ASHOK GULATI WRITES ON FARMERS’ PROTEST: POLICIES FAVOUR THE CONSUMER, NOT THE PRODUCER

THE CONTEXT: Farmers in India, particularly from Punjab, are protesting for higher income stability through demands such as legally binding minimum support prices based on the Swaminathan formula. They also seek loan waivers, pensions, and wage reforms. The situation is fraught with economic and political complexities, especially during elections.

THE ISSUES:

• Demand for Legal Guarantee of MSP: Farmers demand that the Minimum Support Prices (MSPs) be legally binding to ensure they receive a fair price for their produce. They want MSPs fixed according to the Swaminathan formula, which suggests a 50% profit over the comprehensive cost (Cost C2).
• Current MSP Formula: The current government policy sets MSP at a minimum of 50% margin over the Cost A2+FL, which does not include imputed rent on owned land or interest on owned capital. Farmers are demanding a shift to the Cost C2 calculation, which would raise MSPs by approximately 25 to 30% for most crops.
• Additional Economic Demands: Beyond MSP, farmers are also demanding loan waivers, pensions for farmers and agricultural laborers, a minimum wage rate of Rs 700/day, and the inclusion of MGNREGA workers to work on farmers’ fields.
• Fiscal and Economic Implications: Accepting the farmers’ demands could significantly affect the government’s finances (fiscal pressure) and lead to food inflation.
• Need for Diversification: The future of Indian agriculture and the potential for increasing farmers’ incomes lies in diversifying into sectors like livestock, fisheries, and horticulture, which have been growing without MSP support.
• Policy Reforms: Removing bans on agri-exports, stocking limits on private trade, and selling wheat and rice below the economic cost of the Food Corporation of India (FCI) are considered anti-farmer policies.
• Subsidy Reorientation: There is a call to reorient subsidies towards producers rather than consumers, suggesting that a more significant portion of subsidies should support farmers directly, for example, through a price stabilization fund or policies like PM-Kisan.
• Balancing Interests: Policymakers need to balance the interests of producers and consumers, especially in election times when various groups exert pressure on their economic well-being.
• Rational Policy Making: Rational policy-making is advised to keep emotions and politics out of negotiations and focuses on the long-term sustainability of the agricultural sector and the economy.

THE WAY FORWARD:

• Legalization of MSPs: While making MSPs legally binding has been proposed, the government must carefully evaluate the fiscal implications. This could be selectively implemented for crops where market volatility is extremely high, providing a safety net for farmers while avoiding blanket policies that might strain the economy.
• Implementing the Swaminathan Committee Recommendations: This involves fixing MSPs at levels that ensure a fair profit margin for farmers based on the comprehensive cost of production (Cost C2), thus incentivizing farming as a profession.
• Expanding MSP to More Crops: MSP could be cautiously expanded to include additional crops, potentially even beyond the traditional 23 crops, to ensure a wider safety net for farmers.
• Rationalizing Subsidies: Redirect subsidies from consumer-focused to producer-focused, ensuring a larger share of financial support is directed toward farmers, thereby aiding them in lowering production costs and increasing income.
• Investment in Agriculture Infrastructure: Improve storage, transportation, and marketing infrastructure to reduce post-harvest losses, give farmers better market access, and get better prices for their produce.
• Strengthening Farmer Organizations: Encourage the formation and strengthening of farmer cooperatives and producer organizations that can empower farmers to have greater control over their products’ production, processing, and marketing.

THE CONCLUSION:

Reorienting policies to support agricultural diversification, productivity, and market access is the way forward to increasing farmer incomes sustainably. Rationalizing subsidies, investing in infrastructure, and creating equitable trade policies could balance farmer demands with economic pragmatism.

UPSC PAST YEAR QUESTIONS:

Q.1) What are the main bottlenecks in India’s upstream and downstream processes of marketing agricultural products? (2022)

Q.2) What are the challenges and opportunities of the food processing sector in the country? How can the farmers’ income be substantially increased by encouraging food processing? (2020)

Q.3) Livestock rearing has a big potential for providing non-farm employment and income in rural areas. Discuss suggesting suitable measures to promote this sector in India (2015)

Q.4) Given the declining average size of land holdings in India, which has made agriculture non-viable for most farmers, should contract farming and land leasing be promoted in agriculture? Critically evaluate the pros and cons. (2015)

Q.5) There is also a point of view that agriculture produce market committees (APMCs) set up under the state acts have not only impeded the development of agriculture but also have been the cause of food inflation in India. Critically examine. (2014)

MAINS PRACTICE QUESTION:

Q.1) Critically assess India’s current agricultural subsidies regime concerning its producer vs. consumer focus. Discuss a reoriented subsidy policy that could align to double farmers’ incomes while ensuring food affordability for consumers.

SOURCE:

https://indianexpress.com/article/opinion/columns/faremer-protest-farmer-income-haryan-punjab-farmers-at-delhi-borders-msp-legal-guarantee-9168348/