Agri Business

‘Policy flip-flop, not note-ban, cause of farmers woes’

TV Jayan New Delhi | Updated on January 27, 2018

ASHOK GULATI Former Chairman, CACP



Ashok Gulati, the Infosys Chair Professor for Agriculture at ICRIER and a former CACP chairman, thinks that the government is mostly responsible for the on-going farm distress in the country. In an interview to BusinessLine, Gulati says the government cannot wash off its hands saying the problem lies outside its control. Excerpts:

What is the real situation on the farm front today? Are the low prices of farm produce hurting the rural economy?

The NDA government has been trying to keep food inflation under control, which has been a priority for it since it came to power in 2014. If you ask me how much success can the government claim in curbing the food inflation, I would say very little as the two-third of it was because of the collapse in international prices of food commodities.

Compared to 2013-14, the global prices of commodities now are 30-40 per cent lower. But that also hit our exports and sent the backwater flow, leading to a rise in imports. If you do not regulate the import flow there are multiple problems. One, you cannot export much and, two, imports rise, leading to a drop in domestic prices hitting the farmers.

Classic is the case of pulses whose prices collapsed like house of cards. The reason for that was when there was a bumper harvest last year, there were export controls, there were stocking limits for private traders, on the trade front futures were not allowed, and on top of it all, there was an import of 6.6 million tonnes, the highest ever.

So, you had a record crop and you had record imports — a perfect recipe for a perfect storm. As a result, the prices today are half the MSP. That has led to a massive farm distress. As a result, Madhya Pradesh had to bear a brunt of all this. It witnessed farmer protests and there were firings at them. This has resulted in the M.P. government launching Bhavantar Bhugtan Yojana, or price deficit finance scheme, which itself is going haywire. This has resulted in prices going down further.

So, the prices are down for most of the commodities particularly pulses and oilseeds. If you look at the price of soyabean, that of groundnut or the prices of all three major kharif pulses... it’s nothing but a disaster.

One way to wriggle out of this piquant situation is to jack up import duties, which the government did beginning with yellow pea whose import duty was increased to 50 per cent, and allow the private sector to hold up as much stocks as possible. (On last Thursday, the government decided to remove all restrictions on pulses exports and also hiked the import duty on edible oils on Friday.)

But this flip-flop policy won’t work. If you want to invest in storage, you need to have a 20-year horizon. Storage facilities cannot be created overnight. So, it’s a storm created by the flippant and sloppy policies of the government, or by not rising up to the challenge created by a tremor whose epicentre is not in India but in the global market.

So you mean to say that there should been innovative ways of dealing with the global situation?

Indian bureaucracy is not equipped or trained for that. The policy-making in the government is reactive and is not known to be prepared in advance. They cannot foresee a crisis that is coming and they they wake up very late.

Wouldn’t this be true for the previous governments too? Do you see any difference in thought or action by the current regime?

Yes, to some extent. Every government has to face the music and by end of the day, nobody wants the government to offer excuses or wash off its hands saying the problem was outside its control. If there is a farm distress, the government in power is 100 per cent responsible for that. If there is a drought, you cannot be blaming God for that.

A country like Israel, with one-fifth of our water supply, is still exporting to Europe. They do not talk about droughts. So, blaming somebody else is actually exposing your incapability, helplessness and it’s only foolishness.

Do you think demonetisation would have played a role in current crisis?

I differ with many who say it had affected agricultural markets. ICRIER sent people to different mandis immediately after demonetisation was announced. They found there was a temporary crunch situation, but I do not agree that it had led to the price crash. Farmers had adjusted long ago.

Do you think eNAM would make a difference to farmers?

eNAM is a big sham. It requires a lot of efforts at mandi level. It has to start with assaying/grading. Do you expect someone to buy a particular commodity at a particular price just because he was shown it on a computer monitor? If the lot delivered turns out to be of an inferior quality, who will take responsibility for it? Where is your dispute settlement mechanism?

When the basics are not in place, can we create a national market just by installing software on a computer? If such an electronic national market is in place, why don’t Madhya Pradesh farmers who get only ₹2,500 per quintal for urad are not selling it in a mandi in neighbouring Rajasthan where it sells for ₹3,600?

The idea as a national market is right. Somebody has to carry that and implement it properly. It doesn’t happen by talking in the air and through catchy slogans. Even if they can create such a national market in five years , I would salute them. It will take at least 10 years.

What is your take on the government’s initiative to double farmers’ income?

What farmers are getting today is half of what they were in 2013-14. It is actually going the other way. His profitability has collapsed. His cost of urad and tur dal cultivation is more than ₹4,500 per quintal, and he is getting a price of ₹3,500. Agricultural growth in the country has collapsed to half and profitability has become zero.

This is the fifth in a series on Farm Distress. The first report appeared on November 16. The previous article in the series appeared on November 20, on Kerala’s rubber industry.

Published on November 20, 2017

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