A RAW DEAL

Even af­ter 25 years of eco­nomic lib­er­al­i­sa­tion, Indian farm­ers con­tinue to be let down by gov­ern­ments, poli­cies, prices and mar­kets.

India Business Journal - - CONTENTS - IBJ RE­SEARCH BUREAU

Even af­ter 25 years of eco­nomic lib­er­al­i­sa­tion, Indian farm­ers con­tinue to be let down by gov­ern­ments, poli­cies, prices and mar­kets.

It was yet another boun­ti­ful, but bit­ter, har­vest for Indian farm­ers last year. The 2016-17 crop year (July 2016-June 2017) threw up an all-time high food­grain pro­duc­tion of 273 mil­lion tonnes (mt). Last year's rich har­vest was fur­ther pushed up by a spurt in out­put of per­ish­able horticulture crops, like fruits and veg­eta­bles, to 287 mt. Dur­ing the same pe­riod, pro­duc­tion of pulses, oilseeds and sug­ar­cane grew to 22.14 mt, 32.5 mt and 306 mt re­spec­tively.

Iron­i­cally, the bounty across the coun­try's farm­lands only brought mis­ery to farm­ers as prices of most crops crashed se­verely. Early this year, prices of pulses, in­clud­ing tur (pi­geon pea), moong (green gram) and urad (black gram) plum­meted be­low their re­spec­tive MSPs - min­i­mum sup­port prices (the floor prices fixed by the gov­ern­ment for 25 crops, in­clud­ing ce­re­als - like rice and wheat - and pulses, among others, to pro­tect farm­ers against price crash).

The gloom was not limited to pulses alone. The year 2017 be­gan on a shock­ing note for grow­ers of hor­ti­cul­tural crops, es­pe­cially volatile tomato and onion. Toma­toes and onions plunged to un­be­liev­able lows of Re 1 and Rs 5 per kg re­spec­tively briefly at the be­gin­ning of the year.

Rea­son­ably good mon­soon in 2016 - though it was yet another dry year for most parts of south In­dia - af­ter back-to-back droughts in 2014 and 2015 pushed up farm out­put. The in­evitable law of de­mand and supply did play its part in di­min­ish­ing prices of crops. How­ever, other fac­tors were re­spon­si­ble for push­ing prices of pulses and a few per­ish­ables, like fruits and veg­eta­bles, to ab­nor­mally low lev­els.

It was fairly clear to those closely con­nected with the farm sec­tor - such as farm­ers, traders and gov­ern­ment of­fi­cials re­lated to farm pro­duc­tion and pro­cure­ment - as early as mid2016 that 2017 would bring in a bumper har­vest of pulses. Good rains in 2016 and at­trac­tive MSP had buoyed farm­ers to take to cul­ti­va­tion of pulses in a big way. By mid-2016, the acreage un­der cul­ti­va­tion of pulses had risen con­sid­er­ably. Strangely, the gov­ern­ment con­tin­ued to im­port pulses through the first few months of 2017. Con­tin­u­ous ship­ments of pulses from abroad added to huge do­mes­tic out­put, lead­ing to a glut and woe­fully sub­dued prices. Farm­ers who had re­sponded to the gov­ern­ment's call for in­creas­ing pro­duc­tion of pulses nat­u­rally felt be­trayed.

A sim­i­lar, cu­ri­ous gov­ern­ment pol­icy squeezed the fruit and veg­etable mar­ket in the first few months of this year. The gov­ern­ment's de­mon­eti­sa­tion last Novem­ber, aimed at flush­ing out black money, had an un­in­tended con­se­quence on the per­ish­ables. The largely cash-driven veg­etable and fruit mar­ket was left high and dry as over 86 per cent of cash in cir­cu­la­tion was pulled out of the sys­tem. With traders and con­sumers dras­ti­cally cut­ting down their pur­chases in the wake of cash crunch, farm­ers were forced to off­load their pro­duce at rock-bot­tom prices.

