A new battery of middlemen in agriculture

Pic courtesy: Indian Express

There is excitement in the air. Soon after the three ordinances were announced in what the Agriculture Minister Narendra Singh Tomar termed as a “historic day for agriculture” a section of the mainline media was filled with a sense of elation. Now farmers can finally breathe, screamed a headline. Hailing the long-pending agrarian reforms, another newspaper blared out that the freedom to farmer to sell to anyone, anywhere, has finally freed them from the clutches of mandis. 

There is a sense of jubilation over the Central Government’s decision to finally bite the bullet, free farmers from the grasp of middlemen, who as most of the city bred believe have willy-nilly been short changing the farmers. The dhoti-kurtaclad trader, not very literate, but a very smart player in his day-to-day dealings, has often been portrayed as a side villain in Bollywood films. Not only films, even the textbooks have painted him as a villain of the growth story. This is the image that has stayed with us. It remains embedded in our thinking. 

Call him Arhtiya, Sahukar or a middleman; he is often dressed up in a dhoti-kurta or a kurta-pyajama. He also at times doubles up as a moneylender. Although the Webster dictionary describes middleman as a dealer between the producer and the consumer, the average perception is in the negative, painting him more like an evil character. This is far from true. Perhaps a closer to an objective definition has been offered by an Agritech consultant and blogger Venky Ramachandran: “Middlemen offer hyper-local infrastructure to farmers to help them avail timely credit and inputs based on their contextual relationship-driven understanding of farmers’ cropping cycles.”In fact, the relationship goes much beyond providing credit and inputs but also extends to procuring the marketable surplus, and often comes as a much needed respite at times of family emergencies. 

Nevertheless, while the educated despise the traditionally dressed middleman, they have no such qualms about a middleman who comes dressed in a tie and suit. What has the dress sense to do with the liking and disliking for the role a middleman plays is something for the psychologists to find out, but perhaps showing contempt for the local arhtiya comes in handy to replace the existing breed. Many glib talkers, highly educated, who write or call to seek advice on how they intend to bridge the gap between a farmer and consumer by squeezing out the middleman never return back when told what they plan to do is nothing different.   

To illustrate, a Start-Up using digital technology to market agri-inputs is for all practical purposes a middleman. The fact that they use technology and often have app based technological solutions, but in the end they may be a little different from a retailer, but are primarily trying to sell agri-inputs to farmers at a commission. Most of those who use the weather-based advisory to market specific pesticides and fertilisers to meet the timely needs are no different. In any case, whatever algorithms the Start-Ups may be using, and this can be true for big retailers or small enterprises, in the end the effort is to reduce the margins and increase profits. 

Then there is this category of Start-Ups whose claim to fame is to serve as an intermediary in the “farm to fork” supply chains. Most of them work in the vegetable and horticulture supply chains, with direct delivery of fresh fruits and vegetables to consumers. At best these intermediaries can be called as the new battery of middlemen, replacing the humble street vendor and the neighbourhood retail vegetable shopwala. Only time will tell how much benefit farmers receive by way of higher prices that Farmer Producer Organisations (FPOs) promise, and whether they will be able to ensure Minimum Support Price (MSP) to farmers. We know of two FPOs in Maharashtra, which purchased gram from farmers at MSP, and have run into losses.   

While there is no denying that the objective behind setting up Start-Ups and FPOs is laudable, claiming to bring in new technology in agriculture, the challenge remains on how to provide a higher price. Take the case of moong. The MSP for moong for the 2020-21 marketing season is Rs 7,196 per quintal. The average market price in Madhya Pradesh markets have hovered around Rs 4,000 to Rs 4,500 per quintal. Any price above Rs 4,500 will be called a higher price. But will the new battery of middlemen be able to ensure that moong farmers are paid as per the MSP? If not, then why blame the arhtiyasitting in the mandi.   

The excitement over the freedom to sell to anyone, anywhere, also seems to be over hyped. If MSP is coming in the way of a better price discovery, the 70^th Round of National Sample Survey Office (NSSO) had shown that between July 2012 and June 2013, majority of crop harvests, except for sugarcane, was sold to local private trader and a small proportion to the government agency/cooperative. For instance, 79 per cent of moong in the rabi 2013 marketing season was sold to private traders, 18 per cent in the mandi, and only 3 per cent to government agency. Similarly for paddy, 64 per cent was sold to private traders, and only 17 per cent in the mandi, and 6 per cent to government agency. Did the private trade generally offer them higher price? No. 

If bulk of marketing was happening with private trade and that too outside the mandi, as the NSSO report shows, it means the freedom to sell to anyone, anywhere, already existed. In any case, as I have repeatedly said, only 6 per cent farmers get the benefit of MSP, the remaining 94 per cent remain dependent on markets. The question therefore is not whether a farmer sells to the arhtiya or to the new battery of middlemen, that’s not true freedom. The biggest ticket reforms would be when farmers get the freedom to sell to anyone, anywhere, at a price not below MSP. #

Ensure farmers get paid for produce as per MSP. The Tribune. July 31, 2020  https://www.tribuneindia.com/news/comment/ensure-farmers-get-paid-for-produce-as-per-msp-120152?fbclid=IwAR3gDfA6ilDNbEQ9M7QG8PQ71oHt-UvQCKGYD7TL1sZqUUWdGthRAf1fXNY

 

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'Thalieconomics' gets it wrong

This is where the problem lies. The 27-page long chapter on the economics of a plate of food in India, which according to the Economic Survey 2020 is an attempt to quantify what a common person pays for a thali across India, only leads us to one conclusion: the cost of producing cheap food on the plate is being borne entirely by farmers.

“What better way to make economics relate to the common person than something that s(he) encounters every day – a plate of food?”says the introduction to the chapter. Sounds interesting, isn’t it? After all, Thalieconomics, as the chapter is titled, makes an effort to show case to the urban educated how the economic policies have been able to effectively keep food inflation under control thereby keeping their household budget within means. But in the bargain, it very cleverly hides the misery that millions of farmers who produce that cheaper food are living with.  

Only four years back, the Economic Survey 2016 had pointed to the miserable condition of farmers. Accordingly, the average farm income in 17 States of India or roughly half the country was a meagre Rs 20,000 a year. In other words it means that a farm family was somehow surviving on less than Rs 1,700 a month, which I have often argued is not even enough to rear a cow. This in reality is the hidden cost of producing cheaper food. To keep the consumers visibly happy, the entire burden has been very conveniently passed on to farmers. In reality, it is the producer who is actually subsidising the consumer, a fact that policy makers simply want to ignore.

