Protecting rural livelihoods under Covid-19

Sukhpal Singh | Updated on May 05, 2020

This is the time to decentralise foodgrains procurement to many more States, especially ones with high proportion of marketable surplus and of small and marginal farmers

The present and future effects of the pandemic Covid-19 are being debated and discussed globally. In India, the issue assumes much more significance given the levels of human deprivation and precarious livelihoods a majority of the population is exposed to, especially the rural and agricultural activity based households including rural labour migrants, a large number of whom, unlike most other Indians, are stuck in the middle — neither at places of work nor at home!

In this context, it is important to examine the likely effects of Covid-19 on the agro-based and rural livelihoods, particularly at the time of harvest season for rabi crops and sowing of summer crops in some States, and even upcoming kharif season in most parts of India.

Since this is primarily a wheat crop-based season in most States, where harvest is either almost complete or is under way, it is important to recognise that wheat, unlike paddy and many other perishable crops, can be stored at farmer level as it does not require processing before sale or further distribution. Also, it is a crop among many others like mustard and pulses, which is under Minimum Support Price (MSP) and procurement by Food Corporation of India (FCI) and has been procured more regularly and on a large scale than any other crop with the exception of paddy.

However, it is also a known fact that only a very small percentage of farmers (6 per cent) get MSP benefit and, that too, only in a few States like mostly Punjab, and Haryana, and MP. In fact, it is surprising that Punjab would be procuring more than 70 per cent of its production at MSP for FCI, practically not leaving much for private trade and not giving an opportunity to other state farmers to benefit from this national policy.

MSP procurement

When the government is trying to bring new channels for farmers to choose from, especially at a time when government godowns are overflowing with wheat and paddy (71 million tonnes), it is ill-advised to make this level of monoposonistic intervention in one or two States. For example, it is reported that Rajasthan had demanded that 50 per cent of its crops should be procured at MSP.

This kind of blind procurement can also kill the private trade in this commodity altogether, especially when some States (like Punjab and MP) are also listening to noises being made by some farmer unions that even private agencies and traders should mandatorily procure wheat at MSP, failing which they should be fined or jailed. This kind of legal provision backfired in Maharashtra last year and had to be withdrawn after trader protests. The question which needs to be asked is: Why should a private player be penalised for a state decision and a promise made to the farmers?

Rather, this is the time to decentralise procurement to many more States, especially ones with high proportion of marketable surplus and of small and marginal farmers like Bihar, and UP so that in these times of crisis, they cannot only hope to sell but also get MSP! Eight states grow wheat in India with a significant marketed surplus. It is important to focus on marginal and small farmers across these States for MSP and local procurement and for local distribution. That would be a real benefit of state agency intervention, which can’t be blind to social and economic inequalities in the process of procurement.

In fact, PACS and other local collectives like farmer companies and groups have been procuring successfully for FCI in many States like MP, UP, Bihar and Chhattisgarh and need to be brought in wherever possible to avoid crowding of mandis and reach the doorstep of the farmer for procurement. Some of them even share the commission with farmer sellers partly.

In States like Punjab, which has 3,500 PACS, it is time to rope them in with credit support to procure for the FCI instead of creating new sub-yards for this season. Many of them have storage and human resources which can be easily leveraged. It is a bit surprising that Punjab has not thought of involving them in procurement for all these years and is still battling the Arthiyas even in this season who dictate the terms as a lobby.

Deferred sale

If storage and crowding of farmers in mandis is an issue, then some States like Punjab and Haryana have proposed to the Union government a deferred sale incentive price to reduce pressure on markets at the time of harvest which should have been accepted without much delay as wheat can be stored at home or local level easily. Of course, the actual amount per quintal can be what Haryana suggested or even lower to allow farmers to receive the cost of storage and also interest on pending repayments.

