Opportunity lost

Farmers’ rejection of govt scheme is disappointing

The rejection by farmers’ representatives of the government’s proposal to buy the marketable surplus of five non-wheat/non-rice crops over the next five years at their minimum support prices (MSPS) is a lost opportunity to find middle ground between the strikers’ maximalist demands and the Centre’s fiscal capabilities. The government’s latest offer entailed buying masoor (lentil), urad (black gram), arhar (pigeon pea), maize, and cotton over the next five years at their declared MSPS from those farmers who would switch to these crops from wheat and paddy. The purchases under this scheme were openended — there were no quantitative restrictions — and would be done by the National Agricultural Cooperative Marketing Federation of India (Nafed) and Cotton Corporation of India (CCI), under contractual agreements. Apart from partly meeting the legitimate demands of farmers in Punjab and Haryana, the two states at the centre of the farmers’ agitation, for a guaranteed relatively risk-free return on their produce, the scheme would have gone some way towards addressing a looming crisis: Chronic over-cropping of paddy in the north, which has taken a heavy toll on the water table and degraded the soil with heavy fertiliser use. At the same time, it would have enabled acreage to be diversified to crops that consume less water and fertiliser and promote a healthier diet; the scheme would also have addressed domestic supply shortages in lentils and gram and met the needs of biofuels and livestock feeds. Though not perfect, the scheme offered the chance to address multiple issues with one solution.

Leaders of a faction of the coalition that led the farmers’ protests in 2020-21 have rejected this offer on two grounds. The first is linked to its key demand for an open-ended legal guarantee of MSP for 23 crops. The leaders quoted some experts as saying that MSPS for all 23 crops would cost the exchequer ~1.75 trillion. They contend that the government already spends this amount to import palm oil, which is harmful to the environment and human health, from Malaysia and Indonesia. It could spend the same amount on the MSP for oilseeds and save on import. There is merit in this observation, but the figure quoted for all 23 crops is certainly an underestimate. Government and independent estimates suggest that the annual cost of procuring all 23 crops in 2024-25 would be an unsustainable ~10-15 trillion. Though the government announces MSPS for 23 crops, its procurement is mostly limited to wheat and paddy, which includes purchases for the foodgrain buffer stock. In 2022-23, the government spent a substantial ~2.28 trillion on foodgrain purchases alone.

That said, the farmers have a valid argument in suggesting that limiting the scheme to those who switch from paddy and wheat cultivation will distort the market for those who grow these five crops. The fact that it will take place under agencies that have limited experience in large-scale procurement is also unlikely to raise confidence in it. As things stand, suggestions from respected agricultural economists such as price-deficiency payments (paying farmers the difference between the MSPS and the market price of a crop), and loosening stock limits and arbitrary export bans are all in the mix as a way out of the impasse. But this latest rejection suggests that lasting solutions are becoming increasingly elusive.