But before we dwell any further, let’s first look at what Thalieconomics intends to convey. Trying to address the questions that often crops up at ‘dinner table conversations in Lutyens Delhi or in roadside Dhaba in the hinterland’ the Economic Survey 2020 goes into an elaborate statistical exercise to bring out how over the years the vegetarian thali as well as the non-vegetarian thali has become easily affordable. It uses the National Institute for Nutrition (NIN) dietary guidelines and data from Consumer Price Index (CPI) for Industrial Workers from around 80 centres across the country to construct the average price of a vegetarian and non-vegetarian thali. Assuming that an average household of five consumes two thalis a day, Thalieconomics tells us that while an average household saved Rs 10,887 per year on vegetarian meals and for the non-vegetarians the gain was Rs 11,787 per year.

The gain is not as big as the Economic Survey 2020 wants to convey. Even after such a meticulous statistical exercise – which even goes to the extent of calculating the cost of ingredients like spices that are used in preparation of sabzi, dal and non-vegetarian items -- what comes out is that post 2015-16 the average gain is merely Rs 3 per thali. To make it look big, this figure was multiplied with the average number of persons in a household and the number of days in a year to present a respectable annual saving figure for a family. Based on the average yearly increase in salary of an industrial worker, it tells us that the affordability of a vegetarian thali between 2006-07 and 2019-20 has increased by 26 per cent and the non-vegetarian thali by 18 per cent.

Now where the Economic Survey 2020 has gone wrong is to attribute the increasing affordability of a thali to ‘many economic reforms measures introduced since 2014-15 to enhance the productivity of the agricultural sector as well as the efficiency and effectiveness of agricultural markets for better and more transparent price discovery’. If this was true, I see no reason why farmer protests across the country should be growing. In 2014, the National Crime Record Bureau (NCRB) had recorded 687 farm protests; increasing to 2,683 in 2015, and further surged to 4,837 in 2016. Just in two years, farmer protests had grown by seven times. Even thereafter, although no official data is available, the number and intensity of farmers’ protests have only multiplied. Remember the peaceful long march in Maharashtra? Remember recurring events of farmers dumping tomato, potato and onion on the streets?

If agricultural markets had performed efficiently leading to a better price realisation, the Chief Economic Advisor (CEA), under whose guidance the Economic Survey is prepared, should explain how and why farm incomes have been on a downhill path crashing down to a 14-year low in 2018. Consumer food price index the same year had come down to minus 2.65 per cent. When food prices decline, the policy makers rejoice but it is the farmers who suffer the devastating consequences of a drastic slump in incomes. After all, they too have families to support. They too have to meet the household expenses, maintain their livelihoods and let’s not forget they have the same kind of aspirations as the people in the cities. But denying them a rightful price for their produce and that too year after year is what has led to a deepening agrarian crisis. As I have always maintained, when a farmer undertakes crop cultivation what he does not realise is that he is actually cultivating losses. 

Instead of a theoretical construction of the economics of a thali, Economic Survey would have done a greater justice by focusing on the terrible agrarian crisis that prevails. It could have at least made an attempt to understand how farmers have been actually subsidising the national economy. An OECD-ICRIER study for the period 2000-01 to 2016-17 has shown that while farmers got low prices, suffering a cumulative loss of Rs 45-lakh crores in 16 years, the consumers gained by paying 25 per cent less for food. While farmers incurred a loss of about Rs 2.65-lakh crore every year to ensure that urban consumers could afford a cheaper thali, the reason why agriculture is in a severe crisis becomes crystal clear.

To keep food prices low, farmers are actually being penalised to grow food. It is high time appropriate income support policies are put in place to compensate farmers for the low commodity prices. #  

"Thalieconomics' gets it wrong. The Tribune. Feb 8, 2020

https://www.tribuneindia.com/news/thalieconomics-gets-it-wrong-37493?fbclid=IwAR06Zw_rVxnrXeqTLbeLZT5n3zwAzVqSRIOCNf9itndTMx8TET6jQoMeNrI 

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Indian agriculture has been in distress for over two decades. Why couldn't economists see it earlier?

Pic courtesy: The Hindu

It was in 2013, when just prior to the inauguration of the annual World Economic Forum (WEF) jamboree at Davos in Switzerland, Oxfam too released its annual global inequality report. Estimating that the richest 100 families in the world had added $ 240 billion to their wealth in a year, the report said the amount of wealth concentrating in the hands of top 100 was good enough to wipe out global poverty four times over. If only that report had been heard and action taken to reduce global poverty, the widening inequality could have been contained.  

A few days back, Oxfam released its latest ‘Time to Care’ report ahead of the 50^th Annual Meeting of the WEF. While it once again clearly brought out how the concentration of wealth in the hands of world’s 2,153 billionaires had accentuated over the years, almost equalling the wealth in the hands of 4.6 billion people or 60 per cent of the global population, it also pointed to the worsening inequality in India. India’s richest 1 per cent holds more than four times the wealth that exists in the hands of 95.3-crore Indians forming 70 per cent of the country’s population. In addition, the combined wealth of India’s richest 63 families was higher than the Rs 24,42,200-crore outlay of the Union Budget for the financial year 2018-19.   

Coming at a time when all eyes are on Budget 2020, it will be interesting to see whether the Finance Minister Nirmala Sitharaman will make an attempt to correct this historical distortion in economic approach. With growth hitting an 11-year low and that too on the back of an economic slowdown, and with big business drumming up fears of fiscal slippage if she resorts to increased government spending so as to spur rural demand, I doubt if the credit rating agencies and the economists working with brokering agencies will allow for any policy space to be utilised for bridging the widening inequality. Already, enough noise is being created in the mainline media warning against any fiscal exuberance, suggesting big-bang measures which harbours on more of the same and therefore keep fiscal deficit within the target proposed.  

At a time when fall in consumption and investment are being considered as the reasons behind the economic slowdown, any meaningful attempt to enhance rural spending will come from providing more income in the hands of the rural poor, which will also go a long way in addressing growing inequality. Regardless of what credit rating agencies have been suggesting, the Finance Minister will have to defy the contours of the predominant economic thinking that has pushed the economy on a downhill slide. An economy which caters to serving the consumption needs of 10 per cent of the population must now look beyond, and as the Prime Minister often says to translate into Sabka Saath Sabka Vikas.   

In other words, Budget 2020 provides a perfect opportunity to set the economic imbalance right.

In economic terms, everything boils down to creating demand. More the demand more is the economic growth. And it is primarily for this reason the 7th Pay Commission was hailed by India Inc as a booster dose for the economy. After all, more income into the hands of employees would mean more demand, and thereby more consumption. Similarly, any further relief in personal income tax is expected to leave more surplus money into the hands of urban middle-class thereby giving consumers more to spend. But again, this fits into an economic thinking that restricts all measures to cater to consumption needs of 10 per cent of the population. On the other hand, I have always argued that unless growth is inclusive the economic benefits will not reach the masses. Considering that bulk of the rural poor comprises farmers and farm workers, the focus has therefore to shift to agriculture.

