Farmers Protests – Need for Speedy Resolution

 

Farmers Protests – Need for Speedy Resolution

More than 250 farmers' unions under the banner of the Kisan Mazdoor Morcha (KMM), which claims to have the allegiance of about 100 unions, and the Samyukta Kisan Morcha (non-political), a platform of another 150 unions, have called the protest that is being coordinated from Punjab.

Demands of farmers who are protesting includes: legal guarantee for minimum support price (MSP); implementation of the Swaminathan Committee report; rollback of policies they say hurt farmers; full debt waiver; pension; electricity amendment bill; and penalization for those who sell fake seeds, pesticides and fertilizers; withdrawal of cases against farmers during the 2020 protest; and zero-budget natural farming (ZBNF) practices, and determination of crop patterns. The farmers say that the government has not fulfilled the promises made during the 2020-21.  

Considering the viciousness of “vote bank politics”, can the BJP emerge out of the present crisis and implement agriculture reforms? Be that as it may, holistic agriculture reforms which are an imperative may remain a forlorn hope.

MS Swaminathan chaired the National Commission on Farmers (2004–06) appointed by the Union Government in 2004. The Commission submitted five reports in 2006, outlining comprehensive measures required for the sustainability and viability of agriculture in India. The farmers’ are demanding implementation of Swaminathan committee report, particularly pricing C2 + 50% (total cost of production + 50%) for MSP and total procurement remains only on paper – barely 15-20%.

Ipso facto, the Congress had explicitly rejected the Swaminathan Committee Report in 2010. What more, their state governments have not been able to waive farm loans. Now, they are promising to carry out Agri-marketing reforms along with a direct income support to the bottom 20% of the population. Rahul Gandhi has given a clarion call to support farmers protests with promise to ensure their demands will be met in totto including repeal “Draconian 3 Laws”. Not to be left behind, Arvind Kejriwal, AAP, self style Anarchist CM of Delhi, and Mann, AAP Chief Minister of Punjab, have also extended unequivocal support to formers.

Be that as it may, under the Constitution of India mandate, “Agriculture including agricultural education and research, protection against pests and prevention plant diseases” is under the “State List”. Add to them also all matters pertaining to land revenue and taxes on agricultural income. Even Animal husbandry, Fisheries and Water for irrigation purposes also fall under the “State List”.

Ipso facto, agriculture employs almost half of India’s population (44 per cent) despite contributing less than 15 per cent to the country’s GDP. It implies that all alike- both the Central and State governments” must extend support to farmers on par with other countries. However, all State Governments, particularly those ruled by Opposition Parties, are imposing the burden of addressing farmers demands by the Central Government.

In retrospect, the Central Government is caught in a difficult situation where it has to choose between two equally undesirable options – Between the Devil and the Deep Blue Sea. If the farmers demands are met in totto, the vast consumers will be hit hard due to sudden burst of inflation of all agricultural products. Otherwise, the farmers agitation will pick up momentum particularly due to 2024 elections.

Let me provide a perspective of comparative data of “Producer Support Estimate” and “Producer Protection Estimate (ratio between the average price received by farmers as compared to the international price of the same commodity)” available in public domain. While in countries such as Indonesia, Brazil, China, Mexico, USA and European countries the “Producer Support” is positive, in India this amount is negative.  Similarly, as per “Producer Protection”, Indian farmers received prices 13% lower than global prices whereas Chinese farmers received 10% above international prices.

By contrast, as per “Consumer Support Estimate”, Indian consumers are buying farm produce at prices  much lower than the international prices due to subsidized food available through the PDS or the government taxing exports to maintain adequate supply of a crop.

In retrospect, realities of agriculture sector are quite complex. Current agricultural policies and prices are skewed towards curbing inflation which is consumer centric. At the same time, farmer’s interests are managed through subsidies and MSP. State governments procure farmers supplies at the Market yards at the prevailing MSP rates.   

Hardly any debate to resolve is management of Consumer Price Index (CPI) used as a measure of inflation at manageable levels.  Annual increase of MSP automatically results in CPI inflation that may have adverse political fallout what with the working middle class demanding higher wages and salaries. In retrospect, it is a vicious chain-cycle. NO DEBATE! Why?

Who are to be blamed for the cumulative mess or chaos prevailing in the Agricultural sector? All alike, including farmers, State and Central governments for their failure to formulate and implement appropriate agriculture reforms and policies during the past 75-years despite “Jai Kisan” slogan..    

Ipso facto, least realized is that input costs varies from States to States and agro-climatic regions to regions. And, 50% of cost of production is also difficult to determine on annual basis. Merely taking expenditure on inputs for fertilizer and seeds and labor, cannot be used to determine the cost of production. One must add the imputed value of family labor, land cost, the interest on land, etc., as per Swaminathan report. And, land costs – official market values of Rs.3-5 lakhs an acre near cities and towns.  No common denominator can be applied.

