kept low, and in most cases is actually less than even the cost of production that the farmers have to entail. The overwhelming tragedy is that when farmers cultivate crops, what they don’t realise is they are in reality cultivating losses. Whatever be the crop and the technology applied, the fact is that the match is invariably fixed against farmers.

The MSP the government announces actually includes out of pocket expenses incurred by farmers in crop cultivation (A2 cost) plus the cost of hiring farm labour (FL), including family labour, a farmer employs. In addition to this cost, which is labelled as A2+FL, the government claims the MSP being announced since the beginning of the kharif season last year contains 50 per cent profit. Although the government claims it has honoured the recommendation of Swaminathan Commission which had suggested 50 per cent profit over the comprehensive cost, but the new formula falls short of what was in reality recommended. Nor has the government been able to ensure that procurement is made at the MSP it has announced. Several farmer leaders have questioned the government claims, and the trade data showing the shortfall in prices paid to farmers in various mandis is routinely shared on social media.

It is the methodology of working out the cost of production that has somehow gone unquestioned. Although an elaborate system exists for collating statistics pertaining to cost of production, crop cutting experiments to work out the production achieved and so on, the costing falls acutely short of the way prices of agribusiness/industrial goods are worked out. While the employees get 108 allowances in addition to basic pay plus DA, and the cost of processed foods includes administrative cost, and marketing cost plus profit as it may deem fit, when was the last time we heard of farmers getting at least four allowances -- house rent allowance, travel allowance, health allowance and educational allowance for their children included in the final price? And why not, after all a farmer too has to look after his family. He too has to support his children’s education, take care of his family’s medical expenses and so. Worked out on per hectare basis, these allowances can be easily included in the MSP calculations or can be paid directly into their bank accounts.  

Denying farmers their right income (what to talk of additional emoluments) too comes with a heavy social cost, which often gets clubbed under mounting indebtedness. Take the case of a 22-year-old graduate student, Gopal Babarao Rathod, son of a small farmer from Yavatmal in Maharashtra, who committed suicide two years back. Explaining how the rural youth, like their lucky counterparts in the cities, too carry an aspiration, he wrote in asuicide note: “A teacher’s son can easily afford to pay a fee of Rs 1-lakh to become an engineer but tell me how a farmer’s son can afford so much fees?” He then went on to say: “why is it that the salaried employees get dearness allowance (DA) without even asking for it whereas farmers are denied adequate compensation for their produce?”

As per the National Crime Record Bureau, between 1995 and 2015, a total of 3,18, 528 farmers have committed suicide. Mounting indebtedness is the primary reason for the serial death dance that continues with impunity. Since the annual farm suicide statistics does not give a favourable picture of the country’s economy, the government has not released the suicide data after 2016.

All this adds to visible disruptions in social fabric. “No girl wants to marry a farmer. Young farmers are leaving farming and going to Pune and Mumbai to work as taxi and rickshaw drivers. They say that if not money, they will at least get a bride in the city,” Mohan Patil from Satara in Maharashtra told a newspaper. There are over 3,000 young men struggling to get married in Ahmednagar district alone says an article in Business Line, quoting a study. This is true of Haryana, Punjab, Uttar Pradesh, Madhya Pradesh, Chhattisgarh and many other states. Even in the prosperous apple belt of Himachal Pradesh, not many girls are willing to settle down in the villages. Low income levels and the harsh working conditions are cited as the main reason for girls unwilling to settle in rural areas. Not only in India have young farmers found it difficult to get a bride, it is not so easy even in Europe, England, Canada, Australia, and United States. Aimed at finding a suitable match for the young people in farming, a very popular French TV programme called ‘Love in the field’ has been running successfully for several years now. Enquiries revealed that similar TV shows are also being aired in England and Canada. 

As the policy emphasis remained essentially on increasing crop productivity primarily to ensure that availability of food remains comfortable, farm income never received the kind of thrust it deserved.  The decline in farm incomes is an outcome of an economic design that has been followed. As I said earlier, agriculture had been deliberately kept impoverished to keep economic reforms alive. More recently, Raghuram Rajan has said that the biggest reforms would be when we are able to move people out of agriculture, to migrate to cities which need cheap labour. Even the new Chief Economic Advisor has called for more investments in industry so as to pull the youth from agriculture. If agriculture has to be treated as a source of cheap labour in the cities, it speaks of the flawed economic thinking that has led successive governments to dismantle the strong foundations that sustained millions of rural livelihoods.

This is exactly what the World Bank had directed India way back in 1996. It had wanted India to move 400 million people from the rural to the urban areas in the next 20 years, by 2015. These are “agricultural refugees” swarming into the cities looking for menial jobs. It is primarily for this reason that over the years, in addition to more or less static farm incomes, public sector investments in agriculture were also kept deplorably low, hovering between 0.3 to 0.5 per cent of the GDP during the period 2011 to 2017. The total investments, both public and private, have also been declining steadily – from 3.1 per cent of GDP in 2011-12 to 2.2 per cent in 2016-17. Compare this with the tax concessions being given to industry, which measures 5 per cent of GDP. The best way to kill agriculture therefore is to starve agriculture, which employs 50 per cent of the country’s population, of public sector investments. #

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Strengthen Public Procurement System

At a time when MSP benefits only 6 percent farmers and the remaining 94 per cent farmers are in any case dependent on exploitative markets, the focus has to be on strengthening the public procurement system. Besides making MSP more realistic, covering all aspects of cost calculations, the emphasis has also to be on ensuring that whatever surplus farmers bring to the markets is purchased at the official price announced. Although the government did announce assured procurement under PM-ASHAA but failed to ensure its implementation.

