Why not a price tag for farm produce?

No where in the world, do farmers get to sell their produce at a pre-determined price. 

Pic courtesy- FoodPrint. 

A couple of days back a small video clip of an irate Nashik farmer pulling outcrates of tomatoes from his vehicle and throwing it on the street went viral. A number of other reports showed truckloads of tomatoes being emptied in the streets at some places in Maharashtra. 

It is not the first time that such distressing reports have appeared. It is tomato now, it was potato earlier and even the pricey onion has been dumped. Every now and then such agonising reports from different parts of the country have appeared in the media. Only the location, the commodity and the face of the farmer changes. And every time, as far as I remember, these reports have been dismissed with a flip of the hand by economists and the educated elite calling it simply a play of the supply demand mechanism. 

That makes me wonder. Every time an industrial product – be it a car, motorcycle or an FMCG product like soap, shampoo and toothpaste to name a few – enters the market, it comes with a price tag. While economists tell us that free markets, based on the supply demand equilibrium, will lead to price discovery, the fact is that prices are in reality already fixed for all industrial products before they are brought into the market. Take, for instance, the automobile sector. Each new brand that is launched comes with a price tag. Or consider for that matter, medicines that every household require. The maximum retail price (MRP) is always mentioned. Whatever remains unsold is taken back by the supplier. 

When it comes to agriculture, none of the commodities ever come with a pre-fixed price tag. Whether it is tomato, mango or chillies or for that matter any other farm product, and in the absence of a price tag, farmers are left with little option but to face the vagaries of the markets. Unless the production for a particular crop falls, there is hardly a probability for the farmers to get a higher price. Since only 6 per cent farmers get the benefit of an assured Minimum Support Price (MSP) as the high-powered Shanta Kumar Committee had earlier worked out, imagine the plight of the remaining 94 per cent farmers who have been at the mercy of free markets all these years. No wonder, as the Economic Survey 2016 acknowledges, the average annual income of a farm family in 17 States of India, which means roughly half the country, is only a paltry Rs 20,000. 

Aware that farmer has no mechanism to provide a price tag for his produce; markets often end up in ruthless exploitation like what the Nashik farmer had to face when market prices crashed, and was left with no option but to throw his produce. Even in America, where free market operates for decades in agriculture, farmers have paid the price. Studies show when a consumer buys food products, the average realisation of a farmer from every dollar worth of food sold is hardly 8 per cent. With such low incomes, American farmers too are faced with a severe agrarian distress, with farmers saddled with a bankruptcy of $ 425 billion in 2020. 

This doesn’t happen with industrial products for the simple reason that it’s not markets that determines the consumer price. To illustrate, Maruti has decided to raise prices of its vehicles for the third time this year. A hike of 1.4 per cent in January, followed by another increase of 1.6 per cent in April, and in September Maruti is contemplating another increase by 3-4 per cent. The company’s argument is that the price rise is unavoidable because of the continuous rise in input prices. While most urban elite will back this argument saying the company has to cover-up for the additional costs, the fact remains that the correction in vehicle price has been done before the product enters the market. This is not a privilege that a farmer can exercise. He has to live content with whatever the market offers. 

Take for instance, the drop in apple prices for the farmers this year. In Himachal Pradesh, where Adani Agri-fresh happens to be a monopoly buyer, it has reduced the purchase price of premium quality apples by Rs 16 a kg this year. Against Rs 88 per kg offered last year, the company is giving a price of Rs 72 per kg. While the farm input prices have certainly gone up, and inflation too has remained high, there seems to be no economic justification for a reduction in apple prices. But because apples don’t come with a pre-determined price tag, like for the industry, lakhs of apple growers will silently bear the losses. In the absence of a price tag for farm produce, we are actually penalising farmers to grow food. 

In other words, markets treat agriculture and industry separately. This dichotomy in market operations however remains unacknowledged. To bring in equilibrium in the way markets operate, allowing it to treat agriculture and industry in uniformity, crop prices too need come with a pre-determined price tag. This will certainly lead to disruptions of the food value chains, which is invariably built on keeping farm prices low. This must change. It is therefore high time economists and policy makers realise that when the protesting farmers demand MSP to be made a legal right, meaning no trading to be allowed below the assured price that is announced every year for 23 crops, they are actually asking for a price tag for the farm produce.  

