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Woes Of The Farmer

Woes Of The Farmer

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 )

(Published on 11th June 2018, Volume XXX, Issue 24)