The government procurement  is through Mandi’s – Wheat, Paddy, and Sugar Cane centric and subsidies (seeds, fertilizers and power). No more, deficient Wheat and Paddy States need to import from the Punjab-Haryana-NCR-Western UP regions. For, they too have developed canal irrigation systems and are producing surpluses to their demand requirements in their own backyards. No simplistic solutions  on a common template can be determined and applied .

What does it imply for the farmers of certain agro-climatic regions like Punjab, Haryana, NCR and Western UP.? They cannot thoughtlessly continue cultivating Wheat, Paddy and Potatoes using conventional cultivation practices by flooding with fertilizers and pesticides adversely reducing soil fertility with hardly any profit returns despite enjoying 3-4 assured Canal-fed cultivation.

Today, production and supply of products outstrip the internal consumer demand, particularly Wheat, Paddy, Cotton and Sugarcane. Ironic but true, the Central Government imposes export restrictions of onion to control the escalation of Onion prices in local markets thereby depriving profits to the Onion farmer’s.

Surplus marketing management is an imperative through exports. In reality, India does not figure in the top 10 agriculture product exporting countries. Whereas  USA with 150 billion USD tops the list, India agriculture commodities export is valued at USD 38.5 billion (2018) that constitutes 12.6% of total exports.  More important it is to note that for promoting exports of agricultural commodities, not only prices have to be competitive in the international market but also value added products. So, the issues of farmer’s incentives like subsidies are inescapable imperative. China supported its farmers by $212 billion in 2016, and the OECD as a group supported its farmers by $235 billion per year in 2016.

Next, the issue of import substitution by diversification of crops is also critical. International purchases of imported palm oil cost an estimated total US$24.5 billion in 2019. India tops the list of importing nations - US$5.4 billion (21.9% of total palm oil imports). Not only Palm Oil cultivation needs to be promoted by States and Central Governments as import substitution initiative. Similarly, imports of Almonds, Cashew nuts and finished garments while exporting cotton. 

Commonsense of basics of economics: demand, supply and production must be governed by market demand – domestic and exports. No point merely producing surpluses.  At the same time, farmers must exploit opportunities available for import substitution. It impies diversification and in situ value addition.  Hardly there is informed debate on the above issue. For over three decades agriculture experts have been expressing the need for “Agricultural reforms”. Yet, none of the regimes made an attempt to formulate and implement them out of fear of losing vote banks.

Even critical is the reduction of losses in agriculture and horticulture sub-sectors at various stages of production and movement. The estimated the total volume of losses for all commodities to be about Rs 92,651 crore.  In the case of cereals, losses ranged between 4.65% (maize) and 5.99% (sorghum). In the case of wheat and paddy, the losses were 4.93% and 5.53% respectively. Moreover, the losses were higher at the level of farm operations. The perishable crops - fruits and vegetables - suffered much higher losses: Fruits - mango’s (9.16%); guava (15.88%); and apples (10.39%); and vegetables - potato (7.32%); and tomato (12.44%).

All alike are aware of the inherited strongly entrenched trader’s practices in Agricultural Produce and Marketing Committee (APMC) - farmers to sell their produce only through these markets. These markets have been rigged by commission agents taking away an unduly high share of consumers’ rupees in the value chain. As a result of these restrictive trade and marketing policies, India’s farmers have been implicitly “net taxed” despite large input subsidies. The way to escape from the trap is to reform the archaic policy structure – reform the Essential Commodities Act (ECA) of 1955, the APMC Act and the export and import policies - in a way that at least ensures farmers a “level playing field” with consumers. 

Agriculture Export Policy (AEP), 2018 was formulated with the vision: “Harness export potential of Indian agriculture, through suitable policy instruments, to make India a global power in agriculture, and raise farmer’s income”. Unless holistic reforms are formulated and implemented, in no way India can traverse on the path emerging as a global power. 

Economic insecurity, low productivity and lack of modernization are the major challenges. Most important are procurement and public distribution considered vital to making agriculture economically viable and sustainable. Ultimately, technology is also important for farmers to make agriculture economically viable and ecologically sustainable.

Viewed in the overall framework outlined above, instead of allowing the farmers protests to continue and the opposition parties exploiting the opportunities to gain farmers support in vote bank politics, the BJP-led NDA government must expeditiously address the key demands like enacting legal guarantee for minimum support price (MSP) and implementation of the Swaminathan Committee report. Even others like penalization for those who sell fake seeds, pesticides and fertilizers and withdrawal of cases against farmers during the 2020 protest can be accepted and implemented.  Also, the State Governments must be directed to address other demands since “Agriculture” is under the State List as per the Constitution of India.