Making MSP a legal right for farmers is the reform India is waiting for. More money in the hands of farmers, by way of a guaranteed price, will lead to creation of a huge rural demand that will fast forward the wheels of economic development. #

Source: It's time to make MSP a legal right for farmers. Bizz Buzz, Sept 2, 2021. https://www.bizzbuzz.news/opinion/its-time-to-make-msp-a-legal-right-for-farmers-1000777

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Farmers' Protest: Answering Frequently Asked Questions.

Even as the Central government and its acolytes in the media work overtime to sell the benefits of the three new farm laws to the Indian public, the farmers protesting on Delhi’s borders have made it clear that they will not retreat till these laws are repealed. Caught between the crossfire of misinformation and facts, the average urban Indian is somewhat confused about the merits and demerits of the farmers’ protest – which has now crossed the 50-day mark.

If there is one thing that has become increasingly obvious over the least seven weeks, it is that big-city dwellers in India live in a very different universe than their rural counterparts, and have a difficult time understanding why the farmers camped on Delhi’s borders are as determined as they are to have their way. One major reason for that is they do not know the ‘back story’ of the protests.

In order to relieve some of that confusion and shed light on the larger context of this movement, I spoke to journalist, author, and food and trade policy expert, Devinder Sharma, who has spent the last two decades campaigning for income equality for Indian farmers and asked him the five questions that invariably come up most frequently whenever the topic of the farmers’ protests comes up for discussion.

Why are farmers so unhappy with the Central government?

Many think that it is just the three new farm laws that have agitated the farming community and that is why they are at the doorsteps of New Delhi. The way I see it, though, is that this is anger that has compounded over decades and is finally finding an outlet. Three studies show how agriculture has faced huge injustice and inequality and has been deprived of its rights over the last 30 or 40 years.A study by UNCTAD shows that for 20 years, between the mid-1980s and the mid-2000s, the output price or the farm gate price of agriculture remained static across the globe. In other words, farmers’ income in the 2000s (after adjusting for inflation) remained the same as it was in the 1980s. Rich countries, of course, addressed this issue by providing direct income support and a whole lot of other privileges to the farming communities, but the developing countries could not afford it and farmers in these countries have silently suffered the consequences ever since.

Then came a study in 2008 by OECD (Organization for Economic Cooperation and Development) along with a New Delhi think tank which estimated that between 2010 and 2016-17, Indian farmers lost Rs 45 lakh crores in farm incomes! What was even more extraordinary than this crisis was the lack of discussion around it. And this was for only for a handful of crops, so the total extent of the loss that the farmers have suffered must have been significantly higher. This meant a loss of about Rs. 2.64 lakh crore every year because farmers were denied their rightful income.

Yet another report by the Economic Survey in 2016 tells us that the average income of a farming family in 17 states of India, about half the country, is only Rs. 20,000 a year, or less than Rs 1,700 rupees a month. I can’t even raise a cow in that amount! I shudder to think how the farming community has been surviving in half of India.

All that to say that agriculture has been passing through a terrible crisis all these decades, and the fact that farmers have assembled at the borders of New Delhi in the dead of winter shows they have had enough. The academia, the elite, and the economists have all failed to help farmers get their rightful dues, and so now they have taken it upon themselves to fight for their survival.

With these farm laws being introduced, they fear that whatever they have left is also going to be snatched away. That is what has pushed them into this kind of protest which is an iconic one, of a kind at least I have not seen anywhere in the world.

Farmers’ representatives during the 8th round of talks with the government over the new farm laws, at Vigyan Bhawan in New Delhi, Friday, January 8, 2021. Photo: PTI

But isn’t this primarily a protest by rich Punjabi farmers?

If the Punjab farmers were so rich, then they should have been a model for the rest of the country to follow. But a study done jointly by the Punjab Agricultural University, Ludhiana, Punjabi University, Patiala and Guru Nanak Dev University in Amritsar — all public sector universities — showed that between 2000 and 2015, 16,600 farmers and farm workers committed suicide. Incidentally, the total debt that Punjab farm households are reeling under is Rs 1 lakh crore!

If the farmers were rich, why did they commit suicide in such large numbers? Pick up a Punjabi newspaper, and chances are that you will find one or two suicides being reported almost daily. Also, every third farmer in Punjab happens to be below the poverty line.

Let us not forget that, in this country, only 4% farmers have land holdings which are more than 10 hectares. So, what kind of rich farmers are we talking about, when only 4% farmers have more than 10 acres of land? 86% farmers in India have a landholding size of less than five acres. The remaining are what are called median or medium farmers who have a land holdings of 6 to 8 acres.

To say that this agitation is being led by the farmers who are rich just because they get minimum support price is ridiculous. In Punjab, roughly 70% of the small farmers get the benefit of minimum support price. Small farmers are those who have less than five acres. They are the ones who benefit largely from the minimum support price.