Since holding back produce would lead to credit issues for farmers, there is need to use warehouse receipts by recognising local warehouse like those of PACS and other local body storage spaces for providing farmer loans against that produce to free farmers from distress sale. There are interesting experiences in States like Bihar where private agro start-ups are creating such facilities and small farmers are using it.

Further, collateral-free loans of up to ₹50,000 for individuals and up to ₹5 crore for Farmer Producer Organisations/Companies (FPOs/Cs) under priority sector lending as per the RBI directive to meet credit needs of landless, tenant, marginal and small farmers who are into interlocked transaction with local traders, and therefore, can’t exercise choice in selling their produce, can go a long way in this season if banks are instructed to implement it at least in this time of crisis.

Another farmer interest protection measure — Bhavantar Bhugtaan Yojana (deficiency price payment) — which has been discontinued after experimenting with it in a few States and crops — can come in handy now when any farmer selling in any channel can be paid the difference between MSP and actual price at which s/he sells. This can be implemented by the Union government for major crops like wheat, pulses and oilseeds if they feel FCI and state agencies can’t procure beyond a limit.

Since agricultural markets is a State subject, they should proactively implement Market Intervention Scheme/Price Support Scheme (MIS/PSS) in specific perishable and non-perishable crops in partnership (50:50) with the Union government as the provision exists already and has been successfully used by some States for perishables in the past, to protect farmer interest in this time of crisis. This can be even done for perishables by state-level agencies like HOPCOMS, HPMC, and autonomous central projects like SAFAL, and so on.

Many experts are expressing extreme views like suggesting that government should be advising farmers to switch back to food crops as India is likely to experience food shortage due to Covid- 19, which is a far-fetched argument, in light of the fact that India’s granaries have large amounts of surplus stocks (71 million tonnes as of April 2020 without taking into account this season wheat procurement).

This kind of argument also goes against the target of increasing farmer incomes as it is only high-value crops which can lead towards that purpose, and not foodgrains (wheat and paddy) as the latter are constrained by MSP and government procurement, which distort the foodgrains markets.

Ration cards, cash transfer

On the demand side, the poor, especially migrants and those without ration cards, should be given foodgrains free from the local warehouses of FCI and other local agencies for getting rid of excess stocks (as mentioned earlier) and putting them to good use before they rot. Presently, the focus should be saving lives from hunger and not worrying about fiscal implications of such free distribution of foodgrains to the poor or to those NGOs and panchayats which agree to feed the poor with cooked meals.

It can actually be a blessing in disguise for the FCI and the government. The portability of ration cards, which was proposed to be implemented this year, would have been a big relief but even now it should be done as soon as possible. Of course, cash transfers to migrant workers stuck away from their homes and place of work as done by Maharashtra for construction workers (₹2,000 each), and Bihar (₹1,000 each) for its residents in other States, and for PDS beneficiaries by Gujarat (₹1,000 each) is a welcome and much needed initiative which other States should follow quickly.

Among all, Chhattisgarh deciding to provide free foodgrains to all needy shows the way forward in the present crisis. At least, State governments should proactively seek free or highly subsidised foodgrains from the Union government.

Secondly, MGNREGS should be used to start local-level agricultural and allied works, and not just irrigation and watershed, because there is a need for immediate relief for employment and food for work programmes, and many local works can be thought of, especially when local schools which are closed and many other public places can benefit from such employment works, including harvesting and threshing support for small and marginal farmers on their own farms.

In fact, MGNREGS workers who are mostly local can come in handy to help in handling of farm produce in APMC mandis and other designated purchase centres and should be paid double the MGNREGS wage to incentivise them to work in these markets especially in States like Punjab, as the issue is not absolute labour shortage but low wage rate.

Finally, there is no trade-off between lives and livelihoods as both are important and need to be protected. The sooner this is realised, the better it would be. Both Union and State governments should do their bit in this time of crisis and during the post-Covid-19 period.

The writer is Professor and Chairperson, at IIM Ahmedabad

Published on May 05, 2020

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