Of the 95.3-crore Indians that the Oxfam report talked about, at least 60-crore are engaged directly or indirectly with farming.  The first and foremost step is to start viewing agriculture as part of the formal economy. Agriculture should not only be seen as a sector whose only contribution is to ensure that food inflation does not cross the four per cent (plus or minus two per cent) limit as laid down under the Reserve Bank of India (RBI) macro-economic policy, but should be seen as a sector that can create economic buoyancy. More so, at a time when the bottom 60 per cent population holds only 4.8 per cent of the national wealth. This is because agriculture unfortunately has been kept deliberately impoverished so as to keep economic reforms thriving as a result of which agrarian distress remains largely pronounced. According to the Economic Survey 2016, a report that I have often quoted, the average farm income in 17 States of India stands at a paltry Rs 20,000 a year. In other words, farming families in roughly half the country, survive on less than Rs 1,700 a month. At such low incomes, the share of agriculture in country’s GDP is bound to remain low.

The IMF says that declining rural demand has pulled down India’s growth, which in turn has pulled down global GDP. This became known to IMF (and for that matter to mainline economists) only when India’s GDP figures slipped down to less than 5 per cent. But even for the past two decades, farm incomes had either remained stagnant or were in the negative, which means rural spending were already low. This fact was never acknowledged. An OECD-ICRIER study for the period 2000 to 2016-17 shows that Indian farmers had lost Rs 45-lakh crore on account of being denied the rightful price. This was followed by a period when according to Niti Aayog, annual growth in real farm incomes had remained at ‘near zero’. However, not even an iota of concern was exhibited by the World Bank/IMF, the credit rating agencies or India’s mainline economists at the extra-ordinary crisis that prevailed in rural India. As long as GDP hovered at 6 per cent and above, economists failed to see the slump in rural demand.

The launch of PM-Kisan scheme in last year’s budget, providing a direct income support of Rs 6,000 per year per farm family (owning land), for which a budgetary provision of Rs 75,000-crore was made, is a ‘tectonic’ shift in economic thinking. As someone who had relentlessly been seeking an income transfer to the farming community, to partly offset the economic loss farmers have been undergoing year after year, I think PM-Kisan is the right vehicle coming at the right time to increase rural incomes. There is no other policy instrument that can reach all farmers. To make a meaningful impact, my suggestion to the Finance Minister would be to provide an economic stimulus package of Rs 1.50 lakh crore over and above the Rs 75,000-crore that is already allocated under the PM-Kisan scheme. This would provide an amount of Rs 18,000 ever year or Rs 1,500 per month (against Rs 500 at present) which is enough to meet some farm expenses like cost of seed, manure and bio-pesticides. This may not sound to be of much significance for those living in the cities but imagine the implications it has for the rural poor whose income is hovering around Rs 20,000 per year. In any case, the additional allocation under PM-Kisan scheme will flow back into the markets by way of enhanced consumer demand. An effort should also be made to ensure 100 per cent implementation of this scheme. At present, against a total of 14.5–crore farmers, only about 7.6-crore farmers have been covered till Nov 30. Also, the Finance Minister should expand this scheme to benefit tenant farmers.

When farm incomes are low, it has negative fallout on farm workers. According to a study by the Centre for Monitoring Economy (CMIE), in the past one year, 2018-19, almost 1.1 crore people lost their jobs. “Estimated 91-lakh jobs were lost in rural India, while the loss in urban India was 18-lakh jobs. Rural India accounts for two-thirds of India’s population but it accounted for 84 per cent of the job losses,” the report said. Several other studies have shown farm wages declining to its lowest in past five years, and massive job losses being faced by both farm and non-farm workforce. Even the MNREGA scheme, for which a budgetary provision of Rs 61,084-crore was made under revised estimates for 2019 fiscal, numerous reports of payments not being made in time have appeared. To bring the economy back on track, my second suggestion would be to enhance MNREGA budgetary allocation by another Rs 10,000-crore, taking it to Rs 70,000-crore for fiscal 2020.

While the Rs 25,000-crore corpus for last-mile funding for stalled housing projects may help the construction industry, another stimulus of Rs 25,000-crore is needed to prop up the Zero Budget Natural Farming (ZBNF) initiative that the Finance Minister had mentioned in last year’s budget but refrained from making any budgetary provisions. Drawing from the successful reach of the ZBNF programme in Andhra Pradesh, where approximately 5.85-lakh farmers have been shifted from chemical farming systems, it is time to replicate organic cultivation in erstwhile Green Revolution areas, which are faced with severe crisis in groundwater depletion as well as environmental contamination. In addition, an allocation of Rs 500-crore be also made to set up Farmer Markets in major urban centres. This should be to encourage the supply of chemical free farm produce to the health conscious urban population.  

And finally, I expect the Finance Minister to launch an Ease of Doing Farming initiative on the lines of ease of doing business. After all, if 7,000 steps for ease of doing business can be laid out for the industrial sector, agriculture too needs it desperately. At every step, linked to production and marketing, a farmers faces obstacles that are primarily because of lack of governance. This will go a long way in making agriculture an economically viable and environmentally sound enterprise. A vibrant agriculture will create so much of demand that the wheels of development will never be faced with a slowdown. Try it, to experience it. #

Source: 'Ease of Doing Agriculture' is the way forward. National Herald. Jan 31, 2020
https://www.nationalheraldindia.com/opinion/ease-of-doing-agriculture-is-the-way-forward?fbclid=IwAR2j0nI_Zg5XA1MMD6z77toBjeFfYZpy-eHubUqcXKtQ6VpVYkdeegq3oG8  

READ MORE - Indian agriculture has been in distress for over two decades. Why couldn't economists see it earlier?

Invisible Emergency

Three weeks after the kharif harvesting season began farmers were unable to get the right price for their produce. Out of the 14 kharifseason crops that were being marketed, a newspaper reported (Oct 26, 2019) that the mandi prices of at least nine of these crops had been ruling much below the minimum support price (MSP) that was announced by the government. Market prices for moong, urad, tur, niger, bajra, jowar, ragi, cotton, soybean and sunflower were about 8 to 37 per cent below the MSP. In addition, market prices of cotton too were short by an average of Rs 500 a quintal (from the MSP) while farmers had a better price realisation only in case of paddy and maize wherein a more assured procurement system operates.   

Well, isn’t that reason to celebrate? If food prices remain low, the household budget remains intact. The nation rejoices when food inflation remains in check. Never bothering to know what happens to millions of farmers who produce that cheaper food.

Let’s look a little further. The price drop in kharif 2019 was no exception. For the past two years, farmers had reportedly sold pulses, oilseeds and coarse cereals at prices that were 20 to 30 per cent lower than the MSP. Across the country, irate farmers had protested at many a places demanding purchase of the crop harvest they had brought to the mandis. Even in case of wheat and rice, the two crops that are largely procured, farmers were unable to get the procurement price except at places where a robust procurement system exists. Primarily for this reason, truck-loads of paddy and wheat are illegally transported all the way from Bihar and Uttar Pradesh to Punjab and Haryana where a vast and efficient procurement network exists. But with the World Trade Organisation (WTO) breathing down its neck, and with autonomous liberalisation in progress, India is under tremendous pressure to dismantle the food procurement and distribution network.