And to those who say that this is a protest instigated by opposition parties, please go and stay outside your home for one night in the dead of winter to see what it’s like. I don’t think anybody will do that even if they are paid to. Just spend one night in a trolley or tent on a road outside Delhi, and tell me if you would do that for more than a month even if you were paid to. I think it’s time to stop being so contemptuous towards the farming community. Let’s honour and respect the protesting farmers, and try to see what they need and what we can do to help.

But aren’t most farmer unions in favour of these laws?

If the majority of farmers were in favour of these laws, would the number of them on protest be this huge? In fact, it is remarkable that so many farmer unions have come together on one platform. As someone who has worked with farmers for over two decades, I know how difficult it is to get different farmer unions to see eye to eye. And yet, here you have 32 union leaders from Punjab, and many others from Haryana, Rajasthan, Western UP, and other parts of the country. It just shows that the situation is now dire enough for them to put their differences aside and come together for their survival.

As far as the “groups” who are saying that these laws are good, it’s not very difficult to hold up a visiting card saying that you represent x farmer group. We have seen it happen earlier and we are seeing that happening now. What is more important to remember, though, is that such a large section of farmers have actually come out together in strong protest.

Even if a chunk of the farming population is unhappy, isn’t it important to try and understand why they are unhappy and then try and help them, instead of trying to minimise their distress and their numbers?

What is so bad about corporates getting into agriculture?

I was being interviewed on a business channel the other day, and the host asked me, “At a time when the markets are so excited about these farm laws, why are the farmers unhappy?”

I said, “You have answered your own question. The laws are in favour of the market, so of course they are excited. And the farmers feel the laws are not in their favour, and so they are on the streets.”

The world is moving towards corporate agriculture, but contrary to what corporations would like you to think, corporate involvement in agriculture has not boosted farmers’ income. Take the United States, for example, from where we have borrowed these laws. In America, open markets and free trade in agriculture have existed for over six to seven decades, and yet farm incomes there have been in decline. In fact, in 2020, American farmers were saddled with a bankruptcy of more than $425 billion.

If the reforms were so good, why would farmers be faced with that kind of bankruptcy? Most Indians don’t know that America is also passing through a terrible agrarian crisis. In fact, the rate of suicide in rural America is about 45% higher than it is in urban America.

Over the years, small farms in the US have disappeared and only 1.5% of America’s population is now engaged in farming. And yet, the US continues to be the biggest agriculture producer in the world. (Of course when we talk of agriculture in America, we are talking about big machines, big corporates, big business and big agriculture. But when we talk about agriculture in India, we’re talking about millions of small farmers, marginal farmers.)

In America, they don’t have MSP, or APMCs. There, big retailers like Walmart do not have stock limits. They also have contract farming, and do commodity trading, and yet, despite all of that, American farmers are given a subsidy of $62,000, every year. Which begs the question — If open markets are really that efficient, why does the government pump in so much money into the agriculture sector?

The OECD countries, the richest trading bloc in the world, pump billions of dollars into agriculture every year by way of direct income support or subsidies. Europe today is giving about $100 billion of agricultural subsidies annually and roughly half of it goes as direct income support to farmers. So, what we see as ‘market efficiency’ in agriculture or agriculture export, is actually federal support that governments have been providing to the agricultural sector.

We need to be very clear that agriculture is sustainable and viable in rich and developed countries not because the markets are efficient, but because the government provides subsidy support year after year.

Representative image of the APMC mandi at Gariyaband in Chhattisgarh. Photo: Neeraj Mishra

China, incidentally, has now emerged as the biggest provider of agricultural subsidies in the world, beating even America and the European Union. The Chinese government provided $212 billion dollars worth of subsidy support to its agricultural sector in 2016. 38% of the earnings of wheat farmers actually comes from subsidies, as does about 32% of the earnings of the rice farmers. It is not the high yield that they have, but subsidies that gives farmers high income.

Then there is the issue of technology. You’ve heard it all – “When technology comes in, then productivity goes up and income goes up,” etc. Well, since the 1970s, the US had a number of small dairy farms. These dairy farms were technology-rich, and the cattle they had were high- yielding. In fact, American dairy farms were a model for us to follow. But about ten years ago, I read a shocking report in New York Times about a farmer suicide. This farmer was so distressed by the market crash in milk prices, that he first shot each of his 51 cows, and then he shot himself.

