The ongoing agrarian crisis is far from over with all the probability to raise its ugly head anytime in future. It was largely the result of our outdated and archaic policies coupled with inadequacies of the market place such as opaque prices and infrastructural bottlenecks. For a country that has more than two-thirds of its population directly or indirectly dependent on agriculture, it can ill-afford to neglect the precarious conditions as they exist in the agricultural sector today. The livelihood of these people is at stake. Let us understand what lies at the root of the recent crisis. After almost three years of drought like conditions, this year our farmers have delivered a bumper production of most agricultural commodities. The farm sector production has grown by approximately 8 % on the whole this year with the production of pulses up by 50% and that of horticultural products by 40% over last year.
This has been made possible by a lot of support from the government like enhanced availability of fertilizers, counselling over kisan helpline and scientific checking of soil by way of soil cards among many others. It is a conundrum which many do not understand, despite bumper production farmer distress has only increased. Bumper crop production has created an unprecedented glut in the market that sent prices of commodities into a free fall. This is bound to happen as supply outstrips demand for the produce, as would happen with any other product. The drop becomes more pronounced in case of perishable products. This is one part of the problem. The other part of the problem lies in the input costs and its funding pattern. A study on the agricultural costs shows that in a span of 10 years from 2004 to 2014, the cost (per hectare) of fertilizers and seeds have almost doubled. Add to this, the cost of irrigation including cost of electricity which has also increased substantially over the said period. Thus, farming would flourish only when the sale price or ‘terms of trade’ takes into account both the input costs as well as a healthy profit margin for the producer. In the present scenario, the sale price does not cover the input costs let alone a healthy profit margin. Thus, the situation has turned unfavorable for the producers. On one hand, the sale price has not kept pace with the increased costs and on the other bumper production has caused a substantial fall in the realisable price too.
This is not the end, the situation gets compounded further if the farmers have raised loans towards financing their input costs. In the situation of low sale prices, it is the outstanding debt and its servicing that has caused untold distress leading to farmer agitation as well as suicides. Realising the maladies in the sector, the BJP in its 2014 election manifesto promised at least 50% margins over the cost of production and doubling farm incomes by 2022.
Now let us turn our attention to the government policies on procurement of agricultural produce. The government fixes the MSP (minimum support price) for 23 items. Out of which the government procures just two items which are wheat and rice and for the rest of the items there is no government procurement. For the remaining 21 items, the farmers are totally dependent on the open market operations. These markets do not function efficiently due to government over regulation and lack of storage facilities. In spite of having an MSP, majority of farmers do not get this price in the open markets for their produce. Therefore, an MSP is a misnomer and a non-existent price that remains largely unrealisable. Consider an example,
Arhar dal (or tur dal as it is called) that has an MSP of Rs. 50,500 per tonne is selling at a price between Rs. 35,000 and Rs. 47,000 per tonne in the open markets. We are now forced to ask, what is the sanctity of having an MSP when the rate is unreasonable? A farmer is forced to sell at a price fixed by the market which is more often below the MSP, leading to a negative profit margin.
Another point worth noting is the ban on export of pulses which has been in force since 2006. The reason why the ban existed is that the government is circumspect of a situation in which an artificial imbalance could be created in the domestic market by depriving enough supplies and diverting it for export, thereby pushing up prices. Alongside the export ban there is ‘no duty’ levied on the imports. The availability of cheap abundant imports also ensures low prices in the domestic markets. If imports are stopped even temporarily, it leads to spiking of prices in the domestic market. Having an export ban and no duty on imports, places the farmers at the mercy of international markets and its dynamics. This is an artificial way of keeping the retail prices under control. Having control on imports and opening export will jack up the prices in the domestic market which will pinch the common household consumers. The need of the hour is to manage the limited stockpile most efficiently between states. A prerequisite would be to be to have good infrastructure to stock enough food grains to meet the demand of domestic market and the surplus could be freed up for exports. If such is the case, the situation would have been a lot different today. Why can’t there be efficient open markets that thrive on transparency with enough storage facilities?