Suddenly, for no apparent provocation, in the midst of the paddy procurement season, the Karnal district administration in Haryana imposed a ceiling on paddy purchase beyond its quota of 13.5 lakh tonnes for the season. While no explanation    available, the government it seems is all set to withdraw from its stated commitment to buy every grain of wheat and paddy that is brought to the mandi. In Punjab too, the Chief Minister has reportedly told a meeting of arhtiyas that he would not be able to make a commitment that the procurement operations next year operates as smoothly as it used to all these years, pointing to a cut in public stock holding limits in future. Perhaps this is the beginning of an end of public procurement, a system that was so assiduously built over the years pulling the country literally out of the ‘ship-to-mouth’ trap, when food aid from across the continents would go directly to feed the hungry population.   

With granaries overflowing now, cutting down on procurement seems to be the policy approach to reduce unmanageable food surplus. But what will happen to millions of farmers, who toil hard to produce bumper harvests, only to find no buyers for their produce? Will the nation evolve a system of adequately compensating the farmers while keeping prices low?

Farmer throwing tomato, potato and onions on the streets is a recurring phenomenon. Add to it the denial of rightful price for most agricultural commodities, and that too year after year, the reasons for the continuing agrarian distress becomes all too apparent. In fact, I have always maintained that when a farmer undertakes crop cultivation what he does not realise that he is actually cultivating losses. This is appropriately illustrated in an analysis in the Down to Earth magazine (Feb 16-28, 2019) that clearly showed that against a production cost of Rs 32,644 per hectare for wheat, a farmer is able to get only Rs 7,639 leaving a huge shortfall of Rs 25,005 per hectare. In the case of paddy, the loss is Rs 36,410 per hectare; for maize, the gap is Rs 33,688 and for arhar the loss works out at Rs 26,480 per hectare.

Take another case. In response to an RTI application, the Department of Agriculture, Haryana, had replied saying that against the estimated cost of production of wheat at Rs 2074 per quintal for the 2018-19 marketing season, the procurement price was Rs 1,840 per quintal, which means a loss of Rs 234 per quintal. Similarly, for cotton the procurement price was Rs 5,450 per quintal against an average cost of production of Rs 6,280 per quintal, showing a loss of Rs 830 per quintal. With procurement prices deliberately kept low, agriculture becomes a loss making enterprise, and sooner or later farmers are left with little choice but to quit or continue to slog under distress all through life. For the Commission for Agricultural Costs and Prices (CACP) – which works out the MSP for 23 crops – the mandate is not only to provide an assured price to farmers but to maintain a balance with international prices thereby ensuring that the procurement price it fixes does not fuel inflation. The higher the food inflation, the higher will be the pressure on industries to provide higher wages to workers. The higher the wages for industrial workers, the more is the possibility of economic reforms going awry.

Farmers alone therefore are left to bear the burden of keeping food inflation low. They are silently bearing the cost of subsidising the consumers.

The cost of keeping food inflation low has been unprecedented. A brute illustration of the staggering cost farmers had to pay to keep food prices under check comes out very clearly from an OECD-ICRIER study, which computes that between 2000-01 and 2016-17 – a period of 17 years --  farmers suffered a cumulative loss of Rs 45-lakh crore on being denied the rightful price for their produce. It estimated the loss per year for farmers at Rs 2.65-lakh crore based on a negative Producer Support Estimate (PSE) Index of (-) 14.4 per cent. PSE tells us what percentage of farm revenue came from policy support. In case of India, farmers suffered because of trade restrictions, low prices and huge gaps in marketing policies, including shortfall in assured procurement. But an interesting point here is that the loss to farmers actually works out to be the gain for consumers. Perhaps that’s the reason why the shocking estimates of massive losses suffered by farmers didn’t draw any outrage from the middle class.

While the government gets a pat on the back for keeping food inflation under control, it is difficult to even visualise the trauma and suffering a farming family has to undergo after being denied the rightful price for their produce; the hardship families have to suffer when farmers dump tomato or potato or garlic onto the streets out of sheer frustration arising from a price crash in the markets. The denial of rightful income increases their dependence on farm credit as a result of which household indebtedness has multiplied over the years. The increasing debt burden is the primary reason for the spate of farm suicides the country is witnessing, and which (the data) the government has been withholding after 2016. According to the National Crime Record Bureau (NCRB) as many as 3,18, 528 farmers had committed suicide between 1995 and 2015, a stark reminder of the severity of the crisis.

When prices slump, the small farmers are first to bear the consequences, often fatal, but forcing them to abandon agriculture and migrate to the cities looking for menial jobs. On the other hand, increasing migration from rural to urban areas is seen as a sign of economic growth. In fact, the policy emphasis has remained on moving people out of agriculture into the cities which are in need of dehari mazdoor (cheap labour). The continuous slide in real farm incomes therefore has only helped create conditions that forces farmers to abandon agriculture and migrate. According to Niti Aayog, the growth in real farm incomes in the 5 year period between 2011-12 and 2015-16 has been less than half a percent every year, 0.44 per cent to be exact. In such a dismal scenario, what do we expect farmers to do except to quit farming and migrate?  

As rural distress deepened, several studies have brought out the grim realities that continue to hit farm and non-farm workforce in rural India. When farming is in deep economic crisis, it will definitely cast a shadow on the workforce it is generally dependent on. With Gross Value Addition (GVA) in agriculture dropping to its lowest in 14 years, a  report by Centre for Monitoring Economy (CMIE) showed that in the past one year, 2018-19, almost 1.1 crore people lost their jobs. “An estimated 91-lakh job were lost in rural India, while the loss in urban India was 18 lakh jobs. Rural India accounts for two-thirds of India’s population but it accounted for 84 per cent of the job losses,” the report said. Earlier, a leaked Periodic Labour Force Survey 2017-18 report of the National Sample Survey Office (NSSO) had shown that 3.4 crore casual labourers in rural areas, of which 3-crore were farm workers, had lost job between 2011-12 and 2017-18. This represented a 40 per cent drop in casual farm workforce.

The demise of agriculture therefore is clearly embedded in the economic design. Keeping food prices low has been the bane of agriculture. Besides low prices, the continuing bias against agriculture is evident from the low public sector investments. As per the Reserve Bank of India, public sector investment in agriculture hovered around 0.3 to 0.4 per cent of the GDP between 2011-12 and 2016-17. Such low public sector investment pulled private sector investments down in the process, reaching a low (in combined investments) of 2.2 per cent of the GDP in 2016-17. With low investments and low output prices it is futile to accept a miracle to happen in agriculture. It is therefore quite obvious that the decimation of agriculture over the years is the outcome of an unwritten policy of keeping agriculture deliberately impoverished. It suffers not as much from low productivity (as is often believed) as from deliberately kept low farm incomes.

