Wednesday, January 16, 2019
In Focus

Posted at: Mar 26, 2018, 12:45 AM; last updated: Mar 26, 2018, 12:45 AM (IST)

The crippling support

Unfortunately, farmers’ lack of bargaining power has given birth to politically conducive tools like farm loan waivers and minimum support prices, says Rajeev Jayaswal

Last week, the people of Jalna (Maharrashtra) were in a shock when they saw a farmer mercilessly destroying the crop of cauliflower he had grown in his field. The video of Premsingh Chavan’s behaviour went viral. The 42-year old farmer had acted in extreme despair after he came to know that the crop would yield him a princely sum of  Re 1 per kilo, not enough to recover even the cost of transportation to the market. Soon the video lost its appeal and the problem of farmers like Chavan remained unsolved. 

Farmers are not getting remunerative prices. It is not because there is a glut.  People in nearby towns are paying at least Rs 20 a kg for same cauliflower. Farmers, however, have no access to these markets due to infrastructural bottlenecks, indifferent policy regime and vested interests. Politically connected middlemen are ruling the roost. They are minting money at the expense of both — the farmer and the consumer.

Farmers hear about remunerative pricing for their produce during every political event. Gullible crop growers have no choice but to trust them, only to get betrayed.

The ruling BJP had also promised to raise farmers’ income as part of its poll promises. Admitting that the “agriculture is the engine of India’s economic growth” the ‘BJP manifesto 2014’ had pledged to “take steps to enhance the profitability in agriculture, by ensuring a minimum of 50 per cent profit over the cost of production”. Although the same promise has been reiterated by Finance Minister Arun Jaitley in his latest Budget speech, concrete action in this direction is still missing. The government is still grappling with the formula to determine the cost of production so that a 50 per cent profit margin is ensured.

Recently, Prime Minister Narendra Modi tried to clear the air around the cost factor, which is crucial to fix minimum support prices (MSPs) of crops. Reiterating the poll promise that MSPs for all notified crops will be “at least one and a half times the cost”, PM Modi said that for this purpose “the cost will include elements such as labour, rent for machinery, cost of seeds and fertilisers, revenue being given to state government, interest on working capital, and rent of leased land”. 

Notwithstanding the PM’s statement, confusion over MSPs still persists. The Commission for Agricultural Costs and Prices (CACP), which declares MSPs for notified crops, does not consider the cost of production as the sole determinant of the MSP.  “Cost of production is an important factor that goes as an input in determination of MSP,  but it is certainly not the only factor that determines MSP,” the CACP website says while explaining the determinants of MSP. According to it , factors influencing MSPs also include demand and supply; price trends in the market; inter-crop price parity; terms of trade between agriculture and non-agriculture; and likely implications of MSP on consumers of that product.

So far as the input costs are concerned, there are three different methodologies to calculate production costs. The first one involves the actual paid out cost (A2). In the second case, actual paid out cost also includes the value of family labour (A2+FL). The third one, which is aspired, involves the comprehensive cost, including labour, rent as well as the interest components (C2). While the margin for most of the crops is seen quite high vis-à-vis the first two methodologies, it is much less than the promised 50 per cent when compared to the third methodology.

Determination of MSP in a transparent manner is just one crucial step to minimise the farmers’ woes. A comprehensive solution to the agrarian crisis lies in the complete policy shift. The country’s agricultural policy still revolves around the Green Revolution of 1960s. Now, there is a need to have a region approach to better utilise India’s geographical diversities. Crop diversification and easy market access are two key elements that need policy focus. Instead of farmers transporting their produce to far off places for better price, the market should come to them with better offers, which is possible through judicious use of internet technology. The e-NAM initiative does promise to offer a better price, it is, however, a work in progress.


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