The Hindu Business Line : Why are wheat farmers angry?

At a loss to know what the Government is doing, wheat farmers plan to boycott wheat mandis and demand Rs 1,000 a quintal or, in the alternative, want scrapped the ban on private trade and the futures markets.

Farmers of Uttar Pradesh and Punjab staged demonstrations in front of Parliament, now in recess, to demand a better price for wheat. Before Parliament went into recess, the Agriculture Minister had announced a bonus of Rs 100 a quintal. The bonus takes the procurement price to be paid by the Food Corporation of India (FCI) to Rs 850 a quintal. There was considerable thumping of Treasury Benches as if the declaration of bonus was an astonishingly generous act.

Clearly, the farmers do not think so. Mr Prakash Singh Badal, the recently installed Chief Minister of Punjab, was urged to announce a further bonus of Rs 100 a quintal on behalf of the State. Mr Badal has not responded because the Rs 100 Central bonus had itself come in response to his own proposal. He could not offer a second bonus without letting it out that he was not fully conversant with the situation in Punjab when he had made the first proposal.

In 2006, farmers in Punjab were a happy lot despite a mediocre harvest. The Centre had for once acquiesced to rein in the FCI by allowing private traders to enter the wheat market. Farmers got around Rs 1,000 a quintal though the official procurement price was Rs 750 a quintal including a bonus of Rs 50 above the Minimum Support Price (MSP). The Agriculture Minister was visibly happy about what he had done for the wheat farmers.

Inflation attack

Then followed two things: One, the Minister had to go back on his assurance given in Parliament that it would not be necessary to import any wheat in the ongoing year. Second, the farm prices, particularly of foodgrains, started rising, and the United Progressive Alliance Government came under attack for the rising inflation.

Consequently, the Government announced its intention to import just about 5 lakh tonnes of wheat for the Public Distribution System (PDS) in the South. But, by the time the year ended, the Government had imported 55 lakh tonnes of wheat at a price higher than what the private traders in India were paying the farmers.

Inflation continued unabated and the Left allies of the Congress grew restless. They blamed the purchases by private traders as also the dealings on the futures markets for the mess. The Leftists wanted the FCI to be restored to its glory and all non-FCI purchasers kept out of the market. In October 2006, the futures price of wheat for April 20, 2007 had reached Rs 930 a quintal.

Banned or not?

There was some confusion whether the government had actually banned private trading in wheat and rice. Spokesmen of the Forward Markets Commission denied any such ban. The Agriculture Minister added to the confusion by declaring that there was no such ban. However, commodity exchanges such as NCDX were not permitting any new trade.

On February 27, 2007, farmers announced their resolve to give the maximum possible quantity of wheat to the NCDX platform; on February 28, the futures market was banned. The Forward Markets Commission decided to suspend taking open positions on the futures markets for wheat and rice.

On March 17, a farmers' gathering at Moga in Punjab reiterated the decision to bypass the FCI procurement of wheat. The very next day the private traders lined up, bid more than the government procurement price and started offering as much as Rs 1,000 a quintal in Punjab.

On March 30, the Agriculture Minister tried to explain away the issue by declaring that the Government had not asked the private traders to abstain from entering the market. That hardly cut ice, because everyone knew by then that the Government had asked the private players to let the FCI have its fill first before entering the market. The district police officials in Moga were frankly admitting that they had instructions not to allow private trade in wheat for 45 days after the opening of the season.

Myopic policy

The Punjab wheat farmers along with their counterparts in Haryana and western Uttar Pradesh are annoyed at the myopic policy. The FCI is supposed to ensure that market price of wheat does not go below the MSP. As a procurer, it has structural difficulties in purchasing wheat at a price higher than the procurement price.

This year it can offer nothing more than Rs 850 a quintal. The private traders are wooing the farmers, offering Rs 1,000 a quintal. The Government has already announced its intention to import wheat this year. The wheat farmer is angry at what he sees as the Government's attempt to corner him by stymieing free trade, blocking the futures markets and forcing him to sell his wheat to the FCI at an unconscionably low price. He finds it difficult to understand this.

The FCI is not exactly known for its efficiency. When it offers Rs 850 a quintal of wheat to the farmer it operates through the arhatias and pays for costs towards auction fee, market fee, rural development fund, infrastructure cess, labour charges, kachchi adat and pakki adat taking the gross cost of procured wheat to Rs 971.55 a quintal. The total cost of its operation varies from 11.5 per cent in Punjab to a mere 1 per cent in Bihar and Gujarat. "Why should the government be spending Rs 971 a quintal of procured wheat and keep the share of the farmers limited to Rs 850?" the farmers are asking. In Punjab and Haryana, whichever the party in power, the arhatias rule the roost. The MSP-FCI-Arhatias-PDS racket is said to be unbreakable.

In anger the farmers, who are at a loss to know what the Government is doing, have decided to take matters into their own hands. On April 11, that is, on the eve of Baisakhi that marks the opening of the wheat season, they plan to make a declaration of their intention to boycott wheat mandis and demand a price of Rs 1,000 a quintal or, in the alternative, want scrapped the ban on the private trade and the futures markets. It promises to be a hot summer in the wheat land of India.

(The author, member of the Rajya Sabha, is the Founder of the Shetkari Sanghatana. He can be contacted at sharad.mah@nic.in)

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