The point I’m trying to make is that distress has prevailed in America over the decades and we don’t even know about it. If you look closely at what has happened in the US, 93% of the dairy farms have closed down since the 1970s, but milk production has gone up. This is because big corporates have moved into agriculture and set up mega dairies and this has led to milk prices crashing and 93% of dairy farms closing down.

If technology and productivity were indeed the criteria for agricultural success, then I see no reason why those dairy farms would have closed. They closed down because of the market prices they were getting, which just kept declining. It came to the point that they could not even cover their costs of production, and so they just left farming.

This is a warning for us, and is only one of many examples that show how the things that are supposed to increase farmer income actually don’t. What farmers need is direct income support. In Europe, 50% of the subsidies are allocated for direct income support. The US gives $62,000 as subsidy support or an average to each farmer in a year.

I think it tells us that markets are not what are sustaining agriculture; it is primarily subsidies which sustain whatever remains in agriculture today.

So what do you see as the way forward? How can agriculture be saved and revived?

This is a critical juncture in our history and this farmers’ movement should actually make us all sit up and think about the corrections that need to be made.

First of all, like you and I need some sort of assured income, every farmer also needs to have an assured price for his produce. He needs to be sure that after the harvest, when he goes into the mandi, he will at least get that minimum price. If there can be a minimum wage for the workers, I don’t understand why there can’t be a minimum price for the farmers.

The only way I know to ensure that is MSP. In fact, that is a strength of India, because our policymakers did a remarkable thing at the time of green revolution — they introduced a minimum support price. That is something which has stood the test of the time. I also agree there are problems in the mandis, but we need to reform their structure, not shut them down. Throwing out the mandis is like throwing the baby out with the bathwater.

I would suggest that the government make MSP legal for the 23 crops that it announces MSP for every year. Every year the government announces minimum support price for 23 crops but effectively buys only wheat and paddy. (To some extent, cotton and pulses too, as the need arises, but primarily wheat and paddy.) This needs to be extended to all the crops.

An analysis in The Wire showed that in October and November of 2020, in just two months, based on the government’s own portal where they give you details about how many different crops have been sold in these two months and at what the price etc. — If the farmers had gotten MSP for all crops across the board and not just for wheat and paddy, they would have gained by Rs 1900 crores in just two months! I’m sure you will agree that is not a small amount, and considering that in half the country, the average income is only Rs 20,000 a year, imagine the economic benefit the farmers would have received

80% of the gross crop area in India is covered by these 23 crops. That means a large section of the farming population is covered by a minimum support price regime if it is implemented effectively or made legal. That would be real azadi for farmers. He would know that whether he sells in Punjab or Bihar, he will be getting the same price, the minimum support price. That’s the kind of freedom that the farmers are expecting.

Corporates are saying they will now be able to give farmers a higher price for their produce! But higher price than what? The only benchmark we have is MSP. So if corporates, policymakers and economists are already willing to pay a “higher price”, then what is the problem in setting MSP as a minimum income that the farmer is assured of? The corporate sector should be standing with the farmer saying, “Yes, let’s make MSP a legal right, because we are in any case going to give them a higher price.”

But that’s not happening, which means the corporates are not being honest. They know that they will not be able to give a higher price.

Many ‘corporate activists’ who appear on the television have been saying that if the Center brings in a fourth law, which makes the minimum support price across the country legal, then the reforms would collapse and crash! — That means you are yourself admitting that you are not going to give farmers a higher price!

Secondly, delivering minimum support price poses its own set of challenges. In this country we have about 7000 APMC-regulated mandis. What we need in this country is 42,000 mandis within a five-kilometre radius. That is infrastructure we have to create, so farmers can sell their produce easily.  If you have a good network of mandis laid out, then the mechanism of MSP delivery becomes easy.

In America, after all these decades of the free market, the US Department of Agriculture tells us that the share of a farmer in every food dollar is only 8 cents. This means if the consumer is spending $1 on buying food, then the farmer’s share is only 8%. This should tell us very clearly why the American farmer is in a crisis today.

Now compare that with Amul Dairy Co-operative in India. The Managing Director of Amul Dairy Cooperative has gone on record saying that when you buy Amul milk for Rs 100, Rs 70 of that goes to the farmers. The farmer’s share is 70%! So why not draw a lesson from Amul and replicate that model in vegetables, pulses, fruits, etc, to ensure that the farmers get a larger share of the profit?

Why are we ashamed of our homegrown models? Let’s learn from our own strengths and build on them. Instead of opening up agriculture for the corporates to exploit, let’s expand the cooperative network in this country. Let’s experiment and learn how to make that work for vegetables and fruits.

