Farm­ers need a new deal be­yond clichéd MSP pol­i­tics

Hindustan Times (Lucknow) - - Nation - Roshan Kishore roshan.k@htlive.com ▪

NEW DELHI: Fi­nance min­is­ter Arun Jait­ley’s grand bud­get an­nounce­ment of Min­i­mum Sup­port Prices (MSPs) pro­vid­ing as­sured 50% re­turn to farm­ers may not ac­tu­ally mean a 50% re­turn. The govern­ment ad­mit­ted on Fe­bru­ary 9 that it had the so-called A2+FL (a mea­sure of vari­able costs) and not C2 (which also in­cludes fixed costs) costs in mind while cal­cu­lat­ing re­turn mark-ups vis-à-vis MSPs. An ear­lier HT story had pointed this on Fe­bru­ary 7.

Now that the buzz around bud­get seems to have set­tled, a deeper ques­tion can be asked. How much of a role can MSPs, and prom­ises of in­creas­ing them, play in ad­dress­ing the grow­ing vi­a­bil­ity cri­sis of agri­cul­ture in to­day’s age? Be­gin­ning with some stylised facts may help.

Less than one-fourth of In­dia’s to­tal ce­real pro­duc­tion is pro­cured at MSP. The share of pro­cure­ment is slightly higher, a lit­tle less than one-third, for wheat and rice (Chart 1). Of late hor­ti­cul­tural pro­duc­tion has sur­passed food grain pro­duc­tion in In­dia. There is no MSP cov­er­age for fruits and veg­eta­bles.

Even the lim­ited pro­cure­ment which hap­pens is ex­tremely skewed. More than half of to­tal rice and wheat pro­cure­ment is done from the tra­di­tional green rev­o­lu­tion states of Pun­jab, Haryana and Ut­tar Pradesh (Chart 2).

A Na­tional Sam­ple Sur­vey Of­fice (NSSO) re­port for 2012-13 shows that less than half of all farm­ers were even aware about MSPs. The fig­ures vary across crops. Only a frac­tion of those who are aware about MSPs ac­tu­ally sell their crops to pro­cure­ment agen­cies. Such sale is able to dis­pose off only a frac­tion of their to­tal pro­duc­tion (See Chart 3).

These statis­tics pro­vide a con­text to the twin chal­lenges of putting into place a holis­tic and re­mu­ner­a­tive MSP pol­icy. If MSPs have to be re­ally re­mu­ner­a­tive, they need a sig­nif­i­cant hike com­pared to present lev­els. An even big­ger prob­lem is the skewed crop-wise and state­wise cov­er­age un­der the pro­cure­ment net. If this has to be in­creased sig­nif­i­cantly, it would re­quire a mas­sive scal­ing up of govern­ment’s pro­cure­ment op­er­a­tions. This is not just a ques­tion of money. Stor­age of pro­cured food grains is a big prob­lem even at cur­rent pro­cure­ment lev­els.

The only ef­fec­tive way to dis­pose pro­cured grains is through pub­lic dis­tri­bu­tion sys­tem (PDS). This av­enue would come un­der squeeze as cash trans­fers re­place dis­tri­bu­tion of food in the PDS.

Both the present and past govern­ment has been push­ing for abo­li­tion of in-kind food se­cu­rity pro­grammes. Politi­cians, who wax elo­quent about the ben­e­fits of do­ing away with in-kind PDS hardly talk about the ef­fect it would have on pro­cure­ment op­er­a­tions. Wider MSP cov­er­age and cash trans­fers in food se­cu­rity pro­grammes can­not go hand in hand in In­dia.

The prob­lem does not end here. It is a fact that more and more In­di­ans are get­ting out of ab­ject poverty. They are also be­com­ing more and more mo­bile in search of jobs. The mid­dle classes do not need the PDS to buy food grains and other es­sen­tials any­more. Scarcity of such things is not some­thing post-re­form In­dia would even re­late to. Growth in agri­cul­tural pro­duc­tion is the big­gest rea­son for this. Both these de­vel­op­ments re­duce the pos­si­bil­i­ties of a healthy growth in num­ber of peo­ple us­ing the old ar­range­ment of ra­tion shops to ac­cess sub­sidised grains. This means even with­out cash trans­fers, the abil­ity of MSP- type poli­cies to sup­port farm in­comes will shrink in days to come.

All this is not to say MSPbased PDS is not needed any­more. Star­va­tion deaths have been re­ported be­cause peo­ple could not get their ra­tion due to Aad­haar-re­lated prob­lems. The ab­so­lute num­ber of very poor

MORE THAN HALF OF TO­TAL RICE AND WHEAT PRO­CURE­MENT IS DONE FROM THE TRA­DI­TIONAL GREEN REV­O­LU­TION STATES

peo­ple is still very high. MSPbased pro­cure­ment is an im­por­tant an­chor of agri­cul­tural prices in In­dia. It also pro­tects coun­try’s food se­cu­rity. Many farm­ers could switch from food crops to com­mer­cial crops if there were no pro­cure­ment.

What all this does sug­gest is the fact that agri­cul­tural pol­icy mak­ing has got it­self into a culde-sac. The tested method of in­cen­tivis­ing agri­cul­tural pro­duc­tion – MSP-based pro­cure­ment – is reach­ing its lim­its. Un­cer­tainty in farm in­comes is only in­creas­ing with grow­ing weight of per­ish­ables in to­tal agri­cul­tural pro­duc­tion. Chal­lenges such as cli­mate change re­lated ad­verse ef­fects on farm pro­duc­tion would be here much sooner. Farm­ers are feel­ing the pinch of all this, but they have no agency. Farmer politi­cians do not hold much clout in In­dia’s game of thrones.

Those who do not earn their liv­ing from farm­ing are not both­ered for the mo­ment. In­dia’s ur­ban mid­dle class prob­a­bly never had it so good when it comes to con­sump­tion of food prod­ucts. A large va­ri­ety of food items are be­ing de­liv­ered to their doorsteps at dis­counted rates. The more farm­ers’ in­comes are squeezed, the cheaper they get these things. Although much smaller in num­ber than farm­ers, this class ex­er­cises a dis­pro­por­tion­ate sway in opin­ion build­ing.

The po­lit­i­cal class has by and large chick­ened out from han­dling this fun­da­men­tal po­lit­i­cal econ­omy di­vide. It’s happy to pla­cate one class at a time. Lower in­fla­tion for large part of the term, fol­lowed by a tac­ti­cal MSP hike to­wards the end.

The con­se­quences can be dis­as­trous in the not-too-dis­tant fu­ture. A deep rooted cri­sis in farm­ing can end the sup­ply glut largely taken for granted. Signs of grow­ing so­cial un­rest are al­ready vis­i­ble. Any new deal to farm­ers would re­quire res­o­lu­tion of this con­tra­dic­tion rather than fraud­u­lent prom­ises of MSP hikes.

› A court con­scious of the plu­ral com­po­si­tion of the coun­try while called upon to deal with rights of var­i­ous com­mu­ni­ties, can­not make such ob­ser­va­tions which may ap­pear to be coloured with a bias for or against a com­mu­nity

SUPREME COURT

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