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Seeking a different answer

While it has been one of the primary points of contention in the ongoing farmers’ protest, the guarantee of MSP is not likely to ease the present woes of Indian farmers

Seeking a different answer
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A few months ago, the Government passed three bills in the agriculture sector, which aims to improve the existing system of marketing, sale and storage of agricultural produce across the country. These bills will increase the availability of buyers for farmers' produce and allow competition to trade freely without licenses or storage limits, thereby increasing competition among traders, forcing them to pay better prices to farmers.

Farmer leaders are talking about the enactment of minimum support price (MSP), so that private traders are also forced to buy the produce of farmers on MSP. It is notable that every year, the Government announces MSP for 23 crops, but all crops are never procured due to limited resources. A few farmers say that the new agricultural bills will eliminate the MSP. They are adamant on withdrawing all the three bills. Even though MSP is at the heart of the farmer movement, this system is not available in all the states.

Till December 11, 2020, Punjab accounted for 55 per cent of the purchase of Kharif crop on MSP, while it was zero in West Bengal and eight per cent in Uttar Pradesh. However, Punjab ranks third among the paddy producing states in the country, while West Bengal is at first and Uttar Pradesh at second place. Andhra Pradesh ranks fourth in the country in paddy production, but farmers of Andhra Pradesh account for one per cent purchase on MSP. Farmers of Punjab and Haryana account for nearly 70 per cent of purchases at MSP. In such a case, the justification for opposing the agricultural bill by West Bengal and Delhi is beyond comprehension.

Analysis of the data also shows that in the last years only 25 to 35 per cent of wheat procurement was done on MSP, of which Punjab and Haryana had the largest share. It is noteworthy that most of the government procurement centres in Punjab, Haryana and some other states are located within the APMC mandis.

Farmers fear that by encouraging tax-free private trade outside the APMC mandis, the current notified markets will become unstable, leading to a reduction in government procurement. Farmers are also demanding that MSPs be universalised within and outside the mandis, so that all buyers, government or private; treat these rates as minimum prices. Obviously, private buyers would avoid entering government mandis in such a system. The analysis of the data also shows that even though the MSP is visible at the core of the peasant movement, the reason is different, as some states are supporting the peasant movement fearing the closure of mandi taxes. Currently, there is a six per cent mandi tax and 2.5 per cent tax is related to the management of the procurement process. Thus, some states may suffer 8.5 per cent revenue loss from the new agricultural bills.

Small and marginal farmers are not getting MSP right now. Through new agricultural bills, the Government has tried to remove the existing anomalies. With the new agricultural bills, small and marginal farmers will be able to sell their produce outside APMC mandis at a reasonable price and can also store their produce when needed, as the new agricultural bill restrict contracts farming. The bills also propose to abolish the 'ECA Act', which restricts private investment in post-harvest storage.

The practice of contract farming in India is not prevalent in most states. However, it is popular abroad in countries such as Malaysia and Thailand. The Federal Land Development Authority (FELDA) has been established to pursue contract farming in Malaysia. This practice may be started in India also. Suicides committed by the farmers is directly related to the self-reliance of farmers. According to the National Crime Records Bureau (NCRB) data, farmers and agricultural labourers in Maharashtra and Karnataka are committing 13 times and 6 times more suicides than Punjab respectively. The income of farmers in Punjab is also 2.3 times higher than the farmers of Maharashtra and Karnataka.

The 'Kisan Credit Card' (KCC) scheme is the most popular among all agricultural loans, as it presents solutions to the economic problems of the farmers. Under this, the Government of India gives four per cent interest subvention to farmers who have taken loans up to Rs three lakh and are paying instalments and interest on time. At the end of March 2020, all scheduled commercial banks (ASCBs) had a surplus amount of KCC loan amounting to about Rs 7,095 billion, which was about 40 per cent of the total agricultural credit and by March 2020 had 6.7 crore active KCC cardholders. To make universal access to concessional institutional credit accessible, the Government of India has asked banks to provide KCC to all 11.39 crore PM-Kisan beneficiaries. During February to April 2020, banks received 75 lakh KCC applications, out of which 36 lakh KCCs have been issued to farmers. A study by NABARD shows that the KCC scheme has a significant contribution in strengthening the farmers financially. In six states such as Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Bihar and Uttar Pradesh, only 28 per cent of PM-Kisan beneficiaries have KCC accounts. Therefore, there is a need to give KCC loan to all PM-Kisan beneficiaries, so that they can become self-reliant.

After production, agricultural produce passes through several stages to consumers. In this journey, a large part of the agricultural produce is wasted due to lack of proper handling and storage of the produce, which causes loss to the farmers as well as a shortage of food grains in the country. A 2015 report showed that 4.6 to six per cent of grains, 6.4 to 8.4 per cent of pulses, 3.1 to 10 per cent of oilseeds, 6.7 to 15.9 per cent of fruits, and 4.6 to 12.4 per cent of vegetables before reaching consumers after harvesting are wasted.

It can be said that even the guarantee of MSP is not a solution to the problem of farmers in any way. Today, more important than MSP for farmers is to save crops from disasters like droughts, floods, etc., to provide timely financial assistance to farmers. Also, there is a need to strengthen APMC market infrastructure, promote contract farming and make KCC norms more flexible and distribute more KCC loans among farmers.

The writer is the Chief Manager in the Department of Economic Research at the Corporate Centre of State Bank of India, Mumbai. Views expressed are personal

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