One last thing — our economic design has treated agriculture as a burden on society. The argument is that unless we move people out of agriculture into the urban areas, we will not have economic growth. This has to change. In just two days of lockdown, we saw 80 million people go into reverse migration both interstate and intrastate, and that tells us that, that the model of pushing people out of the urban areas, was a flawed, economic model. And I think we need to reverse that model. The possibility of making, agriculture a powerhouse of economic growth is what is required today.

Source: Farmers' Protest: Agriculture Expert Devinder Sharma Answers Frequently Asked Questions. The Wire. Jan 17, 2021 https://thewire.in/agriculture/farmers-protest-agriculture-expert-devinder-sharma-answers-frequently-asked-questions

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Post Covid-19, future belongs to reviving agriculture

In the midst of an economic slump, reflected through the tumbling of GDP figures for the first quarter of the financial year, agriculture has emerged as the only bright spot. Riding on the back of a bountiful rabi crop harvest, agriculture has in reality turned out to be the real saviour. With kharif sowings exceeding by over 8 per cent, and the monsoon rain behaviour being normal so far, India is expected to be heading towards another record harvest. 

In these depressing times, agriculture alone provides a ray of hope. At a time when the gross value added (GVA) – value of goods and services produced minus the cost of inputs and raw materials that has gone into its production -- declined across the spectrum, agriculture and allied activities grew by 3.4 per cent.   

With most industrial houses pulling down shutter at least for the first two months of the lockdown, economic activity got severely curtailed. The GDP growth therefore tanked by a steep minus (-) 23.9 per cent – the lowest among the 20 big world economies – the sharpest decline since India began computing quarterly GDP numbers in 1996. Add to it the staggering job losses; the economic hit for the average citizen has been too traumatic. Private consumption being limited to essential buying only, salary cuts and leave without pay added to their woes. As if this is not enough, 18.9 million salaried people and another 6.8 million daily wage workers lost their jobs since April, as per the estimates of the Centre for Monitoring of Indian Economy (CMIE). 

This is in addition to the estimated 30 million migrant workers (if intra-state migration is considered, the numbers swells to 80 million) who trudged back home, some walking hundreds of kilometres, carrying their children on their shoulder or in tow, in what is seen as the biggest reverse migration since the days of the Independence. Besides the large numbers, the painful long march in a way brought out the failure of economic policies that had rendered farming uneconomical over the decades. With the cost of production rising, and the output prices remaining stagnant or declining, the terms of trade in agriculture had remained negative. Therefore, instead of making all provisions to bring the migrant workers back to the cities, the effort should now be directed to reverse the economic model that continues to push people out of rural areas. Considering that 70 per cent of the rural households are engaged in agriculture, the time has come to bring the focus back on revitalising agriculture. Turn it into a powerhouse of economic growth.

While the pandemic has certainly exposed the fault lines, it will require a set of new ideas and a strong political will to reshape the new economic agenda that will spur economic growth, create employment and at the same time protect nature and environment. Following the same old prescription of economic growth – sacrificing agriculture for the sake of industry – has outlived its utility, as evident from the extent of reverse migration. Agriculture being the biggest employer, the post-Covid-19 challenge instead should be to strengthen rural livelihoods, bring more income in the hands of the farming community, which alone has the potential to realise the dream of Sabka Saath Sabka Vikas. As Qu Dongyu, the Director General of Food and Agricultural Organistion of the United Nations (FAO) said: “Past progress was sustained by the benign trickle-down effects of strong economies. This is not the case anymore. The facts have changed, and so must our minds.” 

It certainly was not an Act of God that pushed agriculture into the throes of a continuing agrarian distress. Agriculture has in reality been a victim of a biased economic thinking perpetuated by the World Bank/IMF aimed at drastically reducing the dependence on farming. Over the decades, farm incomes have therefore been deliberately kept low so as to bring in macroeconomic stability required to boost growth. With inflation target kept at 4 per cent, plus and minus 2 per cent, and since food items carry a relatively higher weight in the computation of consumer price index (CPI), farmers ultimately end up paying the price of keeping food inflation low.

Take the case of paddy procurement price for the ensuing kharif harvest season. While the MSP has been increased by 2.9 per cent, the Commission for Agricultural Costs and Prices (CACP) has acknowledged that the composite input prices for paddy cultivation have increased by 5.1 per cent. 

