The Hindu Business Line : Farmers paying the price for not knowing the cost

Will establishing an autonomous board to ensure remunerative prices for farm produce improve the plight of the farmers? If agriculture is a State subject, it is difficult to understand why the calculation of costs is not left entirely to the State governments, says SHARAD JOSHI.

A senior member of Parliament has proposed the setting up of an autonomous board to ensure remunerative prices for farm produce by fixing minimum support prices, compulsory purchase of produce by governmental agencies and market intervention by such governmental agencies in cases of bumper crops.

Concern for the plight of the farmers needs to be appreciated. The question is: Is establishing one more authority for carrying out the work now entrusted to the Commission for Agricultural Costs and Prices (CACP), the Food Corporation of India (FCI), the National Agricultural Cooperative Marketing Federation of India Ltd (Nafed) and the large number of State bodies, a step in the right direction to improve the situation of the farmers?

Farmer suicides

So far, the Centre has been attributing the rage of farmer suicides to reasons as diverse as water scarcity, lack of credit, high production cost, low productivity, smaller holdings and lack of extension services. An attempt has also been made to blame the family situation, health problems, addiction to drugs and alcohol, and the failure of the general social moral standards. Some State governments have even tried to organise discourses by spiritual gurus to contain the suicides. In this background, it is indeed commendable that a prominent MP is admitting that low price is the culprit.

Schemes to cover production cost

This author proposes an authority whose job will be to fix prices that will cover the `cost of production' as opposed to `index-based prices' proposed by some economists, or `income assurance plans' of the type resorted to by countries such as the US, or the `blue box' schemes followed by other countries. These alternative schemes involve massive bureaucratic machinery and intervention that may not make much headway in India.

The board proposed by the MP is not supposed to try and bring down the prices of agricultural inputs as an alternative to making agriculture a remunerative vocation. It is rather unfortunate that the contemplated board is to be given the mandate to calculate the remunerative prices following the same methodology deployed by the CACP for some years now.

For, the CACP's basic methodology for calculating the production cost has quite a few loopholes and the method of collecting cost data from the sample fields and working out a statistical average thereof may bring out the cost of various elements that do not relate to any real farm.

That is why the Agriculture Prices Commission (APC) had calculated for 1976-77, one paisa as the cost of pesticide per hectare of wheat in Punjab. It is the averaging method that is responsible for numerous cases of contradictions.

The cost of manure was calculated at Rs 1.27 per quintal in 1977-78. Curiously enough, the cost was even lower in 1980-81 (Rs 1.14 per quintal).

Such instances are too numerous. The irrigation cost per hectare was calculated at Rs 181.45 in 1976-77, which would have barely met the electricity charge. Surprisingly, the same cost is shown to have drastically gone down to Rs 70.86 in 1980-81.

Needed, a switch over

To no one's surprise, the cost estimates of the committees that calculate the production costs in the States are around 20 per cent higher than those computed by the CACP. If agriculture is a State subject, it is difficult to understand why the calculation of costs is not left entirely to the State governments.

Further, the farmers have been demanding that the CACP switch to the "synthetic model method" that gives structured costs that are logically linked to one another and correspond to the situation on the field.

Coming from a distinguished MP, one could not have expected a confession that the successive governments have been deliberately trying to depress agricultural prices to give a fillip to industry.

This lack of introspection is indeed unfortunate. In the absence of such a historical analysis, the contemplated board would not have been in a position to decide the action to be taken in the interest of the farmers.

That is the reason why those who moved the idea of establishing a new authority supported, at the same time, the Government's plan to ban the futures market for wheat and paddy and backed the moves to keep private traders out of the wheat market to provide a clear field to the Food Corporation of India.

The basic question is: Do we need to have an elaborate and complex machinery to calculate the remunerative prices, ensure procurement and operation of the minimum support prices mechanism to guarantee that the farmer gets the price that covers, at least, his production cost? There is a simpler way of ascertaining the cost of production. According to basic economics, in a hypothetically free market, the average cost of a product is equal to its average price.

Briefly, the price that a producer gets in a free market must cover his cost. Why, then, have an elaborate bureaucratic machinery for this simple task?

If the government scraps the Essential Commodities Act that puts the restrictions on storage, transport, processing and export of farm commodities, the farmer will automatically get a price that covers his production cost.

No escape route

Since Independence, the farmer has virtually been held a prisoner by the government. The advent of technology has opened up two possibilities for the farmer. He could not take advantage of the much higher prices that, he knew, would invariably come within two months of the harvest, because he did not have the ability to wait.

The farmer was not able to get the advantage of higher prices prevailing at distant places because he had no capacity to transport his produce there.

The advent of information technology and the futures markets have made it possible for the farmers to add time and space utilities without having to move in time or space.

It is rather unfortunate that the Government has moved in to block this escape route for the farmer. The Government forgets that prison walls can never contain the spirit of freedom. The farmers of Punjab and Haryana have refused to give wheat to the Food Corporation of India.

Meanwhile, the anti-farmer forces will try to create the illusion that not freedom but a more benevolent and efficient state authority, will improve the lot of the farmers.

(The author is Founder, Shetkari Sanghatana and Member of Parliament (Rajya Sabha). He can be reached at sharad.mah@nic.in)

More Stories on : Agriculture | Insight | Down to Earth

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Wages of skill shortage

Farmers paying the price for not knowing the cost

`Rising India' under attack

Credit Policy 2007-08 — Factoring in emerging concerns

Why the RBI did not bite

First hundred days

Importance of working with an `A' team

Vocational training