According to Amitabh Kundu (Senior Fellow, World Resources Institute) and Harbir Singh Sidhu (a management consultant), who have written an opinion piece in The Indian Express, the flashpoint between the agitating farmers and the central government is essentially rooted in the mismatch between the supply and demand for the wheat crop in India.
“The genesis of the current state of affairs stems from policies initiated over half a century ago when India was critically short in foodgrains and had to rely upon imports under PL-480 as aid from the US,” they explain.
India set up a massive Public Distribution System (PDS) for supplying wheat (and later rice) to the urban consumers (and other vulnerable sections of the population in rural areas, at a later stage) by issuing ration cards that entitled them to a fixed quantum at controlled prices.
To feed the PDS, potential surplus producing states (notably, Punjab and Haryana) were cordoned off from the rest of the country under a quasi-monopolistic buying by the central government through the Food Corporation of India (FCI) at a farmer remunerative price, labelled as the minimum support price (MSP).
Concurrently, high yielding varieties of seeds were produced and popularised by the state agencies along with pushing the use of tube wells and fertilisers with subsidies for electricity and some fertilisers.
The result was a resounding success for the production and procurement of rice (common varieties) and wheat.📣 Follow Express Explained on Telegram
Over the long period of government monopoly through the FCI, several agencies and administrative orders have emerged whose justification has become tenuous under free market/trade conditions, due to significant technological advancements in post harvest grain handling as also greater awareness of and information to the farmers. Understandably, the costs associated with this institutional arrangement are noted as cuts in the legitimate earnings of the farmers.
On the supply side, Punjab and Haryana are now geared for a rice-wheat cycle. The major problem comes in the rabi season wherein the only superior alternative to wheat in the rice-wheat rotation are vegetables and higher qualities of wheat (such as durum varieties that are exportable).
The chances of success here, however, are lower.
“Under the current procurement policy, the advantages of producing high-quality grains have been ignored. Since the origin of the policy was to feed the PDS system in periods of shortages, the considerations of maximising yield and lowering cost of production dictated the production and procurement decisions. These, unfortunately, were not the best products for export. The critical concern about keeping prices low for the middle classes in India has, thus, impaired the healthy growth of the agriculture sector,” they state.
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