In any case, fixing the procurement prices keeping in consideration the fallout it will have on inflation is one of the objectives of the CACP’s farm price policy. Even during the lockdown, when agriculture performed well, retail inflation for farm workers being higher than the gain in farm incomes, farmers in reality suffered income losses. This is borne by a joint survey conducted by Gaon Connectionand Centre for the Study of Developing Societies (CSDS) which showed that a majority of the farmers did not receive the right price (equivalent to MSP) for their produce. Several other studies over the years have shown how the farm prices have remained static or frozen.   

That is why I have always maintained that when farmers undertake cultivation they do not realise they are actually cultivating losses. 

It is agriculture that is actually crying for bold reforms. Agreed, in its present form, agriculture cannot emerge as the engine of growth. But let’s not forget, a healthy agriculture requires a prosperous farming community, which is only possible if the emphasis shifts to ensuring a significantly higher and an assured monthly income to farmers. This has to be accompanied by a sharp increase in public sector investments in agriculture, health and education. Is this possible? Of course, it is possible provided the mainline economic thinking changes with the changing times.  

 Agriculture served as the lifeline during the pandemic. The challenge now is to ensure that agriculture no longer remains the laggard but becomes an equal partner in growth. That’s the new normal that India should shift its policy direction to. 

Agriculture comes up trumps. The Tribune. Sept 4, 2020 https://www.tribuneindia.com/news/comment/agriculture-comes-up-trumps-136054?fbclid=IwAR1xb7L964sY8zfYWJovpP0YEofPCnUgSSAv1xv8jdfoBbIZtPzrga-kQe0 

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"I have always said that agriculture is being sacrificed to keep market reforms alive." My interview

Distinguished food and trade policy analyst, award winning journalist, writer and researcher DEVINDER SHARMA was trained as an agricultural scientists and quit journalism to write on food and trade policies. He tells SARBJIT DHALIWAL how unfairly independent India continues to treat its farming community

You have been advocating the need for a direct income support for farmers. Now that the Finance Minister has announced an income support of Rs 6,000 per year to small farmers owning less than 5 acres, do you think cash transfer is the way to address farm crisis? 

For more than four decades now farm incomes have remained more or less static. Several studies have shown that the real farm incomes have been on the decline. More recently, a  Niti Aayog study has shown that in the five-year period, between 2011-12 and 2015-16, real farm income had grown by less than half a percent every year, 0.44 per cent to be exact.

Following demonetisation, with farm gate prices slumping across board, we have seen reports of farmers throwing tomato, potato, onion and garlic on the streets. Irate farmers had re-ploughed standing crops of vegetables and reports of farmers endlessly waiting at the market to dispose off their farm produce, had appeared frequently. Farmers’ anger was clearly visible, and following the electoral debacle in the Hindi heartland, the government borrowed the idea to bring in direct income support to farmers.

Like the concept of universal basic income, I believe direct income support is a significant shift in economic thinking. For several years now, I have been asking for direct income support. Even in US and Europe, farmers have been given direct income support for long. The time has come in India to move from ‘price policy’ to ‘income policy’ which means over the next few years the government will have to further provide farmers with an assured or a guaranteed monthly income. After all, how long can we leave farmers to face the tyranny of the markets?

But many people say Rs 6,000 support is too less and too late ...

Yes, you are very right. Rs 6,000 a year actually translates into Rs 500 a month or less than Rs 17 a day. I don’t understand how the government thinks that with such a meagre amount small and marginal farmers will be able to get out of the terrible agrarian crisis that prevails. I don’t know how the government thinks Rs 500 per month will enable farmers to get out of the suicide trap. It seems the immediate objective is to ensure that the first instalment of Rs 2,000 lands in the bank accounts of small farmers before the ensuing general elections, for which a budgetary provision of Rs 20,000-crore has been made.

That there is a drought of practical ideas and thinking at the policy planning level was never in doubt otherwise there is no reason the farm crisis should have multiplied to such a severity. But to provide Rs 500 per month to a small farmer and then think it will do the miracle is a clear-cut reflection on the disconnect that prevails between policy planning and the ground realities. No wonder agriculture is in dire crisis.

The least that could have been done was to double the income support amount, from Rs 6,000 to Rs 12,000 per small farming family.

But where will the money come from?

That’s a question I hear whenever farmers loans have to be waived or they have to be given any financial support. No one has ever asked where the money will come from when huge corporate bad loans are written off. Between April 2014 and April 2018, Rs 3.17 lakh crore of corporate loans have been struck down, and no questions over fiscal imbalance caused or where from will the money come have ever been raised.

