The irony of farm despair in a bumper crop year
India’s farm sector crisis has deepened this year as the governments failed to anticipate the falling prices of food items leading to violent protests by farmers in Madhya Pradesh and Maharashtra that has claimed lives and rattled the state governments.
It was primarily the crash in onion prices to rock bottom levels in the two biggest vegetable growing states and the absence of government intervention that brought the situation to a boiling point. The BJP governments in the two states woke up belatedly to announce procurement prices only after violent protests that claimed the lives of five farmers in Madhya Pradesh.
This despair is a countrywide phenomenon this year in the wake of record foodgrain production. The agriculture ministry has estimated that 273 million tonnes of food and vegetables will be produced this year.
Central bank regulator the Reserve Bank of India on Wednesday warned that the crisis could spread further as market price of pulses had fallen below the minimum support price (MSP) and sought government intervention.
The distress is acute in the horticulture sector as it is not covered by the MSP regime. The Centre’s price regime covers 14 of the 51 major crops. It includes staple food items such as wheat, rice and cereals but not vegetables. Being perishable, vegetables involves high financial stakes and this has caused distress in the last three years.
Recent trends show farmers have been increasing the area under vegetables cultivation in the hope of reaping a bounty but have suffered as prices plummet due to the glut. Last year, farmers in Madhya Pradesh, Maharashtra, Andhra Pradesh, Uttar Pradesh and Punjab had to dump winter crops like potato and tomato as the prices crashed. This came close on the heels of onions finding no takers in Madhya Pradesh and Maharashtra.
However, the glut did not benefit the consumer either, with retail prices dipping by just 30%.
Traders were the real beneficiaries as their rights to control prices in local markets are protected by the Agriculture Produce Marketing Committee (APMC) laws. The law says farmers cannot sell directly to buyer in the local markets, even if they were to strike a good deal. They can sell only through commission agents.
Despite the Centre’s recommendation, state governments have refused to end the monopoly of commission agents, depriving farmers the benefit of an open market economy. Also, in the absence of adequate storage facilities, farmers are forced to sell their produce at whatever price the agents command.
The rising number of farm suicides is another indicator of the deep despair. In just one year between 2014 and 2015, farmer suicides saw a jump of 42%. Farmers lose about 40% of their produce worth ~96,000 crore every year due to lack of storage facilities. The sector employs more than half of India’s 1.27 billion population.
The violent protests and death of farmers in police firing could push other BJP-ruled states to follow in the footsteps of Uttar Pradesh. Soon after he took over as chief minister, Yogi Adityanath delivered on the BJP’s election promise of loan waiver for farmers (costing the exchequer ~35,359 crore). Now, farmers in Madhya Pradesh, Maharashtra, Rajasthan and Haryana are putting pressure on their governments to waive off their debts.