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Posted at: Jun 10, 2019, 6:58 AM; last updated: Jun 10, 2019, 7:03 AM (IST)

Synchronising support

Area planning to control production based on need and farmer participation could go a long way in ensuring adequate MSP

Dr SS Sangwan

Various studies have amply revealed that whenever the prices of agricultural commodities are  subdued, the farmers are in distress. It happened around 1990, the year of the first all-India agricultural loan waiver (ALW) and also around the year 2008, the year of the second all-India loan waiver. From 2014-15 to 2017-18, the increase in minimum support price (MSP) as well as market prices has slowed down compared to their increase during the period 2010-11 to 2014-15. 

It again increased farmers' unrest across the country and fuelled demand for a third all-India agricultural loan waiver since 2015. Perhaps in view of this, the Government of India has increased the prices of all agricultural commodities one and half times over the paid out expenditure (cost A2) and imputed value of family labour (FL) in 2018 (A2+FL). This is the highest ever increase in the prices of most agricultural commodities.  

Present status of production

Despite the higher MSPs announced for pulses, oilseeds and coarse cereals in 2018, their market prices have been much lower in normal years, during  2013 to 2018, though many farmers got higher prices due to more procurement at the MSP by the government agencies under price support scheme (PSS) during the last three years. However, the Central procuring agency, National Agricultural Cooperative Marketing Federation (NAFED), could not clear its stock of groundnut, toor and R&M within the stipulated period of six to nine months after the purchase since 2016-17 as revealed from its tenders for sale through the NCDEX e-Markets Ltd (NeML). NAFED is selling stocks below the procurement prices — MSPs — after incurring a huge cost in procurement, storage, interest on loans, wastage and selling. 

Even the actual stocks of wheat and rice for July 1, 2019 are likely to be 47.6 and 29.6 million tonnes (MT) as against their buffer requirement norms of about 27.58 and 13.54 MT, respectively. The government is protecting the domestic price of Rs 1,840 for wheat with an import duty of 40 per cent.  MSPs and domestic prices of main cereals, pulses and oilseed have surpassed the international prices. Similarly, sugar mills are unable to pay the state advised prices (SAP) of sugarcane which are about Rs 50/quintal above its fair and remunerative prices (FAR) due to stagnant or declined price of sugar prices in the last six years or so. The higher MSPs are not only attracting the attention of the World Trade Organization (WTO) but also limiting the scope of our export of agricultural commodities.

Producers of coconut, potato, onion and chillies are also intermittently realising their low prices in recent years where the Central and state governments have to procure more frequently under the Market Intervention Scheme (MIS). Hence, at present, India is surplus in cereals, self-sufficient in our requirement of 24 MT of pulses.  The main food import of India at present are the edible oils to the extent of 12 to 15  MT which may be  partly due to their volatile production but  largely due to lower prices of imported oils like palm, soyabean and sunflower. Therefore, the biggest challenge is to ensure the MSPs by controlling the production of cereals, pulses and oilseeds as per the requirement. One of the options is through area planning which is followed in agricultural surplus countries like the US and Australia. 

Status procurement by government

In case of cereals, the average procurement of total production during 2014-15 to 2017-18 by the Food Corporation of India (FCI) was 28 per cent of wheat, 33 per cent of paddy and one per cent of coarse cereals, and it is limited in some states like Punjab, Haryana and Madhya Pradesh (wheat) while Andhra Pradesh, Uttar Pradesh and Rajasthan have joined to some extent in recent years. Under the price support scheme (PSS), the procurement of oilseeds and pulses by NAFED was the highest so far, valued at Rs 30,023 crore during the Kharif season in 2017 and Rabi in 2018. But it accounted for only 12 per cent of their total production with the highest 24 per cent for gram and 21 per cent for toor (upper limit as per the PSS guidelines is 25 per cent).  This procurement was widespread in 12 states other than Punjab and Haryana and it has created awareness about MSPs all over India as reflected in an increasing number of farmers registering for sale to NAFED. 

Whether unlimited purchaseis sustainable?

Despite the recommendations of the Shanta Kumar Committee to limit the purchase of cereals by the Food Corporation of India (2015) as per need, the purchase of wheat and paddy at the MSP is still without any cap for the individual farmer, resulting in excess stocks. Under the PSS, the maximum procurement limit is 25 quintals per farmer which is almost followed. The government is incurring an average loss of about Rs 1,000 per quintal during the last three years in handling, storage and selling their stock of pulses and oilseeds below the MSP. Disposal of wheat and rice at Rs 2 and Rs 3 per kg is taking huge budgetary support. It is estimated that the total food subsidy and losses under PSS/MIS may require about 10 per cent of the total budget. Besides, there are budgetary support from the states for sugarcane, cotton and other crops.  Is it sustainable in long run? Or is there a need to try other prevalent options the world over to support the farmers. 

The approach of area planning 

Area planning is an alternative mechanism adopted by countries like the US, Australia and the UK etc. To illustrate, in the UK, all farms above five hectares have to get approval for the use of land not only for growing crops but even for erecting buildings, carrying out excavations and engineering operations needed for other agricultural allied activities. In the US and Australia, their zoning process regulates the production of crops as per their domestic, industrial and export demand. Contrary to this type of elaborate exercise, our departments of agriculture and horticulture are generally setting targets of 10 per cent higher productions every year as a thumb rule.   

How to initiate area planning?

Area planning under the crops is a huge challenge in a democratic system. At the national level, the precise estimation of total demand for each agricultural commodity has to be made well in advance of their sowing seasons by the related departments. Then that demand may be divided among the states in proportion to their acreage under the crop concerned in the last five years or so. The state may sub-divide the demand at the regional/district level again in view of their previous acreages. State officials of the agriculture and horticulture departments may register the individual farmer's area under individual crops well before the sowing season for assuring purchases at MSP. When the aggregate registered area under a particular crop reaches the allocated limit of the district/state, its registration may be stopped and the remaining farmers may register for the next best paying crop where the limit has not reached. To benefit the maximum number of farmers, an area cap can be put for an individual farmer, say three acres per mustard farmer. Similarly, caps for other crops in view of the total demand and the number of growers in the previous years.  Thus, planning of land under the main crops and agricultural allied activities may enable the optimum utilization of scarce resources like fertilizers and water etc. The production as per demand may also keep the market prices of agricultural commodities in a narrow range with the MSP and actual procurement operation likely to be limited. It is to be noted that the suggestion of area planning was given to the authors by some farmers themselves during the survey for the study of protected cultivation during 2017 where the price crunch was felt due to the growing of similar crops. Some states are already moving in the direction of area planning, viz, Haryana that has started registering for the purchase for mustard much before the marketing season but could not procure from all registered farmers due to the widening gap in its market price and MSP. Even a cash incentive of Rs 2,000 per acre and assured purchase at MSP has been announced in its six districts for shifting the acreage from paddy to maize. Therefore, registration for assured MSP has to start before sowing with area cap for the crops per individual farmer. 

In achieving the involvement of farmers in area planning, the planners have to make convincing estimates for domestic, industrial and export demand for each crop. Ensuring MSPs for all registered farmers will result in steady increase in the income of farmers and optimum use of scarce resources of land, water and fertilisers etc. It can also affect shifting of more acreage to desired crops like oilseeds to reduce their imports. Above all, it may be a better alternative to address farmers' distress than a quick fix solution of agricultural loan waivers.  

Dr SS Sangwan  is former professor, SBI Chair, CRRID, Chandigarh 


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