While
the latest news from the World Bank may sound very exciting to foreign
institutional investors and also to the Narendra Modi government, all does not
seem to be hunky-dory at home. Ayhan Kose, director of the development
prospects group of the bank, gave a projection that the Indian economy would
grow at 7.3 per cent in 2018-19 and 7.5 per cent in the next two years.
This
may give a respite to the growth-hungry government but the sad part is that
neither farmers nor the youth are happy with the goings-on. Be it the
manufacturing, service or retail sector, there does not seem to be much
excitement. Foreign institutional investors have already started leaving India.
This may or may not be directly related to India’s growth story. But we need
investments for growth and FIIs need return on their investment. As the rupee
dips, their return is affected and hence their exit.
On
the agriculture front, the month of June started with a 10-day-long protest. We
saw milk and vegetables being thrown on the roads. We also saw how vegetable
and milk supply to the cities is being contained so that all and sundry feel
the heat of what the farmers are being subjected to. Yes, the prices are now
high as the supply is less. This is the third time in one year that farmers
have protested. And so far, they have received nothing except some promises
that their loans would be written off.
On
the political front, the two main political parties have already started
politicising the issue. Congress President Rahul Gandhi addressed the Kisan
Samriddhi Sankalp rally in Mandsaur in Madhya Pradesh. However, the speech
largely served the political agenda for the 2019 Lok Sabha elections. The
speech started another war of sorts, with the BJP defending its side and the
Congress rebutting it point-by-point.
The
BJP accused the Congress of instigating the farmers to protest for political
gain. The micro-blogging site, Twitter, trended with #RahulGoBack alleging that
people who are spilling milk and vegetables on streets cannot be farmers. They
are paid workers of a certain party. Their sole aim is to target Modi.
Be
that as it may, neither the BJP nor the Congress wants to address the actual
issues facing the farmers. It may also be a possibility that the political
leaders do not even have an idea of what exactly their problems are.
It
starts with what has been so attractively packaged for farmers for years – the
minimum support price (MSP) – promising the farmers that they will get a fixed
price for their crop, irrespective of the circumstances they face. Now, the
question is, who will pay this price. Of course, the food procurement agencies
set up by the government. But the fact is that these agencies start procuring
several days after the crop start coming into the grain markets. Since there is
hardly any procurement, the farmers are forced to sell to the local vendors or
aartias
– the intermediaries.
The
government’s policy formulation wing – NITI Aayog’s evaluation report published
in 2016 has laid bare the ground realities. The report says that 79 per cent of
the farmers expressed their dissatisfaction with the MSP regime. The reasons
quoted were delay in payments, lack of infrastructure at procurement centres
and delayed announcement of MSP. Some also said that the procurement centres
are at a huge distance from their village, making it difficult for them to sell
their crop.
If
one goes by a survey conducted by the National Sample Survey Organisation
(NSSO), only 6 per cent of the farmers are able to sell their produce at MSP.
Another survey that concentrated on the awareness level of farmers about MSP,
pointed out that only 24 per cent of the farmers were aware about the MSP of
crops grown by them. Except for wheat and rice, the government procurement
agencies buy small quantity of other crops, leading to low level of awareness.
It also revealed that 92 per cent of the farmers in Maharashtra, the state
where maximum farmer protests took place last year, were not aware about MSP of
their crops.
In
other words, despite the repeated usage of the word MSP in political speeches,
awareness about it is very low. Also, not every farmer is able to reach the
government procurement agencies. In other words, the government has to
strengthen its own infrastructure in case it wants to help farmers.
Another
demand that the farmers have been raising is about implementation of the
recommendations of the Swaminathan commission. The key recommendation of the
commission has been the formula to calculate MSP. It says that MSP should be
set at cost plus 50 per cent of the cost. Simply put, if the cost price of the
produce is say Rs. 100, the MSP should be Rs. 150.
Arun
Jaitley during his budget speech this year announced the implementation of MSP
at 1.5 times the cost of production. However, there is a huge difference in how
cost of production is calculated. The commission has recommended that cost of
production should be calculated comprehensively taking into account the imputed
rent and interest on owned land and capital. On the other hand, the government
has taken the actual cost of production as the base for calculation of MSP. In
other words, there is a huge difference in what is being said and implemented.
In fact, Jaitley’s formula, does not give any incremental revenue to the
farmers. It maintains the status quo with a very nominal increase.
If
farmers sell their crop at a price lower than the MSP, from where will they
repay crop loans? In such a scenario, demand for loan waiver is obvious. The
BJP government in principle is against loan waivers, for it disturbs credit
discipline and promotes moral hazard.
But
when farmers in huge numbers protest, the state government has to change its
stand. But there have been instances where farmers got a cheque for Rs. 1 against
loan waivers, which is like rubbing salt into their wounds.
The
government is often criticised for its step-motherly treatment of the farmers
in comparison with the big industrialists, who go for debt restructuring. Some
others simply flee the country, without paying their dues. The fact is that in
the case of debt restructuring, interest is either reduced or the loan period
is increased and in case a loan becomes non-performing asset (NPA), there is
still a hope that the loan may be recovered. In the case of farm loan waivers,
there is hardly any chance of recovery.
Overall,
the problem remains the same. Unless the farmers earn sufficient revenue, they
will always be on the roads, protesting and demanding loan waivers. The
government has to rejig its procurement and agricultural marketing structure so
that the farmers do not fall prey to the middlemen and are not forced to sell
their produce at unfavourable prices. The concept of MSP that was introduced
long back should be reframed keeping in mind the ground realities.
The
data from the central statistics office lays bare the fact that the gross
national income from agriculture has increased year on year but the gross value
of input cost has also increased. In other words, apart from ineffectiveness of
MSP, the farmers do not have much in their hand to take home as the cost of
production has increased considerably. The net income growth remains in single
digit. For instance, nominal farm income for the quarter ended March 2018 was a
mere 4.9 per cent for the agriculture sector on the whole.
The
farm prices are rising but at a very low rate compared to the general prices.
In other words, farmers have to spend more while they hardly earn anything out
of their produce. If nominal income remains below 5 per cent, it will take
another 14 years to earn at least 10 per cent revenue. And the commitment that
Modi made to the farmers in Bareilley in February 2016, of doubling the farm
income by 2022, will remain just a dream.
(The
writer, a company secretary, can be reached at
jassi.rai@gmail.com
)
