The responsibility of society to the “annadata” (food producer) is not limited to paying them a few more rupees for their hard work. It’s a deep mess that requires definite thought and action

Agriculture based on market intelligence as well as the development of supply chain management systems by the farmers themselves will go a long way in improving the condition of Indian farmers.

The Union government recently increased the Minimum Support Price (MSP) for major agricultural products. It is a ritual followed every year, just before the kharif season. Ironically, the government is increasing the MSP, but is reluctant to make it a legal guarantee, which is currently one of the main demands of restless farmers in Punjab and Haryana.

Here is an overview of what PSM means for a farmer; is the recent price increase enough? is the government logic behind calculating the flawed PSM and opportunities for farmers beyond government support.

Realities on the ground

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Kewalram Rahangdale of Madhya Pradesh owns three acres of ancestral land, which he mainly uses to cultivate rice during monsoon (kharif) as well as winter (rabi). He has a borehole, which he uses to suck as much water out of the ground as he could until it dries up by the end of February in the absence of a refill facility in water. For Kewalram, an increase of Rs 72 from the MSP does not make a difference. “I grow paddy because I can’t think of anything else that will give me guaranteed yields; it doesn’t matter if I get a profit or not. I cannot diversify into maize or turkey because despite the guarantee from the MSP, the government will not buy it for sure, ”he said.

Kewalram’s argument makes sense. Last year, the country produced 100 lakh tonnes of chana (chickpeas), but only 21 lakh tonnes were purchased by the government, which is only 21% of the total production. Likewise, maize production was 280 lakh tonnes, but only 19 lakh tonnes (6.7%) was purchased by the government. So while PSM is guaranteed, supply is not. As a result, farmers unloaded their stocks on the open market at discounted prices.

Milind Murugkar, policy researcher, says: “MSP matters most to farmers who grow rice and wheat, but for other crops it doesn’t make much difference whether the support price goes up or down, because the government only buys a fraction of what is produced. So the MSP hike is just theoretical.

The government claims that the MSP is 50% higher than the cost of production. “The MSP is calculated on the basis of an obsolete system. The cost of production (called C2) must be calculated in such a way that it covers all the expenses of the farmers and leaves it a substantial profit, ”said Devinder Sharma, food and trade policy analyst.

In accordance with the recommendations of the MS Swaminathan Commission, the PSM should be 50% higher than the farmer’s overall cost (C2). But does the government give C2? “During his campaign in 2014, Narendra Modi promised to give farmers A2 + FL + C2. It was a great promise and impossible to keep. So today, the government calculates the MSP by adding A2 and FL. Modi made a promise he couldn’t keep. Therefore, unrest in Delhi has been raging for 5 months, ”says Murugkar.

For files,

A2 cost = All expenses paid by farmers for seeds, fertilizers, chemicals, hired labor, fuel, irrigation, etc.

A2 + FL = Actual costs paid + imputed value of unpaid family labor = imputed cost of capital

C2 = Imputed capital cost + land rent

Ideal MSP = A2 + FL + C2 + 50%

Real MSP = A2 + FL + 50%

Why does the government not buy everything from farmers at the price they want?

He cannot, mainly due to restrictions in place due to the World Trade Organization (WTO) agreement that does not encourage him to engage in open government procurement. “So consider that the Center and the States continue to buy from farmers to keep the market cost above the PSM. In such a scenario, the government will transport huge stocks of grain, which will be contrary to WTO standards. Why? This is because an overburdened India will have to sell in international markets. When India enters the world market as a buyer, food prices rise, but when India enters the market as a seller, prices drop dramatically. Thus, selling in India has an impact on the income of farmers in developed countries. So Indian farmers have to pay the price to keep those in the developed world happy, ”says Murugkar.

There is a general feeling of disappointment and mistrust of the Modi government. This is mainly because of the unfulfillable promises the government made to garner votes. “Instead of promising to double farmers’ incomes by 2022, the government should have committed to a basic floor price, which will cover the costs of farmers and give them a reasonable profit on top,” adds Murugkar.

