Give farmers a viable crop alternative

Devinder Sharma

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Food & Agriculture Specialist

At a time when agrarian distress is quite pronounced, and while India ranks 102 among 117 countries in the Global Hunger Index-2019, the country’s granaries are overflowing. Against a surplus of 73.1 million tonnes of wheat and rice which was stacked with the government in July 2019, the food stocks are projected to swell by another 10 million tonnes or so to reach a record 84.7 million tonnes in July 2020.

Expecting to be saddled with an extra 46.3 million tonnes by July 2020, over and above what is prescribed under buffer norms, the Centre is asking Punjab, Haryana and other surplus states to curtail procurement.

While the PMO wants to reduce the subsidy burden, and ostensibly reduce the cost of carryover stocks, the Commission for Costs and Prices (CACP) is seeking a review of the open-ended procurement policy under which the marketable surpluses of wheat and rice farmers bring to mandis, the government is committed to buy at MSP. Seeking a restriction on procurement by setting limits for purchase, the CACP is suggesting that the private sector be allowed to directly procure from farmers.

The last time the government amended the APMC (Agricultural Produce Market Committee) Act in 2006 to allow private companies to buy directly from farmers, it ended up turning the country into the world’s biggest importer of wheat. Private trade swung into action to make brisk purchases, but didn’t disclose the quantity purchased and hoarded the grain. As a result, there was a shortfall in procurement at a time when there was no visible drop in production. To meet the food needs for public distribution, India had to import 5.5 million tonnes of wheat in 2007-08 at almost double the price it paid to domestic farmers. International prices had jacked up when India’s wheat import needs became known. This had evoked a lot of controversy, and the BJP (which was then in the opposition) had demanded a CBI inquiry into, what it called, the wheat import scandal.

Allowing private trade to buy wheat or paddy directly from farmers bypassing the APMC-regulated markets, therefore, is fraught with dangers. At no stage can the government afford to ignore the ‘food security’ requirements and has to be ready with adequate buffer stocks, even if it is more than what is required, to meet any unforeseen shortages.

To the question of what to do with excess inventory, isn’t the failure to liquidate stocks when there exists plenty of hunger simply a reflection of food mismanagement? In 2006, when the first Global Hunger Index report was published, India’s ranking was a dismal 96 among 119 countries, sliding further to 102 in 2019. Several studies have shown that rural India (and also urban poor) was spending less and less on food. A leaked report of the consumer expenditure survey — which has been junked by the government — clearly shows how food consumption in rural areas had steadily dropped by 10 per cent in the period 2011-12 and 2017-18. The piled-up stocks, therefore, could have been very effectively used to meet the nutritional needs of a large section of the population. Here I agree with the recommendations of the CACP which suggests additional allocations to be made under the National Food Security Act, the Antyodaya Anna Yojana and other welfare schemes.

On the issue of curtailing open-ended procurement, what needs to be understood is that even if the MSP does not entirely cover the cost of cultivation, at least it provides an assured price. For the farmers, an assured price as well as an assured procurement is what protects them from the tyranny of the markets. That is why the farmers’ demand for raising the MSP and linking it with the Swaminathan Commission’s recommendations has been growing steadfast. But for quite some time, the dominant economic thinking is for dismantling the APMC-regulated markets and doing away with the MSP. The World Bank has been consistently demanding this, the World Trade Organisation has been questioning the need for public stockholding, and even economic surveys as well as some mainline economists have repeatedly pointed to how administered prices are coming in the way of what it calls as price discovery.

If there is one market intervention that ensures price discovery, it is the MSP, if it is delivered properly. In a country where only six per cent farmers get the benefit of MSP, markets have failed miserably to provide a better price to 94 per cent of the remaining farmers and thereby help in price discovery. The introduction of e-NAMs (electronic national agricultural markets), too, has failed to assure a higher price to farmers. Although former Finance Minister Arun Jaitley had acknowledged that e-NAMs are the first step towards setting up spot markets, what is not being answered is why in the US agriculture continues to slide into deep crisis year after year despite having the world’s largest commodity exchange at Chicago, and another at New York? According to the US Department of Agriculture, the growth in real income for American farmers has been on the decline since the 1960s.

Strengthening the procurement system is, therefore, the answer. Instead of ascribing a quota system (at the farmer or the district level) for limiting wheat and paddy procurement, an effective procurement system needs to be evolved for alternate crops. For instance, if Punjab’s share in total procurement of wheat has to be reduced from the existing 37.1 per cent, an equally robust procurement system for crops like maize, millets, pulses and oilseeds have to be first ensured. This also holds true for paddy, which is blamed for the depleting groundwater. Farmers do realise the need to diversify, but in the absence of an assured price and procurement, are not willing to make the shift. Rightly so. After all, volatility of markets is what hits farmers the most.

Give farmers a viable alternative, they would do the rest. But on the other hand, any move to systematically dismantle the food procurement system, based on the twin strategies of assured price and an assured market, which Dr MS Swaminathan had once referred to as the two planks of a ‘famine avoidance’ strategy, will have serious political ramifications.