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Monday, May 23, 2022

From Plate to Plough: Why farmers agitate

An efficient and sustainable solution for better prices really lies in ‘getting the markets right’ by overhauling the agri-marketing infrastructure and its associated laws.

Written by Ashok Gulati , Shweta Saini |
Updated: June 11, 2018 7:09:31 am
Why farmers agitate An efficient and sustainable solution for better prices really lies in ‘getting the markets right’ by overhauling the agri-marketing infrastructure and its associated laws. (Illustration: Sarfaraz Alam)

After it completed four years in office, the BJP-led NDA government launched a major media campaign that claimed, “48 months of transforming India”. Several infographics and tweets by the government show happy farmers, their lives having being transformed in these 48 months.

Cut to news channels telecasting live videos of farmers protesting during the 10-day bandh that hit the supply of essential commodities, including milk and vegetables, to urban areas. The aim of the protestors was to attract government attention to their myriad woes, especially low agri-prices.

Who should one believe? The “saaf-niyat” of the government and its claims of “sahi vikas” or the desperate farmers dumping their produce on roads? The Union agriculture minister termed the farmers’ strike as a drama that was enacted to catch media attention. A few facts about the government’s performance in agriculture during the last 48 months can throw more light on the motives of the agitating farmers.

In this period, the Indian economy (GDP) grew at an average rate of about 7.2 per cent but its agriculture sector (agri-GDP) grew at a mere 2.5 per cent per annum — according to the CSO figures of May 31. Interestingly, in the last four years of the UPA-2 (2010-11 to 2013-14), the economy clocked a growth rate of 7.1 per cent per annum and the agri-GDP grew at 5.2 per cent per annum (see figure). Investments in agriculture (gross capital formation in agriculture, GCFA, as percentage of agri-GDP) fell from 17.7 per cent in 2013-14 to 15.5 per cent in 2016-17. Agri-exports fell from $42 billion in 2013-14 to $32 billion in 2015-16, recovering to $38 billion in 2017-18. Agri-imports increased from $16 billion in 2013-14 to $24 billion in 2017-18, bringing down the agri-trade surplus from $26 billion in 2013-14 to $14 billion in 2017-18. Also, compared to 2013-14, the profitability of most major crops is down by at least one-third in 2017-18. Therefore, it is not surprising that the annual growth rate of 3.6 per cent in farmers’ real incomes, achieved between 2002-03 and 2012-13, has fallen to about 2.5 per cent in the last 48 months.

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Overall, the data shows that all has not been well on the agri-front after 2013-14. It is this below-normal performance in agriculture that has resulted in farmers’ protests. Their basic demands are two-fold: First, deliver on the promise of “50 per cent profitability over costs”, and second, ensure complete loan-waiver. The promise of remunerative prices was based on the 2006 M S Swaminathan Committee Report that recommended fixing MSP at cost plus 50 per cent. In his presentation on October 4, 2006, Swaminathan made it clear to the then Union Minister of Agriculture that the cost he was referring to was Cost C2 or Comprehensive Cost (sum of paid-out costs, and imputed values of family labour, rentals on owned land and interest on owned capital). Sum of paid-out costs and imputed cost of family labour is A2+FL Cost that is about 38 per cent lower than Cost C2.

After four years in office, Prime Minister Narendra Modi has announced his intention to give farmers MSPs that are at least 50 per cent above the cost (A2+FL and not C2). What actually happens is yet to be seen. The failure of the government to deliver on the promises made in the BJP’s manifesto for the 2014 Lok Sabha election means that the farmer is confronted by the declining profitability of farms. This is especially true for those cultivating cotton, maize, groundnut, soyabean, jowar, bajra, rape and mustard seed, and even sugarcane. Their margins (MSP over A2+FL) in 2017-18 are lower than the margins in 2013-14. Even if MSPs for kharif crops in 2018-19 witness a hefty increase, given the limited reach of the government’s procurement mechanism, benefits are likely to go to a limited number of farmers in select states.

An efficient and sustainable solution for better prices really lies in “getting the markets right” by overhauling the agri-marketing infrastructure and its associated laws. It needs to be done on a priority basis and in a synchronised manner. Agriculture is a state subject. Therefore, the fact that more than 20 states in the country have NDA governments presents the Centre with a unique opportunity to carry out the long-due marketing reforms in the agriculture sector. Unfortunately, that opportunity seems to be slipping fast.

What might happen, instead, is a spate of farm loan-waivers. The total bill of farm loan-waivers, from 2017 till 2019, we are afraid, may touch Rs 3,00,000 crore. This might give temporary relief to farmers but agriculture is unlikely be revitalised. Attaining 4 per cent growth in agri-GDP on a sustainable basis remains a challenge. With agriculture merely chugging along, doubling farmers’ real incomes by 2022-23, as PM Modi has envisioned, may remain a pipe-dream.

The government can draw a few lessons from its performance in the agriculture sector. But it should first have the humility to accept that the sector is not doing very well. It must focus on effective and timely implementation of its programmes — the PM’s Fasal Bima Yojana, Krishi Sinchayee Yojana and the National Agriculture Market. This requires hard work, fixing various nuts and bolts before these schemes can deliver. Can that be done before the 2019 general elections? Only time will tell.

Gulati is Infosys Chair Professor for Agriculture and Saini is senior consultant at ICRIER

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