Farm­ers across the coun­try - most of whom are heav­ily in­debted - were nat­u­rally livid that they had to suf­fer huge losses even dur­ing a bumper crop year. Then, the Yogi Adityanath gov­ern­ment's Rs 36,359-crore farm loan waiver - an elec­toral prom­ise made by none other than Prime Min­is­ter Naren­dra Modi - fol­low­ing the BJP's thump­ing vic­tory in Ut­tar Pradesh in March trig­gered a sim­i­lar de­mand among farm­ers across In­dia.

In April and May, New Delhi wit­nessed a unique protest by farm­ers

"In the cur­rent APMC­con­trolled sys­tem, farm­ers may typ­i­cally get as lit­tle as 25 per cent of the price that con­sumers fi­nally pay." ASHOK GU­LATI Ex- Chair­man, CACP

from drought-rav­aged Tamil Nadu. They tried hard to draw attention of pol­icy-mak­ers in the na­tional cap­i­tal to their plight by car­ry­ing hu­man skulls and hold­ing dead mice in their mouths. Farm­ers' protests soon spread to other parts of the coun­try. Farm­ers in Ma­ha­rash­tra staged protests by dump­ing veg­eta­bles and spilling large quan­ti­ties of milk on the roads. In June, a farm­ers' rally in Mad­hya Pradesh took an ugly turn as six peo­ple were killed af­ter the po­lice fired on the pro­tes­tors.

Farm­ers across the coun­try had two main de­mands - a to­tal waiver of farm loans and better crop prices, amount­ing to 50 per cent higher than their cost of pro­duc­tion. In fact, their sec­ond de­mand stemmed from a sim­i­lar rec­om­men­da­tion made by the Na­tional Com­mis­sion on Farm­ers, headed by em­i­nent agriculture sci­en­tist M S Swami­nathan, in 2006. The cost-plus 50 per cent MSP was also pitched by Mr Modi dur­ing his cam­paigns for the gen­eral elec­tion of 2014.

As the protests grew louder and gained wide public sup­port, four more State gov­ern­ments waived off loans of small farm­ers. The Tamil Nadu gov­ern­ment was first off the block, writ­ing off loans worth Rs 5,482 crore of small farm­ers' bor­row­ings from co­op­er­a­tive banks. This was fol­lowed by Ma­ha­rash­tra's Rs 34,022-crore, Kar­nataka's Rs 8,165-crore and Pun­jab's Rs 10,000-crore farm loan waivers. The com­bined farm loan waivers across the five States ac­count for Rs 94,028 crore.

Mean­while, pres­sure is mount­ing on other States, es­pe­cially the BJPruled States of Mad­hya Pradesh, Ra­jasthan, Ch­hat­tis­garh, Haryana, and Gu­jarat to em­u­late Ut­tar Pradesh and Ma­ha­rash­tra. Many of these States will go to the polls in the next two years and are likely to write off farm loans to score elec­toral div­i­dends.

Su­per­fi­cial mea­sures

For years now, farm loan waivers have been the sought-af­ter weapon to bat­tle agrar­ian strife. Around Rs 89,000 crore of loans of about 4.9 crore farm­ers have been waived by the Cen­tral and var­i­ous State gov­ern­ments in the past decade. The na­tion­wide, Rs 52,000-crore loan waiver an­nounced by the pre­vi­ous UPA gov­ern­ment in 2008 oc­cu­pies the bulk of this fig­ure, notes a study by In­di­aSpend, a Mum­bai-based web­site fo­cused on public in­ter­est is­sues and in­ves­tiga­tive jour­nal­ism.

The study fur­ther adds that the past loan waivers have done lit­tle to re­dress agrar­ian dis­tress. The waivers have been pri­mar­ily meant to dis­cour­age sui­cides by farm­ers, ap­par­ently caused by wide­spread in­debt­ed­ness. How­ever, In­di­aSpend's anal­y­sis shows that farm­ers' sui­cides have con­tin­ued un­abated de­spite writ­ing off loans in the past.

Sui­cides by farm­ers have surged by about 42 per cent from 5,650 in 2014 to 8,007 in 2015, ac­cord­ing to the latest data re­leased by the Na­tional Crime Records Bureau re­cently.

Around 33 per cent of small and

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