The combined effect of bountiful production, export ban and duty-free import had led to a drop in prices as much as 50 % in the wholesale market and up to 20 % in the retail markets. For example, in the retail market the prices of vegetable fell by 13.5 % in May 2017 when compared to prices in May last year. While the retail prices of pulses registered a sharper decline at 20 % in May 2017 over corresponding period last year. Talking of wholesale market, the decline in prices of vegetables in May 2017 is around 60 % over last year’s prices in the corresponding period. This year we have witnessed a period of deflation in food process for the first time since 2012. Taking stock of the situation after crash in prices in May 2017, the government decided to levy a 10 % duty on import of food items which exists even today.
There are some peculiar problems afflicting the farm sector. Most marginal farmers grow only one or at most two crops simultaneously since their land holding is not much. This makes their fortune linked with just one or two crops. If the crops do well and the prices in the market are conducive only then will he makes a small profit.
For example, farmers in MP have traditionally grown onions and when the prices of onions increased exponentially in 2010-11 to around Rs 80 per kg, onions became the favorite crop all over the state. Consequently, the land under cultivation doubled over a span of next 5 years. The problem started a few years later. The price of onions has been dropping for the last three years in a row and this year when the prices had crashed to almost Rs 4 per Kg, most farmers have been left high and dry. At the current rock bottom prices, the farmers have not been able to cover their input costs. In order to provide relief to farmers, only last year the government had offered an attractive MSP for onions and procured a huge quantity. For want of storage facilities, the procured crop rotted away in open storages. Experts feel that most state governments are ill prepared lacking planning before the harvesting season. The state governments neither have any clue on movement of prices of commodities in the market nor have storage facilities to stop wilting of procured crops. This year, of the 34 lakh tonnes of onion produced in MP, the government has been able to purchase only 7 lakh tonnes while the storage capacity is miserably below 6 lakh tonnes. With the onset of rains most of the procured crop as well as that still waiting to be procured has wilted, benefitting none.
Apart from the above cited problems, there are a lot many extraneous perils plaguing the farmers that keep them on their toes all the year round, year after year and unabated.
There is scourge of middle men who are always on the lookout for duping the farmers and stripping them of their penny’s worth. They buy at wholesale prices (which are often pleasing prices set by them) and slowly release stock at the retail prices. Thus, making a neat profit of 30 to 40 % as their rate of return at the cost of farmers in the process. These middlemen are well to do individuals akin to industrialists who roam around in fanciest of cars dwelling at fanciest of addresses in big cities.
Among the natural perils encompassing vagaries of weather include, rains and prevalence of rodents & pests that infect the crop. Too much and untimely rain is just as bad as too little of it. There is another statistic that needs special mention here to bring the issue in perspective which is, the proportion of farmland under organised irrigation. This figure in our country stands at a little over 1/3rd which makes our crops largely rain dependent and therefore an adverse distribution of rainfall in any given year takes a toll on farm incomes. Among the manmade reasons, the top few are threat of land acquisition by government and private bodies for supposedly benevolent purposes such as social infrastructure and housing. In most cases the land is acquired by force thus evicting and stripping farmers of their landholdings. The farmers have to keep an eye on such predatory acquisitions.
Another reason that has become relevant these days is the lure of modern lifestyle that towns and cities accord to the young ones of the farmers. The young generation is reluctant to take up farming as their fathers or forefathers did for decades. The youngsters flock to towns and cities to take up other jobs and carve out a whole new life for themselves. This leaves no one to take care of the farming activities except the farmer himself, forcing him to employ expensive labour to fulfil the tasks thus driving the cost of inputs northward.
One very opportune policy intervention made by the present central government is the crop insurance scheme called as Pradhan Mantri Fasal Bima Yojana (PMFBY) launched in March 2017.
In its very first year of its launch, a total 25 million farmers have been covered by paying a nominal premium. The major part of the ‘required premium’ was split between the center and the states. However, the implementation and the payment of ‘sum assured’ to the affected farmers has left more to be desired which will only improve in years to come. It is a progressive step in the right direction.
A temporary relief to the farmers has come by way of farm loan waivers of the farmers’ current loans announced by various state governments. No doubt, it is a short-term measure but provides immediate relief to the aggrieved farmers facing desperate conditions. All agree that this could only be a one-time measure and long-term solutions need to be thought out to put an end to precarious conditions of our farmers. This calls for systemic interventions at the policy level to end existential dilemma faced by India’s farming community.
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