Take the case of 7^th Pay Commission. Arun Jaitley has earlier informed that it will entail an additional annual burden of Rs 1.02 lakh crore which will benefit 45 lakh central government employees and another 50 lakh pensioners. But when the 7th Pay Commission is implemented by the state governments, PSUs, colleges/universities, a Credit Suisse Bank study says the annual burden will be in the range of Rs 4.5–lakh crore to Rs 4.8-lakh crore. Did you hear anyone asking from will the money come from or whether it will add on to fiscal deficit?

Now coming to income support, if only the government had doubled the income support to Rs 12,000 per year per small farmer I am aware that the budgetary allocation would have also doubled. Piyush Goyal has said that Rs 6,000 support will require an additional finance of Rs 75,000-crore in a year. If the amount had been doubled, the budgetary requirement would increase to Rs 1.5 lakh crore.

Before you raise an alarm over where will the money come from, let me tell you that the immediate need was to discontinue an economic stimulus package of Rs 1.86 lakh crore that is being paid to India Inc since 2008-09 when the global economic meltdown took place. No one knows why this stimulus package still continues to be paid. No one ever asked the fiscal implications of this package, which means the country has spent Rs 18.60 lakh crore in ten years. Is that a small amount? And look, the tap still continues to flow. Why couldn’t this economic stimulus package be stopped and diverted to agriculture? If done, I am sure the Finance Minister could have announced a direct income support of Rs 15,000 per month to farmers.

I agree, but two wrongs don’t make it right

I too agree with you. But first tell me why do you think that even one wrong makes it right? Why is that the former Chief Economic Advisor Arvind Subramanian used to say that writing-off corporate loans leads to economic growth and waiving farm bad loans leads to credit indiscipline and former RBI Chief Urjit Patel had even called farm loan waivers as a moral hazard? Isn’t that simply a way to defend the wilful corporate defaulters?

Merrill Lynch had gone to the extent of telling us that farm loan waiver, which has already touched 1.9 lakh crore, amounts to 2 per cent of GDP. But it never told us how much would an NPA of Rs 10.3-lakh crore would be in terms of GDP. That’s how the blatantly biased economic system works. When you give money to the poor, it is called subsidy, a word that has been demonised. But when you give massive doles or tax cuts to corporate, it is called incentive for growth. No wonder, I have always said that it is socialism for corporate and capitalism for farmers.

Why is that while both the corporate and the farmers draw loans from the same banks, corporate get ‘haircuts’ with bulk of the loans written off by banks, which in turn leads to economic growth, whereas the poor farmer’s assets are seized and auctioned even for small outstanding amounts Rs 1 lakh or less. I have seen farmers going to jail for defaulting on just one repayment. In Punjab, thousands of farmers have received legal notices from banks for not being able to pay back in time and hundreds of them are in jail. Why doesn’t the same happen with Corporate big wigs? Why should the banking norms be different for different people?

You have also talked of income disparity. Can you tell us why do you say that agriculture has been deliberately kept impoverished?

I have always maintained that agriculture is being sacrificed to keep market reforms alive. Why I say so is because in the economic liberalisation paradigm, agriculture plays only two roles – First, it has to provide cheaper raw material for the industry, and secondly, it must provide cheaper food to people and keep food inflation low. Therefore farmers alone have carried this burden all these years. Farmers do not realise when they cultivate crops, they actually cultivate losses. The match is invariably fixed against them.

Let me illustrate. In 1970, the MSP for wheat was Rs 76 per quintal. Forty five years later, in 2015, the wheat price was Rs 1,450 per quintal, an increase of 19 times. To understand how farmers have been deprived of their rightful price, I made a comparison with other sections of the society. The basic pay (plus Dearness Allowance) of government employees in the same 45-year period had gone up by 120 to 150 times; of university/college professors by 150 to 170 times, of school teachers by 280 to320 times. If only the basic pay of employees and teachers for instance had risen in the same proportion as the farmers, I am sure a majority would have quit their jobs and with many suicides reported.

In addition, employees get a total of 108 allowances. When was the last time you heard of a house rent allowance being included in the MSP for farmers; an educational allowance for the children; health allowance for the farmer’s family members and a travel allowance for them? Why should MSP only take care of out of pocket expenses that a farmer incurs plus family labour along with a small profit margin? Why not calculate farmers cost like the way Cost Accountants do for the agribusiness industry?

Farmers have been demanding a higher MSP, as suggested by the Swaminathan Commission, and also want a loan waiver. How justified you think are their demands?  

