Editor’s Note: This is the second article in ‘Farmer’s Lament’, a series of three articles on the agriculture sector in India.
Soon after India’s Independence in 1947, Jawaharlal Nehru said: “everything else can wait, but not agriculture.” His focus on developing the agriculture sector was built as much on recent disasters owing to mismanagement and scarcity of food resources, such as before and during the Bengal Famine of 1942-43, as it was on his conception of a comprehensive model of development for the country. However, a convenient way to follow Nehru has been by the use of quick-fix solutions, such as loan waivers and increase in Minimum Support Price for agricultural products. But the question is: is this the best way to resolve the problems that beset the farmers of India?
Not quite.
One of the most widely followed practice by governments is to make the Minimum Support Price (MSP) `fair’ for the farmers. The Union government constituted National Commission on Farmers (NCF) in 2004, which was headed MS Swaminathan. The NCF’s recommendations on the MSP are taken as reference points today when discussing this topic. The Commission’s recommendations were along these lines:
The Commission for Agricultural Costs and Prices (CACP), gives three definitions of production costs: A2, A2+FL and C2.
A2 costs – It basically cover all paid-out expenses, both in cash and in kind, incurred by farmers on seeds, fertilisers, chemicals, hired labour, fuel, irrigation, etc.
A2+FL costs – It cover actual paid-out costs plus an imputed value of unpaid family labour.
C2 costs – These costs are more comprehensive, accounting for the rentals and interest forgone on owned land and fixed capital assets respectively, on top of A2+FL.
The MS Swaminathan Committee report had recommended a minimum support price of 50% profits above the cost of production classified as ‘C2’ by the CACP.
Increasing the MSP most directly helps the farmer. It is a good initiative and has helped a lot of farmers, but this is not enough. Increasing MSPs may look good most on manifestos for elections but for truly addressing the problems in the agriculture sector, one needs to have a more comprehensive approach, which includes a big emphasis on procurement and storage. Aided by a good monsoon season, India may have produced record food grain this time but the lack of storage is not going to help. Recently it came to the fore that the government of India has not been fully paying the Food Corporation of India (FCI) the cost to run the massive food-grain procurement, storage and distribution network, and that it owes FCI an amount of Rs 20,00,00,00,00,000, due to non-payment of dues for three years now!
To maintain the food procurement, distribution and supply, the Food Corporation of India (FCI) has been borrowing money from government’s National Small Saving Fund (NSSF). In 2016-17, FCI borrowed Rs 6,60,00,00,00,000 from NSSF at an interest of 8.8% as an emergency fund raising. Even though the godowns of FCI are brimming with grains after the bumper season, past instances of rotting stacks of food-grains in FCI godowns might become more frequent with such a huge foodgrain harvest. Without funds, how is the FCI supposed to maintain stocks? This has been a problem not only of this government but many governments before. As the government has increased the Minimum Support Price (MSP) of foodgrains, it is expected to increase procurement as well. And this is where the lack of fund could impact the most.
Availability of wheat is more than rice and with the kharif season around the corner, the government needs to start thinking of what to do with the wheat (which is not exported usually, due to global low prices of wheat) before the rice stock comes in. These are just some nuances of a fairly chronic problem. In West Bengal, under the Trinamool Congress (TMC), the collapse of the state procurement infrastructure has led to widespread distress among farmers and even farmer suicides.
Being a follower of certain Dharmic followers that advocate balance in one’s pursuits, I would suggest that the solution for this problem lies in the use of both. The government can only enact innovative schemes like the ‘limited procurement scheme’, where the government would procure excess farm produce and leave rest to be cleared at market price, if it has enough silos and storage for keeping this excess. At the end of the day, it all boils down to that. Minimum Support Prices are important but have to be supplemented by the increase in infrastructure, silage and procurement rates. You may ask how that is possible with the limited funds that the government has. Yes, the government has limited funds but if utilized properly they can still go a long way in resolving this. I would suggest that each village must have atleast one silo/storage facility and the MLAs or MPs of that area can contribute to this. But would that be enough?
Maybe not.
There are serious financial crunches in various sections of the value chain. To address this, I would like to put forward a proposal that may invite a lot of debate and even criticism but which I feel is the only way to address the dismal state of this in a fairly quick, quality-assured and sustainable way: put a major portion of silage, procurement and storage in the hands of private-sector entities. I will be discussing this along with the increased presence of agripreneurship in my third article. The government should handle certain key areas including a basic regulation and auditing of private sector involvement but not necessarily keep with it areas that it can source to private players and get the job done. The reason for advocating this is three-fold: more flexibility and freedom of negotiating of private-sector entities, albeit within the bounds of the law, which can help them tackle various kinds of problems on the trot; the second is more freedom to experiment and to adapt new techniques in a quicker way without excessive red-tapism; and lastly, the constant competition mode after a fixed time period in public-sector entities does not allow long-term relationships between procurers and suppliers while that is not a problem with private sector players, which leads to long, sustainable bonds and stable market chains.
I would like to conclude by quoting one of the biggest names of American history Thomas Jefferson:
“Agriculture, manufactures, commerce and navigation, the four pillars of our prosperity, are the most thriving when left most free to individual enterprise.”