The immediate challenge is to bring more money into the hands of the farming community, which will create more demand, and in the process reignite the country’s economy. Moreover, if agriculture becomes economically viable and environmentally sustainable, it can take away much of the pressure the country faces in creating additional employment. Agriculture being the largest employer, it alone has the ability to reboot the economy. Especially at a time when the bottom 60 per cent population holds only 4.8 per cent of the national wealth, and a significant proportion of this comprise farmers and farm workers, a refurbished agriculture needs to look beyond the outdated textbook prescription of reducing the population in agriculture, and instead focus on revitalising agriculture. This is the surest way to Sabka Saath, Sabka Vikas.

Since a beginning has already been made with the launch of a scheme to provide direct income support to farmers, a tectonic shift in economic thinking moving from ‘price policy’ to ‘income policy’, one measure could be to double the allocation under PM-Kisan programme. At present, an amount of Rs 6,000 per month is being provided to landowning farmers, in three equal installments. Effectively this comes to a paltry support of Rs 500 per month, and needs to be raised to make a real difference. I am hoping that sooner than later, the direct income support will be enhanced to Rs 5,000 a month. This will supplement income support measures that have been launched in several states, beginning with the innovative Ryathu  Bandhu scheme in Telengana.

This has to be followed up by setting up a more elaborate mechanism to ensure a minimum monthly assured income of Rs 18,000 per month per farming family. The idea is not to issue a cheque every month but to evolve a mechanism to provide farmers with an assured monthly income based on crop productivity and geographical location of the farm. Among several other steps to bring in structural reforms that agriculture is crying for, agriculture needs to come up with an index for ease of doing farming. If 7,000 steps, big and small, can be created for the industry under the ease of doing business norms, I see no reason why agriculture should not receive the same benefit in governance and implementation issues.    

At a time when the average farmer in the United States receives a direct income support of $ 60,586 (Rs 42 lakh); $ 10,149 in Japan; and $6 ,762 in European Union; what the Indian farmer gets is too meagre. A farmer needs to be adequately compensated for the loss he/she incurs in providing cheap food. Let’s be clear, a farmer cannot be penalised anymore for growing food. The nation must stand with the farmers in this crisis and find a suitable template to provide them with a real income (and an annual increment) that is at par with other sections of the society. #

Source: State of Environment 2020. 

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Punjab Agriculture Crisis is Worsening

Lovepreet Singh was a young farmer with a lot of dreams. Knowing well that he inherited an outstanding loan of Rs 8 lakh he still wanted to give farming a try. But unable to pay back the loan, he finally ended his life. He was only 22-year-old.

The suicide by Lovepreet Singh of Barnala district sent shockwaves in Punjab. In three generations, the family had lost five members to farm distress. A year and a half ago, his father, Kulwant Singh, had ended his life by hanging himself just a day before the state government launched the first phase of the farm loan waiver. His grandfather too had earlier committed suicide. “We had taken around 8-acres of land on lease at the rate of Rs 50,000 per acre annual rent but due to the hail storm in 2017 our wheat crop got damaged. We could never recover from that, “his mother Harnail Kaur told the media. 

This is probably the first instance when members of three generations of a farm family had borne the brunt of continuing indebtedness. Earlier, there were cases when a father or mother and his or her son had committed suicide but the fact that the economic crisis is being passed on from a farmer to his next two generations clearly shows how deep-rooted the malaise is. This remains me of yet another tragedy when a farmer Jaswant Singh had tied his five year old son to his waist and jumped into the canal. He left behind a note saying that he knows it is unfair to take his son along to the watery grave but he knows for sure that his son wouldn’t be able to pay back the Rs 10-lakh outstanding loan he carried.   

Despite the farm loan waiver launched by Capt Amarinder Singh’s government, under which Rs 2-lakh outstanding for a farmer from a cooperative bank is written off, the spate of suicides continues unabated. This year alone, between the months of January and July, 645 farmers had taken the fatal route to escape the humiliation that comes along with indebtedness. With private money lenders, banks and agents of micro-finance institutes (MFIs) as well as the Non-Banking Financial Companies (NBFC) breathing down their necks, farmers are increasingly being driven to commit suicide. According to data compiled by the Bhartiya Kisan Union (Ugrahan), between April 1, 2017 and August 31, 2019, a total of 1,280 farmers and farm workers had committed suicide.

The fact that Punjab, the bread basket of the country, has turned into a hotbed of farmer suicides over the years, is certainly not without reasons that are unknown. With Rs 4,609-crore of farmers bad loans having been written-off since the Congress government launched the loan waiver scheme, a total of 5,61,886 indebted farmers have benefitted so far. With the possibility of more bad loans being waved off in future diminishing, there is little possibility of the benefit being extended to more farmers. But at the same time there is no denying that the government has in fact gone back on its electoral promise of waiving all outstanding farm loans taken from cooperative, nationalised, private banks as well as from private money lenders. This would have entailed an expenditure of close to Rs 90,000-crore, which the state government said it didn’t have.  

If the death toll so far in 2019 is any pointer, on an average three farmers are committing suicides every day. The continuing tragedy on the farm is happening at a time when Punjab on the other hand has been bestowed with Krishi Karman Award for being the best performing state in rice production in 2017-18. Punjab has been the top contributor of rice to the central pool since 2009-10, except for 2010-11 when Andhra Pradesh had left Punjab behind. In case of wheat, Punjab has retained the top position in contributions to the national pool since 2008-09, providing on an average 37.83 per cent of the total contribution to the food reserves. With such a high contribution of wheat and rice to the central pool, and with 98 per cent cultivable area under assured irrigation, the rigid dichotomy between increased crop productivity and worsening agrarian distress remains rather unexplained.

Now take a look at the three criteria specified for Krishi Karman Award – first is for achieving high production for which 55 marks are kept; secondly, 30 marks are assigned for the special initiatives taken for achieving record output; and finally, 15 marks are reserved for expenditure under foodgrain development schemes – and the reasons for the continuing crisis in agriculture becomes crystal clear. If only the package was redesigned keeping at least 50 per cent marks for the welfare of the farmers growing these crops, the policy planning focus would have shifted to ensuring a decent and sustainable livelihood for the farming community in distress.

The thrust of the state policies have so far remained on increasing foodgrain production at whatever cost without caring for the farmer who toils endlessly to produce the record harvest. According to studies, Punjab tops the global productivity in cereal crops – wheat, rice and maize, and yet has turned into a graveyard for farmers. Take another example. To fight the menace of stubble burning, Punjab has formed 6,400 farmer groups to provide those with machines as well as to educate them on why not to burn the paddy stubble after harvest. Teams of experts comprising scientists from the Punjab Agricultural University and the state department of agriculture will be interacting with these farmer groups.

