The recent protests by farmers in the vicinity of Delhi underscore a major oversight by India’s agricultural economists and policymakers in creating a sustainable and effective framework to ensure fair compensation for farmers.

While scientists succeeded in engendering the Green Revolution and farmers increased “output” leading to food security for the nation, the latter are ensnared in a low-income trap. This reflects agro-economics’ inability to deal with the issue of “price”.

The NSS survey 77th round of the Situational Assessment of Agricultural Households (Report No 587) reveals a grim reality. The average monthly income per agricultural household is ₹10,218. A household consists of 4/5 persons, the per capita monthly income therefore is just ₹2,500.

Of this, the net surplus from crop cultivation is 37 per cent and the highest share is wages (40 per cent) — most households earn more by labouring for others (see table).

In response, some economists have cited a simplistic “demand-supply” theory and said that even dismantling the Minimum Support Price (MSP) system will favour farmers.

Leaving farmers to the vagaries of “demand-supply” will not be in their interest and not even consumers, especially because a logical outcome of this theory will be free agri imports/exports and the resultant price volatility.

Also, the assumption that farmers in sectors like dairy/poultry/fisheries (where there is no MSP) are flourishing is fallacious. The average monthly income of ₹10,218 represents households engaged in allied sectors too (Reply to Lok Sabha Unstarred Question No 741 dated February 7, 2023).

The irony of dairy farmers receiving just ₹35 for one litre of milk “poured”, when one litre of bottled water itself retails for ₹20, is lost on agri-economists. There is undervaluation of labour and output in dairy too. The absence of protests does not mean that the problem can be wished away.

Solution at hand

But there is a solution with which the Centre is actively engaged — building the cooperative network. What has been missing in our agri ecosystem is a working model of mediated value chains at least in identified essential commodities — grains, pulses and, say, ‘TOP’ or tomato, onion potato — whereby the interests of both producers and consumers are taken care of.

For this to happen, the owner and operator of this entire value chain have to be both producers and consumers. That farmers are also consumers supports the foundation for this structure as commercial interests then converge to not protect both producers and consumers.

Among producers, the category which needs protection primarily are small and marginal farmers (owning up to 2 hectares); among consumers, it is only those whose income levels are low (who can be identified on the basis of colour-coded ration cards) who deserve essential items at “fair” rates.

A large cooperative network, that encompasses producers, processors and market players, will economise the cost of intermediation and bring gains to all. Existing cooperatives can be refashioned towards this end by enlarging their scale and scope. As for subsidising poor consumers, the government can pay the difference.

The way forward

Thankfully, such a structural solution is emerging now with a re-energised cooperative sector making its presence felt. The creation of a separate Ministry for Cooperation offers a beacon of hope.

Early signals are that the long-standing problem of finding a “fair price” is beginning to be addressed through entities like Nafed and NCCF.

Cooperation Minister Amit Shah had announced in January that the entire produce of pulses of farmers who register with Nafed and NCCF (at start of production) on their portal, will be bought at MSP.

The same can be done for oilseeds and TOP too, if infrastructure for decentralised storage can be worked out for TOP under Nafed/NCCF leadership utilising Agri Infra Fund loans. Sorting/grading, basic processing and packing can also be taken up under this.

In the backdrop of this push by the Ministry of Cooperation, a five-step strategy is suggested to increase farmers’ income without causing inflationary pressures:

Ministry of Cooperation to announce a “policy of assured procurement” at MSP of, say, 10 crops including pulses, oilseeds and TOP through Nafed/NCCF. Make this “assured procurement” applicable for all farmers who register on a procurement portal at the time of sowing itself along with land details. (Verification through digitised land records can be used to eliminate aggregators/traders from this process)

Nafed/NCCF to plan and “capture” the entire value chain of the commodities under the guaranteed MSP items from procurement to primary processing to packaging to retail sales.

Nafed/NCCF to set up retail outlets all over the country for “Bharat” brand agri commodities. These outlets will be a conduit for regular supply to consumers. Franchisee models can be worked out and bank funding may be available to entrepreneurs for setting up “Bharat” brand outlets.

Alongside, plan, procure and hold appropriate buffer stocks of pulses, oilseeds and TOP utilising shared and decentralised infrastructure which can be built by member cooperatives of Nafed/NCCF.

Agriculture, which is a State subject, to be moved to the Concurrent List so that Central Government initiatives through Nafed/NCCF do not run into legal hurdles.

(The writer is a former banker with experience in agri-credit operations)