But there are two problems the government is encountering. First, the World Trade Organisation (WTO) is keeping a close watch on the increase in MSP prices, which are classified as farm subsidies in the international trade parlance. US, EU, Canada, South Africa, Pakistan besides others have repeatedly questioned MSP on wheat, rice and pulses saying that the prices have breached the permissible de-minimissupport limit allowed to developing countries. India is expected to keep MSP within the prescribed 10 per cent limit of the total value of a particular crop. This acts as a strong deterrent to raise MSP as per the farmers demand and not face the ire of WTO.

Not only WTO, there is strong lobby within the country that advocates dismantling the APMC mandisso as to enable farmers to realise price discovery. The underlying objective is to allow private terminals to take over instead, laying the foundation for corporate farming. Already several states have suitably amended the APMC Act removing fruits, vegetables and livestock products from the mandi operations. But this has neither helped farmers realise a better price for their produce nor reduced the arrival of fruits and vegetables into the regulated markets. In fact, Bihar had revoked APMC Act way back in 2006 with the objective of attracting private sector investments in market operations. Nothing like this happened, and even now truckloads of paddy and wheat are routinely brought and sold illegally in Punjab and Haryana mandis.  

Instead of dismantling APMC mandis, the policy emphasis should be on expanding the existing network of mandis. There are nearly 7,600 APMC markets operating at present and if a mandi has to be provided in 5 kms radius, India will need 42,000 mandis. Public sector investment must be directed towards strengthening the mandinetwork. If India can provide Rs 6.9 lakh crore for building highways I see no reason why at least Rs 1-lakh crore out of it cannot be diverted for public sector agricultural market infrastructure.

The reason is simple. Unless there exists adequate market infrastructure, no meaningful reforms are possible in agriculture. While it is generally agreed that APMC mandishave become a den of corruption with strong cartels of middlemen operating, the answer does not lie in throwing the baby with the bathwater. APMC is crying for a change, and the introduction of electronic operations (in eNAM markets) has certainly helped. But a lot more needs to be done if genuine improvement is required. Merely replacing the public sector with the private companies will defeat the very purpose. Let me make it clear, nowhere in the world, and that includes the US /EU, have the private markets helped farmers with a better price. Even the value chains, which are getting into academic fashion, have failed to prop up farm incomes. #

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Agriculture Too Needs Policy Support 

Moving from ‘price policy’ to ‘income policy’ the government has brought in an element of fresh air into public policy. While doubling farm incomes by 2022 remains more less a slogan, Telengana’s ‘Rythu Bandhu Pthakam’ scheme under which farmers were initially paid a sum of Rs 8,000 per year per acre (with no upper cap), followed by KALIA scheme launched by Odisha, and since then some variants brought in by Jharkhand, West Bengal, Karnataka and more recently in Andhra Pradesh have heralded a direct income support programme for small and marginal farmers. The Union government too has chipped in with its PM-Kisan programme, which entails providing Rs 6.000 per year, in three instalments, for small farmers with landholding less than 2 hectares. While the first instalment of Rs 2,000 has already been paid to a large number of farmers, the government said it would need an additional Rs 75,000-cr every year to fund this scheme.

Whether it is because of political compulsions or driven by the dire need to augment farmers income, the introduction of a direct income measure for farmers is indeed a significant step. Even though the amount allocated is meagre, I am sure it will be enhanced substantially in the years to come. The nation must stand with farmers at these difficult times. Direct income support has to be followed with a more elaborate nation-wide programme to provide an assured income to farmers. At least a minimum of Rs 18,000 per month per farm family, linked to crop production, geographical location and inflation, must be ensured. The idea is not to issue a salary cheque every month but to work out a mechanism that guarantees an assured income package. For this, the Commission for Agricultural Costs and Prices (CACP) needs to be renamed as a Commission for Farmers Income and Welfare, with the term of references changing suitably. 

Compared to an average domestic support of $60,586 per farmer in US; $ 10149 in Japan; $ 16562 in Canada; EU $ 6,762; China $ 863; and $ 345 in Brazil, an Indian farmer barely gets a support of $ 227, which is primarily by way of indirect subsidies. On the contrary, compared with the massive subsidies doled out to the industry, referred to as ‘incentive for growth’, farm subsidies appear rather miniscule. In addition to the huge industrial subsidies, economic stimulus packages, and the corporate NPA write-off every year, the government has recently ensured 7,000 steps, big or small, for ease of doing business.

When will agriculture receive such a policy impetus? #

Give farmers a fair deal. The tribune. April 1, 2019

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Thursday, November 22, 2018

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