Making reforms meaningful
A hike in MSP must be complemented by parallel efforts to ensure that the ultimate benefit reaches the farmer, argues Arun Srivastava
Barely two months ago, the farmers of Madhya Pradesh had taken to the streets demanding minimum support price (MSP) for their produce. The state government was not too willing to concede to the demands of the farmers. The agitation eventually turned violent and at least nine farmers lost their lives in police firing.
MSP is a form of market intervention by the government to insure agricultural producers against any sharp fall in farm prices. The MSP is announced at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP). MSP is the price fixed to protect the producer - farmers - against excessive fall in price during the bumper production years. It is a guaranteed minimum price for their produce.
Amid farmers' unrest in many parts of the country, the demand for an increase in MSP has been voiced regularly. The manner in which MSP is used makes it clear that it is no more an instrument to improve the financial condition of farmers but to boost the image of the ruling party.
MSP has, in fact, lost much of its financial relevance as it failed to serve the interest of the farmers. Questions are also being raised about the efficacy of MSP in serving all types of farmers. The beneficiary quotient has been the primary factor in assessing the impact and the utility of the MSP.
Only a week back, the Narendra Modi government announced a hike in the minimum support price for the common variety of paddy, increasing it by Rs 200 per quintal. But the move will benefit only 6 per cent of the farmers. During the last four years, no serious attempt has been made to study the impact of MSPs on the life of farmers. During these four years, a large number of farmers have committed suicide. The government had earlier promised to implement the Swaminathan Committee's formula, which suggests that MSP for a crop should be fixed at 150 per cent of the cost determined by CACP but the incumbent government settled for 50 per cent. The government has, then, betrayed the farmers.
As JD(S) leader, Sharad Yadav, has pointed out that unless the procurement system is revamped and made robust, farmers will continue to make distress sales. He says that he found farmers selling paddy at Rs 1,200-1,300 per quintal when the MSP is Rs 1,550. Similarly, maize was selling at less than Rs 850-900 per quintal as against the current MSP of Rs 1,425. In the case of moong (green gram), farmers were selling it at Rs 3,000-3,500 per quintal when MSP is Rs 5,575. Procurement agencies collect crop as per the requirement of the PDS and, obviously, the government is not concerned about small and poor farmers.
There is a pressing need to set up a robust procurement system and eliminate the middlemen who have been exploiting the farmers. Even today, farmers rely on them for acquiring money and for selling their crops. This shows the failure of the procurement agencies. Incidentally, these people constitute the support base of the ruling party. And, as such, it could well be expected that any party looking to secure its gains ahead of an election year would not want to act against them.
The lobby of the middlemen is so strong that each attempt to weed them out, even during the Congress rule, was successfully foiled by the vested interests across different levels. Often, under political pressure, the procurement agencies go on a low-key and would procure only the quantities needed under the PDS. This attitude was primarily against the interest of the small and poor farmers.
Shiv Kumar Sharma, president of the Rashtriya Kisan Mazdoor Sangh, alleges the government has defrauded the farmers. Sharma, one of the leaders of the agitation in Mandsaur in June 2017, in which five farmers were killed in police firing, said the government earned more than Rs 1.5 lakh crore from farmers through the crop insurance scheme, taxes on diesel and GST on agriculture equipment but would return only about Rs 15,000 crore to farmers through the MSP hikes. Anil Yadav, the state president of the Bharatiya Kisan Union (BKU), argues that MSP hikes would hardly bring about any change in the life of farmers as traders would continue to buy the crops much below the support price and sell at a much higher price.
Until the input cost of agriculture is reduced and there is an effective law to control traders, farmers are not going to secure any benefit with such a hike in MSP. Traders will continue to buy the crop at mandis much below the MSP. Besides, the elements such as a hike in the labour wages by Rs 1,200 to 1,500 per acre, GST of 18 per cent on machinery and farm implements and 12 per cent on fertilisers, and rise in diesel prices have further complicated the life of farmers.
Economists have already expressed apprehensions that this could cost the exchequer an additional Rs 15,000 crore and would wreck government finances, stoking inflation. They argue that the promised doubling of farmer incomes is not possible unless the number of farmers is reduced. Intriguingly, the government has been working towards this agenda.
In February 2016, Modi spoke of his "dream" of doubling farmers' income by 2022. This was repeated in successive budget speeches of the Finance Minister. In April 2016, the Dalwai Committee was formed; and it came out with a 14-volume report identifying ways to double farmers' income from the 2015-2016 levels in real terms in seven years. Since there was no updated estimate of the actual level of farmers' incomes in 2015-16, the Committee arrived at estimates by applying net state domestic product (NSDP) growth rates on estimated state-wise farmers' incomes of 2012-13 (from the NSSO).
It is an open secret that loan waivers and increased MSP provide only temporary relief to farmers. The current crisis in India's farm sector is perhaps the worst in the last 15-odd years. The agrarian distress was underlined by the finding that as many as 64 per cent of farmers would like to leave agriculture and move to a city if they were offered a job there. This percentage was slightly higher than the 62 per cent that the State of Indian Farmers Survey reported in 2013 for the same question. However, the big difference from the 2013 survey was that as many as 60 per cent of farmer respondents in the current survey said they would not like their children to take up farming as the source of livelihood.
In the three years since the government promised to double farm incomes by 2022, agricultural incomes have been stagnant. If one looks at the MSPs of select crops in 2016-2017, the Swaminathan Committee formula remains a mirage. The announced prices hardly meet the actual cost of crop production.IPA
(The views expressed are strictly personal)