The Hindu Business Line : Is the farmer-consumer conflict an illusion?

The conflicting interests of the farmers and consumers are often exaggerated. The conflict is often created by Government policies designed to keep food prices deliberately low in the interests of the industry under the guise of helping the common man.

Policy-makers often tend to forget that the farmer is a consumer too.

Sharad Joshi

The Union Agriculture Minister, Mr Sharad Pawar, allowed entry of private traders in the wheat market in 2005-06 and defended it by saying that it was would benefit the wheat growers.

Recently, he asked why the benefits to the consumer should be at the cost of the farmer. He also wondered why the Government should not make purchases in the open market from the farmers instead of procuring foodgrains at prices fixed keeping in view inter alia, the interests of the consumer.

This marks a major departure from the traditional practice of Agriculture Ministers promising farmers remunerative prices and assuring the urban populace cheap food.

The balance has shifted in favour of the consumer since the year the onion prices skyrocketed, costing the then ruling alliance the Assembly elections in six States. The defeat of the ‘India Shining’ syndrome by the ‘Aam Aadmi’ slogan further confirmed it.

Irreconcilable interests?

Are consumers and farmers two distinct communities whose interests are irreconcilable? In fact, farmers constitute the largest single segment of the consumer market though, as consumers, they appear to be only marginal players in the market. There are farmers who produce superior varieties of grains and sell them in the market to purchase cheaper and inferior varieties of foodgrains for their family’s consumption.

Most farmers retain a part of their own produce for domestic consumption. They keep back grains, but not the sifted, sorted and the cleaned ones. They gather the grains strewn around mixed with earth and weeds, and clean it for domestic use. The earth-mixed grain is treated with reverence as it is believed to be manifestation of the goddess of wealth. It is believed that throwing it away would invite the anger of the Goddess. Potatoes, onions and vegetables are also retained for consumption by the farmers, but not the whole healthy ones, but those of inferior quality, suitably cleaned.

It is often ignored that farmers — the largest segment of consumers — benefit from high prices of agricultural commodities. Even the landless labourer is a net beneficiary as agricultural wages have been observed to be rising faster than agricultural prices.

When people talk of consumers in contra-distinction to the farmer, they are equating the consumer with the urban fixed-income consumer. Hence- low food prices are a symbol of the political clout of the more articulate urban consumer. To make food cheap for the urban consumer, the Government had resorted to compulsory levy on foodgrains in the pre-Green Revolution days. The farmers were required to deliver to the Government a certain quantity of foodgrains, fixed according to their land holding, irrespective of their actual production that year.

The farmers were paid a levy price that was substantially lower than the going market price. If a farmer had not produced enough grains to fulfil the levy quota, he was required to make up the shortfall by purchasing the deficit quantity in the open market at a higher price and deliver it to the Government at the lower levy price. Till recently, paddy and sugarcane producers had suffered under the compulsory levy at artificially low levy prices on sugar and rice.

I distinctly recall Minoo Masani being shocked when I told him that the sugar his family got on the ration card came from this exploitative system.

The Agreement on Agriculture (AoA) of the World Trade Organisation (WTO) tolerates a Public Distribution System where the produce is procured in the open market and not artificially subsidised. But the drafters of the AoA never imagined that procurement could be taking place at deliberately depressed prices.

The recent statement of the Agriculture Minister, Mr Pawar, is consistent with the stipulations of the AoA. There is no moral or economic justification for placing the burden of consumer welfare on the back of the farmer.

Role of intermediaries

There is often an argument made, particularly by economists on the Left, that the enormous gap between the prices that the consumers pay and the prices farmers receive is caused by the commissions and the profits of a whole chain of intermediaries. This is only partially true. Dr Uma Lele, in her study, has said that commission agency in agricultural markets in India is highly risky and far from lucrative.

The truth is that the consumer pays prices that are consistent with and a function of urban incomes while the farmer has to make do with the lowest possible prices. Once the upper and the lower limits are fixed as functions of ‘India’ and ‘Bharat’ incomes, the chain of intermediaries moves in to appropriate the maximum possible share.

There is no conflict between consumers and farmers, except the one that is deliberately created by self-seeking politicians. Farmers and the farm labourers are the largest segments of the consumer class. The illusion of the conflict between them comes from the ‘India-Bharat’ divide caused by government policies deliberately formulated to depress the prices of raw material and wage goods in the interests of the industry but is justified as being in the interests of the ‘Aam Aadmi’.

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

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