To sell the highly subsidised machines, 6,400 farmers groups have been formed. I don’t understand why similar groups cannot be created to address the worsening agrarian crisis? Why regular camps and interactive sessions cannot be held with farmers in small groups, learning from them the reasons which lead to farm suicides? Why can’t these suggestions be collated and then action taken reports is filed? Why should the state government only swing into action when farm machinery has to be sold and keep quiet to address the bigger humanitarian task? #

Worsening agrarian crisis. Deccan Herald. Sept 25, 2019. 

https://www.deccanherald.com/opinion/main-article/worsening-agrarian-crisis-763727.html

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Rural investments can change the face of India.

When Rooop Singh and his younger brother Basant Singh returned after performing the last rites of their father, they didn’t know that destiny too had the same pathway reserved for them. A decade after they cremated their father, Avtar Singh, who had committed suicide unable to bear the burden of mounting indebtedness; the two sons took the same fatal route. They jumped into the Bhakra canal in Punjab. They were residents of Patiala district.

Mounting farm indebtedness had taken two generations of the family. 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. Not an isolated case, but it tells you how a perpetually loss making farming enterprise has taken a huge human toll over the decades. As the serial death dance on the farm continues unabated in Punjab, farmer unions estimate that even after the Congress government announced farm loan waivers, more than 430 farmers had committed suicide in a year

Therefore the recent report that farm incomes have touched the lowest in 15 years didn’t come as a surprise. It only endorses what has been known for long. The Centre for Monitoring of Indian Economy (CMIE) too had predicted that the nominal farm incomes in 2018-19 would be in the negative. This is in a way an extension of the findings of the Niti Aayog which had worked out the real farm incomes in the five year period, between 2011-12 and 2015-16, to be less than half a per cent every year, 0.44 per cent to be exact.

In such a dismal scenario, I sometimes wonder how the farming communities survive year after year. Those who end their lives add up to the collateral damage but what about those who do not give up, and continue to struggle against all odds? More so when it is generally believed that the real farm incomes have been on the decline for almost four decades now. A recent study by the Organisation for Economic Cooperation (OECD) has estimated a loss of Rs 45-lakh crore that the farmers had suffered on account of being paid a lesser price for their produce between the year 2000 and 2017. Another study by UNCTAD had earlier estimated that the farm prices all over the world when adjusted for inflation had remained almost static in the 20 year period between 1985 and 2005.

It is therefore obvious that 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. At the same time, farmers are being deliberately paid less so as to provide cheaper raw material for industry. A farmer therefore has only two roles – to provide cheaper food for the consumers and provide cheaper raw material for the industry.

To be born in debt and live in debt all through his life is virtually like living in a hell. Imagine being told every year that the government has enhanced the credit limit for farmers. It is generally believed that credit pe credit is the only way for farmers to survive. As the debt keeps mounting the distress grows, but I have never seen economists and policy makers ever talking of providing farmers with their rightful income. It is for the first time, confronted with farmers’ anger visible through the electoral results in the Hindi heartland, that the government has launched a direct income support programme to provide small farmers with an annual support of Rs 6,000. This meagre amount signifies a significant shift in economic thinking – moving from credit to income support.  

But what is little understood is that the decline in farm incomes is an outcome of an economic design that we follow. As I said earlier, agriculture is being deliberately kept impoverished to keep economic reforms alive. Continuing with the same flawed economic thinking, the chief economic advisor has also called for more investments in industry so as to pull the youth from the rural to the urban areas. This is exactly what the World Bank had directed India way back in 1996. It is primarily for this reason that public sector investments in agriculture have remained between 0.3 to 0.5 per cent of the GDP between 2011 and 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 drastically curtail public sector investments in this sector which employs 52 per cent of the country’s population.

No wonder, as per the latest CMIE calculations, of the 56.6-lakh job losses encountered in past 12 months, almost 82 per cent or 46-lakh are from rural areas. This is the outcome of an economic policy that aims at pushing the rural unemployed youth to urban areas, which are in need of dehari mazdoor. If displacing farmers so as to create a workforce of dehari mazdoor is economic growth, there is a serious need to take a relook. Shrinking land holdings are not a problem, the bigger difficulty arises by denying the farmers with a rightful price for his produce.

The deliberate neglect of agriculture has rendered farming uneconomical and environmentally unsustainable. What is not being appreciated is that investing in rural areas is the only viable long term solution to many of the problems India faces – hunger, poverty, youth unemployment, forced migration and climate change. All these have deep roots in the rural areas. Since agriculture is the predominant rural occupation, the thrust of any sensible economic policy has to begin with treating agriculture as an economic activity. It alone has the ability sustain millions of livelihoods and thereby reboot the economy. #

कर्ज माफी से आर्थिक मदद की ओर. Amar Ujala. Mar 11, 2019

https://www.amarujala.com/columns/opinion/debt-waiver-to-economic-support

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After Dec 11, agriculture has been pushed to the center stage of Indian politics. But will it usher in a new renaissance?

The writing was on the wall. The anger that rural Gujarat voters had exhibited in last year’s Gujarat Assembly elections, edging the ruling BJP overwhelmingly in the Saurashtra region, was a clear pointer to the serious agrarian distress that prevails in the hinterland. Failing to keep a tab on the rural pulse, and unable to assuage the growing farmers anger that was spilling on to the streets, the electoral debacle in the predominantly agricultural belt of central Hindi heartland – Madhya Pradesh, Chhattisgarh and Rajasthan – was already scripted.

Interestingly, while Congress romped home riding on the promise of farm loan waiver and a higher procurement price for paddy, K Chandrashekhar Rao in neighbouring Telangana swept the Assembly polls riding the popularity of a direct income support scheme Rythu Bandhu for farmers. Under the novel investment scheme, the first of its kind in the country, land-owning farmers will get a support of Rs 8,000 per year, to be split in two -- Rs 4,000 each for kharif and rabi crop season. Benefitting nearly 58 lakh farmers, Telangana government has made a budgetary provision of Rs 12,000-crore for this scheme for 2018-19. The direct payment amount has since been raised to Rs 10,000 per farmer, and soon thereafter Jharkhand has been quick to follow up by launching a similar scheme providing Rs 5,000 per acre.

The speed at which the newly elected Congress governments in Madhya Pradesh, Chhattisgarh and Rajasthan implemented the farm loan waiver promise clearly shows the political urgency the party felt it needs to accord to agriculture. While Madhya Pradesh has waived outstanding farm loans to a maximum of Rs 2 lakh per farmer, which is expected to cost Rs 35,000-crores, Rajasthan and Chhattisgarh have announced a full loan waiver costing the state exchequer Rs 18,000-crores and Rs 6,100-crores, respectively. More than 8.3 million small and marginal farmers stand to benefit from the loan waiver when fully implemented.

Undeterred by the warnings being issued by economists, bankers and planners saying that farm loan waiver will upset the balance sheets and set in a bad precedence, Congress President Rahul Gandhi has warned “My message to farmers is that this country belongs to you and the Congress and other opposition parties will work together to ask Prime Minister Narendra Modi to write off your loans. We’ll not let him sleep until he waives your loans. If Modi doesn’t act, the Congress will do it 100%.” 

