Understanding the agitating farmers, A calibrated approach to reforms Current Affairs 10th June, 2017DEVENDRA VISHWAKARMA
Understanding the agitating farmers
In news: Farmers in two of the largest states of Madhya Pradesh and Maharashtra have resorted to agitation. The protests have come soon after the Uttar Pradesh government waived farm loans earlier this year, setting off similar demands in other States. Farmers from Kerala in April, 2017 staged protests at Delhi’s Jantar Mantar carrying skulls of fellow farmers who have committed suicides.
- Full waiver of farm loans.
- Hikes in the minimum support price for agricultural produce.
- Writing off of pending electricity bills.
Maharashtra government promised to waive farm loans of small and marginal farmers worth about Rs. 30,000 crore and set up a State commission to look into the matter of raising the MSP for crops. The Chief Minister also promised that buying agricultural produce below their MSP would soon be made a criminal offence.
- Indian farmers faced two consecutive years of drought in 2014-15 and 2015-16. Such an occurrence — two droughts in a row — only happened five times since 1870, and on three occasions in independent India: The mid-sixties, the mid-eighties and now. Despite this rare farmer tragedy, we did not observe any farmer riots during the recent drought years.
- More than 5,500 farmer suicides were recorded in 2014 and the figure rose at least 40% in 2015, with Maharashtra contributing the most, according to the National Crime Records Bureau.In Maharashtra, which witnessed the highest number of farmer suicides between 2014 and 2015. Between 2014 and 2015, the state saw an 18 per cent jump — from 2,568 to 3,030.
- The National Crime Records Bureau attributed the reasons to crop failure, failure to sell produce, inability to repay loans, and other non-agriculture factors such as poverty and property disputes.
Why are farmers agitating?
- Socio-economic reason:
The socio-economic explanation is that nobody wants to be a farmer anymore. Because it is unremunerative, and relatively hard physical work. The children of farmers aspire for a well-paying urban job. But the economy is not producing enough jobs to accommodate the migrants from farmer families. This leads to frustration, despair, unrest. Hence, the riots.
- The rural-urban wage gap is wide at 45%, almost four times that of China. The share of farming in GDP is under 14%, although more than half of India’s 1.25 billion people still depend on it.
- Demonetisation: The Centre’s decision to demonetise high-value currency notes in November last year came as a severe jolt to farmers as cash is the primary mode of transaction in agriculture sector.
- Pricing of agricultural produce:
- Steep fall in the prices of agricultural goods: The price slump, significantly, has come against the backdrop of a good monsoon that led to a bumper crop. The production of tur dal, for instance, increased five-fold from last year to over 20 lakh tonnes in 2016-17.
- Irrespective of price fluctuations, MSPs are supposed to enable farmers to sell their produce at remunerative prices. But procurement of crops at MSP by the government has traditionally been low for most crops, except a few staples such as rice and wheat. This has forced distressed farmers to sell their produce at much lower prices, adding to their debt burden.
- In Madhya Pradesh, this year was the second year of a bumper onion crop with no buyers. Farmers were forced to sell produce at for Rs 2 to 3 per kg as the state government delayed announcing procurement price of Rs 8 per kg. 33% of onion procured by the government rotted in absence of adequate storage facility
- Our farm subsidy policy encourages the production of only low-value staples, such as rice and wheat, and the output of fruits and vegetables — that more Indians are eating and farmers producing — is not covered by the government’s minimum support price. Much of the farm distress sweeping India now stemmed from a glut of potatoes, onion and tomatoes.
- Agriculture still at mercy of monsoon rain:
- For far too long, farming has been at the mercy of nature, especially the June-September monsoon rain.
- Agriculture in India is facing a tough time because of its dependence on the monsoon. Over 50% of the crop area does not have any irrigation facility and almost three-fourth of the annual rainfall is concentrated in four months a year, between June and September. A deficit monsoon for two consecutive years in 2014 and 2015 and unseasonal showers ahead of the winter harvest in 2015 have hit the farmers hard. Entire south India is bearing the brunt and Tamil Nadu is facing the worst drought in 140 years.
- Poor productivity:
- The use of technology is patchy, and only one-tenth of every rupee the government spends on rural areas goes to improving productivity — which is why farmers in India grow 46% less rice an acre than their Chinese counterparts.
- Agricultural market- Yet not reformed:
- The monopoly of traders over local agricultural markets is perpetuated by law, which bars farmers from selling directly to consumers. This kills any chance of farmers getting a fair price, lining the pockets of commission agents instead.
- The cardinal malaise lies in successive governments treating agriculture as a source of votes and not an engine of growth
Why farm loan waivers is not a solution?
Farm loan waivers are only a “temporary necessity” to address the agricultural crisis in the country and not a permanent solution to the problem, according to MS Swaminathan, agriculture scientist and the architect of India’s Green Revolution in the 1960s.
With poor extent of indebtedness and reported increase in suicides among farmers in distress, loan waivers appear as the easy solution to the problems of the farming sector. But it comes at a cost.
Issues related to loan waiver –
- Farm loan waivers disrupt “credit discipline” among borrowers as they expect future loans to be waived as well.
- It does increase the problem of moral hazard by penalising sincere and law abiding farmers.
- It gives rise to a tendency to default if the loan waivers are not a one-time solution but keep appearing every decade.
- It certainly leads to a deterioration in the performance of banks but also has an impact on credit off-take and repayments. It was the same approach of writing off loans of big corporate defaulters which has led to a situation of unprecedented NPAs in the banking system.
- But it also penalizes the small and marginal farmers who are more dependent on non-institutional sources of loan such as the local moneylender. The interest on these loans is higher but these are excluded from any loan waiver scheme.
- The old, labour-intensive methods must give way to technology for efficiency and higher yield
- Pricing and subsidy mechanism must be overhauled.
- The focus should be more on making the Pradhan Mantri Fasal Bima Yojana a success rather than demanding farm loans waivers from banks.
- The government should look at diversifying the cropping pattern and developing new technology to fight drought. Bringing green revolution to eastern India(BGREI) must be implemented in true spirit.
- The Pradhan Mantri Fasal Bima Yojana, the new crop damage insurance scheme approved by the Union cabinet in January 2016, is also a vast improvement on the old crop insurance model in vogue since 1970s. The new scheme which has the lowest premium so far has proposed use of remote sensing, smart phones and drones for quick estimation of crop loss and speedy claim process. The focus should be more on making this a success.
- Conserving water, improving the irrigation facilities, and developing agriculture markets and competition can be the building blocks for growth in agriculture and mitigating farmers’ woes. State governments are barking up the wrong tree by resorting to loan waivers.
- The only long-term solution is to gradually align crop production with genuine price signals, while moving ahead with reforms to de-risk agriculture, especially by increasing the crop insurance cover. Expediting steps to reform the Agricultural Produce Market Committee system and introduce the model contract farming law would go a long way to free farmers from MSP-driven crop planning