Farm loan waiver is the immediate relief farmers need. After all, if for four decades farmers have been denied their legitimate income, and have survived on taking credit and repay that credit draw more credit from another source, why shouldn’t the nation stand with them and see that they are relieved of their economic burden once for all. Let’s give an opportunity to farmers to get rid of the entire economic baggage they carry. Waiving farm loans is not an act of generosity or is an attempt at being politically correctness, what we need to understand is how and why farmers have been deliberately kept impoverished all these years.

A recent OECD-ICRIER study says that in the past two decades farmers have incurred a loss of Rs 45-lakh crore on account of low prices. Earlier, I remember an UNCTAD study had estimated that farm gate prices across the globe had remained frozen between 1985 and 2005 when adjusted for inflation. Can we even imagine how with all these losses has the farming community been surviving year after year? Despite living in hunger themselves, they still produced food for the country. 

Swaminathan Commission’s recommendation is for giving farmers the weighted cost of production plus fifty per cent profit. But the government has manipulated the formula treating the basic expenses in production as A2 plus family labour (A2+FL) and then given 50 per cent over it. This formula gives a much lower price than what Swaminathan recommended. Although the new improved price has been announced for all 22 crops for which MSP is announced but everywhere farmers were able to sell at a much lower price, often 25 to 40 per cent less than the announced price. As a result economic losses continued to pile up.

As per the high-powered Shanta Kumar committee even though only 6 per cent farmers get the benefit of MSP and the remaining 94 per cent farmers are dependent on the vagaries of markets, MSP must be enhanced to the level Swaminathan recommended. But I see a lot of pressure is being exerted by the industry (and their brand of economists) to dismantle the regulated markets. This will be rather unfortunate. The reason is simple. Once the APMC markets are disbanded, farmers will be ruthlessly exploited and price discovery will become an instrument for exploitation. Take the case of Bihar. It abolished APMC markets in 2006. In the absence of APMC, farmers are able to sell wheat and paddy at prices which are much lower than that in Punjab and Haryana where farmers do receive MSP because there exists an elaborate network of APMC mandis. This year, huge stocks of paddy illegally transported all the way from Bihar have been apprehended in Punjab and Haryana.

The answer therefore lies in strengthening the APMC network rather than disbanding it. There exists roughly 7,600 APMC mandis so far and what India needs is a network of 42,000 mandis for every 5 km radius.

What in your opinion should the government to do to pull agriculture out of the distress that prevails? Is there a sustainable solution that can bring back the smile on the face of farmers?

Yes, of course. Agriculture needs a holistic set of reforms, including credit policy, market reforms, trade policy etc, which must begin with the premise that agriculture too is an economic activity. In fact, at a time of jobless growth now leading job loss growth, agriculture being the largest employer alone has the potential to reboot the economy. The three steps that the government should initiate immediately in addition to what I have said earlier, so as to ensure economic security must include:  

1) Along with direct income support, the next step to augment farm incomes should be to set up a Farmers Income Commission. My suggestion is to rename the existing Commission for Agricultural Costs and Prices (CACP) as a Commission for Farmers Income and Welfare with the mandate to ensure that farmers are able to realise an assured monthly income of at least Rs 18,000 for a household owning not less than an acre. At the state level, each state should set up a Farmers Income Commission.

2) Initiate a series of steps for ease of doing farming. This involves governance, and also removing obstacles that farmers face routinely. If industry can have 7,000 steps carved for ease of doing business I see no reason why agriculture cannot get the same attention. This will need a separate monitoring wing with enough teeth, under the Ministry of Agriculture and Farmers Welfare. At the state level, Farmer Commission should be given more powers to regulate farming operations. 

3) It is time to increase public sector investment in agriculture, which has been dwindling over the years. Between 2011-12 and 2016-17, public investment has remained between 0.3 and 0.4 percent of the GDP. Considering that nearly 50 per cent population is engaged in agriculture, the total investment, both public and private, must increase every year. But this can happen only when agriculture is treated as an economic activity.#

India support socialism for industry, capitalism for farmers. National Herald, Feb 24, 2019

https://www.nationalheraldindia.com/opinion/devinder-sharma-india-supports-socialism-for-industry-capitalism-for-farmers

  

READ MORE - "I have always said that agriculture is being sacrificed to keep market reforms alive." My interview

Understand the economic design that pushes farmers out of agriculture

In case you missed watching it, here is the video of an interview in Hindi that I gave to popular #AajTak TV Channel, that went viral.

खेती का चक्रव्यूह 2/5

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READ MORE - Understand the economic design that pushes farmers out of agriculture