His argument is backed by sound reasoning. After all, when corporate bad loans to the tune of Rs 3.16 lakh crore between April 2014 and April 2018, were written-off, there was no hue and cry from the economists or bankers. Travelling through the rural belt before the elections, angry farmers did confront me at a number of places asking if huge loans of corporate can be written-off why not for farmers. In fact, their anger was specifically directed at former Chief Economic Advisor, Arvind Subramanian, who had gone on record saying that corporate loan write-off leads to economic growth. On the other hand, when farm loan waivers were first announced in Uttar Pradesh after the Yogi Adityanath government was sworn in, former RBI governor Urjit Patel had said that it will upset the national balance sheets and lead or moral hazard.

Nevertheless, the clear electoral verdict in the Hindi heartland has finally brought agriculture to the centre stage of Indian politics. Agriculture has emerged on the top of the political agenda, and the message has gone loud and clear. It is probably for the first time that the electoral verdict has brought in a visibly renewed confidence among the farming community. Rising above the divisive electoral policies that kept them split on the basis on religion, caste and ideologies, they now feel their collective electoral strength. The recent election results have shown them the power to topple governments. This is a major factor that will certainly influence the 2019 general elections.

After all, in a country which roughly has 50 per cent population engaged directly or indirectly in farming, farmers are finally in a position to be a lot more assertive. For over four decades now, real agricultural incomes have remained frozen. A recent OECD study has shown farm incomes have remained static in India for the past two decades. Earlier, an UNCTAD study had shown farm gate prices across the globe, factored against inflation, had remained static between 1985 and 2005. A recent Niti Aayog study has concluded that real farm income had only grown at less than half a percent, 0.44 per cent to be exact, in the five year period between 2011-12 and 2015-16 despite the fact that production had gone up steadily.  

Farmers in reality are being penalised to grow food. Barring a few exceptions, they have been consistently paid less than the cost of production over the years. To maintain food inflation under control, the entire economic burden has been conveniently passed on to farmers. To be born in debt and live in debt all through his life is virtually like living in a hell. Credit pe credit, was the only way to survive, and the debt kept mounting. Such is the economic deprivation that prevails, that even the Economic Survey 2016 stating that the average income of a farming family in 17 states of India or roughly half the country stands at a mere Rs 20,000 per year failed to shock the nation. With policies and economics failing farmers, the emergence of farmers on the political horizon is the only way forward. Only time will tell whether this political turnaround will usher in the new renaissance. #

After Dec 11, farm crisis on top of political agenda. Deccan Herald. Dec 23, 2018

https://www.deccanherald.com/specials/sunday-spotlight/after-dec-11-farm-crisis-top-709477.html

READ MORE - After Dec 11, agriculture has been pushed to the center stage of Indian politics. But will it usher in a new renaissance?

Direct Income Support is the need of the hour

Riding on the popularity of the Rythu Bandhu scheme, which provides Telangana farmers with a direct income support of Rs 8,000 per acre per year, Chief Minister K Chandrashekhar Rao romped home sweeping the electoral verdict in recent Assembly elections. Encouraged by the positive response, and knowing it could pay him rich dividends, he had raised the amount to Rs 10,000 per year just before the elections.  

The first of its kind in the country, and what essentially began as an exercise to work out an input subsidy scheme to offset the cost of seed, fertiliser and pesticides, the Rythu Bandhu scheme has finally turned into a direct income support for the debt-ridden farming community. Under the novel investment scheme, land-owning farmers will get a support of Rs 4,000 each for kharif and rabi crop season. Benefitting nearly 58 lakh farmers, Telangana government has made a budgetary provision of Rs 12,000-crore for this scheme for 2018-19. More than the budget provisions, what makes this scheme effective is the way it was implemented. Within a month the land records were put in order, and the distribution of money has been as per the promise. Buoyed by the public response, and the appreciation it has received from a wide array of experts, economists and others, KCR is now keen to replicate it across the country. “This will require an additional Rs 3.5-lakh crore. It shouldn’t be a problem allocating the amount for farmers. It will be fruitful for them,” he said.

It is a question of priorities. Finding financial resources for a terribly distressed farming community should not be a problem, if the intent is clear. According to the 2016-17 NABARD All India Rural Financial Inclusion Survey, Telengana (79%), Andhra Pradesh (77%) and Karnataka (76%) are among the top in the chart in the list of States with highest indebtedness. That farmer’s had expressed their gratitude for a slender income support of Rs 8,000 per year, which narrows down to roughly Rs 666 per month, is only a reflection of the acute rural deprivation that prevails. This shows the urgent need to pullout majority households from indebtedness. Writing-off outstanding loans is one way to address the complicated issue, providing direct income support is perhaps less distorting and more beneficial in the long run. After the loan waiver, direct income support followed by a more comprehensive assured income programme must begin. 

Several years back, when I first called for providing farmers with direct income support, mainline economists had laughed it off. At a time of globalisation and economic liberalisation, where markets ruled the roost, a number of questions were thrown up. It has taken some years for the people to grasp the implications, understand what I meant, and while the idea was sinking in, KCR certainly set the ball rolling. There are gaps but with the passage of time the scheme will get better. I am sure tenant farmers will subsequently be included, and there will be mechanisms to draw out absentee landlords and government/private sector employees who also hold agricultural lands. 

Telangana’s example was soon followed by Karnataka in a much truncated form. Just before the last Assembly elections in May, the outgoing Karnataka Chief Minister Siddaramaiah launched a new scheme, called Raitha Belaku, extending a direct income support of Rs 5,000 per hectare for dryland farmers, with an upper cap of Rs 10,000. The scheme entailed an expenditure of Rs 3,500-crore every year, and around 70-lakh farmers would directly benefit, he had claimed. And with news reports of Congress toying with the idea of providing Rs 3,000 per month by way of income transfer to small and marginal farmers in Madhya Pradesh, I am sure assured farm income will eventually become a norm rather than an exception. Even in Punjab, considering that every third farmer is below the poverty line, direct payments for marginal farmers should be tried.

Agriculture has been on the receiving end for over four decades now. As per Economic Survey 2016, the average income of a farming family in 17 States of India, which means roughly half the country, stands at a meagre Rs 20,000 a year. According to Niti Aayog real farm incomes in the five year period, between 2011-12 and 2015-16, grew at less than half a percent every year, 0.44 per cent to be exact. No wonder, the rural landscape remains equally depressing – falling incomes, mounting rural indebtedness, rising farm suicides, unmanageable glut at the time of harvest, and swelling rural to urban migration. At a time when tax concessions to the tune of 5 per cent of GDP are given to big business, public investment in agriculture has remained as low as 0.3 to 0.5 per cent of GDP.

With declining farm incomes and public sector investment shrinking over the years, agriculture has been a victim of a deliberate bias in economic thinking. For all practical purposes, agriculture is considered to be a non-economic activity. The macro-economic policies are heavily tilted against agriculture. While farm loan waivers, for instance, are considered to be a drag on the national economy, it is believed that huge corporate write-offs lead to economic growth. Unlike farm loan waivers, which become a State government’s headache, the corporate loans are the responsibility of banks and are seen as non-performing assets (NPAs) of the banking sector.

