Root causes

Updated on: Dec 06, 2021

Governments must address farm distress by going beyond populist, knee-jerk responses

With this calendar year having witnessed many farmers’ protests, including the recently concluded one in Mumbai, the Centre must take urgent steps to address agrarian distress. Farmers’ groups in Mumbai have pressed for loan waivers, price support measures and compensation for drought. The State government has expressed a willingness to meet most demands within three months, possibly to contain any adverse political fallout. Indeed, producers of onion, chillies, tomato and garlic have to contend with volatile prices all the time. Marketing infrastructure is inadequate, especially for small producers who lack the capacity to store their produce. In Madhya Pradesh, the Bhavantar scheme does not seem to be working well enough, while e-NAM remains a work in progress. While allowing producers to access markets other than the APMC and removing curbs on stocks and exports, the Centre must ensure that the model Agriculture Livestock and Marketing (Promotion and Facilitation) Act, 2017, takes marketing reforms a few steps forward. This must be accompanied by real-time tracking of inventories and development of storage and processing capacity. A ‘glut’ in the markets is a misnomer in a country where per capita consumption of eggs, milk, fruits, pulses and horticulture products can be increased by a considerable margin without still approaching global levels. PPPs in creating market yards and storages should be fast-tracked. But even before that, farm extension services should ensure against huge swings in area sown, merely on the basis of imperfect market information.

By raising support prices of cereals, pulses and coarse grains to 150 per cent of the cost of production, the Centre could be dragged to the WTO for allegedly breaching its farm subsidy entitlement and ‘distorting’ world markets. The MSP is seen to distort prices by incentivising output. Meanwhile, the Centre has allowed rice exporters a 5 per cent subsidy under the ‘Merchandise Export from India Scheme’, a programme already been targeted by the US at the WTO. Under the WTO’s Agreement on Agriculture, developing countries are entitled to product-specific subsidies up to 10 per cent of the value of its produce. However, there are at least two flaws here. First, the current value of the produce is based on a 1987-88 reference price rather than a more recent year, as a result of which the value of the product is severely underestimated. Second, developed countries have to comply with an average ceiling rather than a product-specific one, as a result of which they can subsidise select products. However, efforts should be on to move to income support steps that are WTO-compatible, given the limited reach of MSP.

Indian agriculture needs to go beyond loan waivers and generous price support. For rural household incomes to ‘double’ in the next five or seven years, the focus should extend to increasing productivity, crop diversification and reducing cost. Diversification into livestock really lifts incomes of cultivator households. A multi-pronged crisis in rural India calls for a broad-based response.

Published on November 25, 2018
This article is closed for comments.
Please Email the Editor

You May Also Like

Recommended for you