Prices fluctuate widely in the international food market, which is beyond the control of the Indian government as we do not have strong supply chain management systems and facilities such as cold storage, which can act as a cushion. against market uncertainties. The best that the government can do is to be reasonable in its commitments and to think beyond the policy of the vote banks.

Devinder Sharma suggests that the MSP should be calculated the same way we calculate the industrial cost of products. “In agriculture, we only include direct expenses, add family labor and give a 50% price on it. In the case of industry, a businessman would include all costs, including the efforts of the head of the household, his wife or son. In addition, they benefit from the Maximum Retail Price (MRP). Look at the commissions available to sellers. In pharmacy, commissions can go up to 500% and in agriculture we only give 50% above the cost of production, ”deplores Sharma.

In addition, the government has increased the MSP for paddy by Rs 72, which is 3.8% above last year’s MSP and is lower than the current inflation rate. “How is that fair? This clearly means that the farmer earns less than what he spends. It is necessary to rethink the methodology for calculating costs in order to ensure on the one hand that a farmer obtains a real profit by calculating the PSM using the standard used to calculate the industrial cost, on the other On the other hand, we have to make sure that inflation is taken into account. If government employees receive a high cost allowance, farmers should also be properly insured against inflation, ”Sharma said.

Blame the economists

“I would blame the current generation of economists for the plight of farmers. We follow an economic conception of keeping food prices low for two reasons: To keep an eye on food inflation and to push people out of agriculture and to provide cheap labor to urban areas. I think this is wrong economic thinking. When you deny the farmer the price he deserves, he gets agitated and you face the kind of protest that has been going on in Delhi for so many months, ”says Sharma.

Strengthening the farmer to strengthen the economy

Our GDP is at -7 right now and it was -23 a few months ago. The agricultural sector is the only stable job provider as it grew by 3.4% in the first quarter despite the contraction in GDP due to the pandemic. “Demand is falling and industrial growth is not happening, which affects the purchasing power of the consumer, that is, of the common man. In India, 50% of the population depends on agriculture. It is therefore important to increase the purchasing power of a farmer to promote industrial growth. If you want to increase the demand of a large population, you can aim for inclusive development and that can only come by increasing the productivity of agriculture, ”said Murugkar.

Read also : Agrarian crisis boiling again as farmers and workers struggle

Deepak Chavan, former journalist and agricultural researcher, suggests that agriculture based on market intelligence as well as the development of supply chain management systems by farmers themselves will go a long way in improving the condition of Indian farmers. .

The common man doesn’t care enough

An agricultural economist once joked: “PSM is not for farmers, but for the common man to think that the government is doing something for farmers.”

The ignorance and lack of empathy shown by a majority of urban Indians towards the cause of the farmer’s unrest in Delhi reflects the I don’t care attitude most people live with when it comes to rights. farmers.

A study by the Organization for Economic Co-operation and Development (OECD) with a New Delhi-based think tank indicates that between 2000 and 2016, Indian farmers lost Rs 45 lakh crore. Which means that each year they were losing Rs 2.64 lakh crore. Why? Because the farmers received 15% less than the price they should have received. Ironically, at the same time, consumers have gained 25%. “Do we as a nation think the farmers have lost Rs 45 lakh crore? Let the industry suffer a loss of a lakh rupee crore and there will be a big uproar. People will start to talk about political paralysis, tax incentives and economic stimulus. This clearly shows that we have a bias against farmers and economists are responsible for it. Why should farmers suffer to keep food prices low? Sharma asks.

Chavan says the government is crippled by the lack of vital market inputs needed to help farmers select the right crop and decide the right time to sell. “Unfortunately, the Reserve Bank of India also has a limited view of the agrarian crisis in India. Journalists lack the depth to capture the causes of farmers. My only hope is the common man. If we can convince him of the plight of farmers, real change is very possible, ”says Chavan.

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