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Wednesday, July 18, 2018

Fields of unrest

Better prices for produce, not loan waivers, is the right response to the farmers’ protests

By: Editorial | Published: June 9, 2017 12:14:06 am

There is a clear pattern to the farmer agitations currently on in Maharashtra and Madhya Pradesh. To start with, they seem to be concentrated in the relatively more prosperous agriculture belts — the stretch from Nashik, Ahmednagar and Pune to Satara, Sangli and Kolhapur in Western Maharashtra and Neemuch, Mandsaur and Ratlam in MP’s Malwa region. Farmers here grow a range of commercial crops. They are also largely from progressive agricultural communities such as Marathas and Patidars. These farmers — unlike their brethren in drought-prone Marathwada, Vidarbha or Bundelkhand, who are largely into subsistence agriculture, and often resort to seasonal migratory employment — have seen good times, particularly through the first decade of this century till about 2013. This was a period of remunerative prices for most crops on the back of a global agri-commodity boom and domestic demand fuelled by rising incomes.

The first setback to the above party came towards mid-2014, with the collapse of world commodity prices, leading to both falling exports and rising imports of farm products from the country. The current crisis, however, has to do more with domestic headwinds that may have some link with demonetisation. In virtually every crop marketed since November — whether soyabean, green gram, pigeon-pea and potatoes or tomato, onion, garlic, red chili, fenugreek, grapes and pomegranates — farmers have experienced huge price declines. The government claims this is mainly due to bumper production. But there is also a demand side. Produce trading in India is predominantly cash-based. The body blow this traditional agro-commercial capital has suffered due to demonetisation — and the inability of formal finance to fill the gap — may explain the apparent lack of liquidity in the markets now. With nobody really to buy and stock up, the speculative capital that used to buoy commodity prices has practically ceased to exist. And it’s farmers who have taken the ultimate hit.

This situation is unsustainable, both politically and economically. But the solution cannot lie in farm loan waivers. Indebtedness is only the symptom of the actual disease, which is one of low prices and demand for produce. What the farm sector desperately needs is liquidity, which can come from institutional finance, modern agro-processing and organised retail, both domestic and foreign. While a zero GST rate on most primary farm produce is a welcome move, it needs to be supplemented with the removal of all restrictions on stockholding, domestic movement and exports. There is also a case to impose higher import duties, especially on pulses and edible oils, as a temporary measure. If there can be anti-dumping duties and minimum import prices on steel or float glass, why not for products from the farm — more so, in today’s troubled times?

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