Prime Minister Narendra Modi-led central government’s bonanza of Rs 15,500 crore to farmers via prices support mechanism for 14 crops including paddy in the Kharif season is perhaps unprecedented in post-independent Indian agriculture history. It is as dramatic as the unprecedented farm loan waiver given by UPA 1 which added to the nation’s debt burden.To deal with a full blown and elongated agrarian crisis, this was a pre requisite and was promised in the last union budget. Farm distress was primarily due to pricing erosion — food glut has seen prices fall far below MSP leading to agitations and all round hue and cry.
The move will not only ensure 50 per cent return to farmers on their production costs in 2018-19, but also lays a firm foundation towards doubling their income by 2022, the ambitious target set by Modi.
Several farm experts and agriculture market analysts may still have issues with the decision taken by the cabinet panel on Wednesday. They have eloquently pointed out to lease rentals of farmland not being covered as recommended by the MS Swaminathan committee. Moreover, procurement policy needs clarity which has not come through.
Experts have also pointed to inflationary concerns ranging from 0.38 – 0.7 per cent, losing opportunity in export markets apart from expansion in fiscal deficit by 0.2 per cent thereby impacting central finances.
Nevertheless, the latest decision should be positive with major cost components covered and provide immediate relief to farmers who till now have gone through severe distress in several parts of India.
Prime Minister Modi’s ‘commitment and conviction’ in tackling the farmers socio-economic issues cannot be questioned given the home work done by Niti Aayog and ministerial panel leaded by home minister Rajnath Singh.
Minimum support price is about 50 – 97 per cent more than the actual costs and family labour incurred by the farmers’ vis-à-vis different crops. The absolute increase in MSP for different crops is in the range of 4 – 52 per cent over the support prices offered in the previous year.
In the process, Modi government seems to have seen this as an opportunity to boost pulses production that are otherwise imported in a big way to meet the growing demand.
Free market dynamics do not support the idea of determined support prices. Instead, it should be left to market forces. MSP should only be used as an instrument to align the farm produce to market dynamics and not the other way round. Vulnerability of small holding farmers in particular is serious given the fragmented, disorganised commodity markets with commission agents and brokers benefiting the most.
In fact, extreme farmers’ distress had forced six states including BJP ruled Uttar Pradesh to announce loan waivers up to Rs 88,000 crore in the last one year. Loan waivers may not provide lasting solution to farmers’ prosperity nor is it sustainable for the states even in the short term given resource constraints.
MSP should set the benchmark for free market pricing of various products and not deprive the farmers of their meagre earnings or destroy the food security campaign of India also aimed at alleviating poverty by 2030.
From the political angle, opposition Congress and assorted non-BJP parties are bound to squirm, fret and frown given the huge advantage Prime Minister Modi will derive as the campaign for Lok Sabha elections picks up pace.
Opposition’s campaign against the government riding piggyback on farmers distress may be blunted as well. From a long-term perspective, fixing prices should only be a way to recognize true market value of most retail and commodities markets. Policymakers should set a time line for linking farmers to market sans government involvement. Other avenues of income for socio-economic emancipation of farmers going through the vicious debt cycle and committing suicides must be found.
A national consensus in revamping farm matrix should become a priority for the government. In fact, political parties will have to spell out their agriculture agenda, if elected to power in 2019. States can also come up with specific plans given that agriculture is a state subject. Several states have experimented with the idea of separate budget for agriculture. This idea can be given shape even by central government and BJP as the main political party.