Direct income support will to some extent help in addressing these glaring disparities. At a time when farmers face extreme volatility in markets at times of harvest, and price distortions because of unwanted imports, direct payments will act as an agricultural safety net. It has to be accompanied by several initiatives in agricultural reforms, including redesigning credit, markets and cropping patterns and finally leading to an assured monthly income package to make an everlasting impact. 

To begin with, two steps are important:

 1.  Farm loan waivers too needs be clubbed with bank NPAs, and should be treated the same way as corporate write-offs. Since both the corporate and the farmers take loans from the same banks, how can the default by farmers become a State’s headache, which is expected to provide for loan waivers thereby adding on to its fiscal responsibility? While at the same time corporate bad loans are treated as a bank's headache? Why not treat farm loans as also bank's responsibility? Freeing up farm waivers will give State governments more room to provide for direct payments and to enhance farm incomes.

       2.  The Commission for Agricultural Cost and Prices (CACP) which fixes the MSP for 24 crops, needs to be now renamed as Commission for Farmers Income and Welfare with the mandate to ensure an assured monthly farm income of at least Rs 18,000 per month per family. This should be based on the average income derived from direct payments, MSP, FPOs etc, at a district level and the balance should be paid by income transfer.  #

Direct payment to farmers is a safety net. The Tribune. Dec 20, 2018.
https://www.tribuneindia.com/news/comment/direct-payment-to-farmers-is-a-safety-net/701050.html?fbclid=IwAR1XMZR5etyN73eficpO81b7optg7Ecw64qcqEUQ9w8jYC4bVAGae43zoDc

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Farmers are a victim of inefficient markets

For over 40 years now tomato prices have remained frozen -- Pic from web

Consider this. For nearly 40 years now, the average price Indian farmers are getting for tomato in 2018 is not much different from what they were getting in 1978. Adjusted for inflation, the price of tomato remains almost the same, perhaps a little less. Reports of angry farmers dumping tomato onto the streets for failure to get a price that covers even the cost of cultivation have donned the media space for the past two consecutive years. As far as I can recall, reports of farmers feeding tomato to cattle or throwing it on the streets used to appear frequently in the newspaper even way back in the early 1980s.

In the absence of a truly national market, with restrictions on movement and open participation of traders, one can certainly say that an efficient market for agricultural commodities is still not a reality in India. Even if only 6 per cent farmers get the benefit of Minimum Support Price (MSP), which means the remaining 94 per cent are dependent on markets, the low prices of farm commodities are not a reflection of market efficiency. In that case let’s look at farm prices in the US, which is still the world’s most advanced (and one of the largest in terms of market prices) economy in the world. US markets are competitive, bigger players operate with relative ease, and where futures trading dominate thereby allowing for what is called as price discovery.

Writing on his blog, 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. In a tweet, another Canadian farmer, Philip Shaw, who farms in Ontario province, quotes the corn price on September 12, 2018 at $3.52 per bushel, which means another fall of 4 cents from what was traded in January this year. In the words of Mike: “The farmer who planted his first field of corn in 1974 can expect the same prices for his corn as he retires.”

If markets were so efficient, I don’t see any reason for the completely distorting price signals. If for 44 years, the markets fail to discover the real corn price that a farmer needs to get, it is quite obvious that the markets are far from efficient. After all, as the American farmer said, all the while the prices of seed, land, equipment, fertilizer, and fuel have grown exponentially but the output price remains the same. Nothing can be more painful.

Dr Robert Johannson, Chief Economist of the US Department of Agriculture (USDA), while addressing the 2018 Agricultural Economic and Outlook Foreign Trade Forum in Mar 2018 stated explicitly: “Real farm prices, when indexed for inflation, have fallen sharply since 1960.”Yes, you heard it right. This is happening in America. No wonder, to meet the market’s inability to pay the farmer the rightful price, the US provides an average of $ 50,000 per year as subsidy support to every farmer.

In India, a recent OECD study has conclusively stated that farm prices remained frozen for the past two decades. Farmers have been deliberately paid 15 per cent less all these years to keep food inflation under control. In the absence of any corresponding subsidy or direct farm income support, Indian farmers have been very conveniently left in the lurch. Hit by rising input prices, declining public investments in agriculture, and the increasing price volatility, farmers are the victims of an inefficient market. Yet, the dominant economic thinking is that the best way to address agrarian distress is to further liberate the markets, which will provide the right price signals. What is however not being acknowledged is that even in the US markets have failed to prop up agriculture.

As the kharif harvest season begins, prices of moong, urad, groundnut, bajra and jowar are already ruling much below the MSP. Take the case of moong. Against the procurement price of Rs 6,975 per quintal, the prevailing prices in the past week in Madhya Pradesh mandis hover between Rs 3,900 to Rs 4,400 per quintal. In Maharashtra, the best price offered is Rs 4,900 per quintal. In case of urad, against the MSP of Rs 5,600 per quintal, what the farmers have been able realise in Maharashtra mandis is anything between Rs 3,900 to Rs 4,200 per quintal. This is the beginning of the season and I wonder what will be the prices when the arrivals peak. But going by the past two years experience, when prices of pulses fell by 20 to 40 per cent in mandis across the country, there is hardly any expectation of prices going up this year.

At a time when markets have failed miserably to pull out farmers from perpetual indebtedness, the launch of Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA) has to be seen as an acknowledgement of the fact that farmers need a guaranteed income. The thinking behind assuring farm incomes alone is a significant step forward in bridging the great income divide that prevails in agriculture vis a vis other sectors of the economy. As part of the PM-AASHA initiative, the government will in reality push three schemes, including the continuation of the existing price support scheme, and expanding the price deficiency payments scheme as tried out in Madhya Pradesh. The third scheme, and which needs critical evaluation, is to allow on a pilot basis private players in procurement operations, to begin with in oilseeds.

After announcing a higher MSP, even if it is much below what farmer unions have been demanding, the promise to buy 25 per cent of the entire marketable surplus can only be implemented successfully if an adequate market infrastructure is laid out. Against the requirement of 42,000 APMC mandisat 5 km radius, India only has about 7,600 mandis. While the mandi network has to be expanded, what is also needed is an appropriate financial back up to meet the price support. The budgetary provision of Rs 15,053-crore that has been set aside for the next two years is far too low. If India Inc can be provided with an economic stimulus package of Rs 1,86,000-crore in 2008, and which has still not been withdrawn, I see no reason why a similar package by way of procurement prices cannot be announced for agriculture to begin with. #

Lack of mandis, funds may blunt PM-ASHAA. The Tribune. Sept 18, 2018.

https://www.tribuneindia.com/news/comment/lack-of-mandis-funds-may-blunt-pm-aasha/654517.html 

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