Farmers' demands are impractical and unrealistic

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Farmers' demands are impractical and unrealistic

Monday, 19 February 2024 | Uttam Gupta

Farmers' demands are impractical and unrealistic

The farmers want the Govt to withdraw from the WTO and all Free Trade Agreements, which is next to impossible in a globally interdependent world

After three years of hibernation, farmers mostly from Punjab are back on the roads with over a dozen demands from the Union Government. If taken on board, these are sure to spell disaster. The foremost demand is securing legal guarantees for the Minimum Support Price (MSP) of their agricultural produce. 

MSP is a "minimum price" for any crop that the government considers as remunerative for farmers and hence deserving of "support". Put into practice in the 1960s under an 'executive order', it was meant to assure farmers that they get at least MSP from selling their produce; that distress sale is avoided. It fixes MSP for 23 crops grown in Kharif and Rabi seasons based on the recommendations of the Commission for Agricultural Costs and Prices (CACP) - a body under the Ministry of Agriculture & Farmers Welfare.

The agencies of the government, such as the Food Corporation of India (FCI), buy wheat, rice/paddy, and coarse cereals, from farmers at the MSP. The quantities thus procured are meant for giving to over 800 million beneficiaries under the National Food Security Act (NFSA). At present, the beneficiaries are getting their eligible quota for free. The entire cost of purchase, handling and distribution is borne by the government as a subsidy.

The state agencies such as the National Agricultural Cooperative Marketing Federation of India Ltd (NAFED) also purchase other crops such as pulses and oilseeds. Apart from providing support to farmers, this helps maintain the stability of prices for consumers. However, not all crops for which MSP is announced are purchased. The MSP is not backed by any law. But, farmers want a legal guarantee for it. They would want it for all 23 crops for which MSP is currently fixed. The demand could be extended to cover all crops; in fact the entire agricultural produce.

Today, the bulk of farmers' produce is picked up by private traders, processors, aggregators, exporters etc even as government agencies buy only a small portion (over one-third in the case of paddy and wheat and a tiny fraction for other crops). When there is a law on MSP requiring that no purchase can be made at a price less than this minimum, they will all be scared of buying from farmers. Who will take the risk of landing in jail? 

The farmers would wish that the Central government direct all the private entities to purchase their crops at MSP. Such an order would be reminiscent of the control and license Raj that existed prior to liberalization and reform initiated in 1991, perhaps even worse than that. This is a preposterous idea.       

The farmers can't obviously allow their crops to rot in the fields. So, they would expect the government/agencies to pick up their entire produce albeit at MSP - pointing at the 'legal guarantee'. This too is next to impossible.

Even if the purchase by government/agencies is restricted to 23 crops for which MSP is currently fixed, the Centre will have to spend at least Rs 10,00,000 crore which is equivalent to its capital expenditure (this is mainly on building infrastructure) and will consume over 45 per cent of its tax revenue. And, if it were to buy all of the farmers' agri-produce, that would require around Rs 40,00,000 crore out of its annual budget of Rs 45,00,000 crore (2023-24). That leaves a small Rs 5,00,000 crore for all others including defence, security, law and order, wages and salaries, infrastructure, subsidies etc.      

The interest payments at around Rs 10,80,000 crore (2023-24) on the Union government's outstanding debt alone are more than double this amount. Mammoth sums are spent on subsidies for agri- inputs such as fertilizers, irrigation, seeds, credit etc. The farmers want this to continue as these help them reduce production costs. With no money left after paying MSP, all this support would cease.

Garnering money to pay for the purchase is only one side of the nightmare. The other has to do with the wherewithal to carry out purchases on such a monumental scale. The state agencies don't have the infrastructure to handle and store even the 'limited' quantities currently procured by them leading to huge wastages. One shudder at the very thought of their having to buy the entire agri-produce. What would the state agencies do with this stuff?

They can't hang on to it forever. The stock has to be offloaded to private trade sooner rather than later. This will entail huge losses due to sales at below MSP and the cost of handling and carrying it as long as they hold. These losses will have to be paid from the taxpayer's money. And, don't forget India will be taken to task by the World Trade Organization (WTO) as the produce picked up by private traders could find its way to the international market distorting trade. 

Assured purchase of the bulk of paddy and wheat offered for sale by Punjab and Haryana farmers de facto, has led to indiscriminate growing of these crops to the point of excessive use of chemical fertilisers, deterioration of soil quality, depletion of groundwater and serious environmental problems. To alleviate these, there is a dire need for crop diversification. But, providing a legal guarantee will ensure that it is business as usual; in fact, the trend will aggravate.

From the perspective of consumers also, legal backing for MSP is a bad omen. In view of a sizeable chunk of the crop produce not coming to the market (inevitable when there is no purchase/sale by private entities), there would be acute shortage resulting in an 'astronomical' rise in food prices and inflation. In such a scenario, no measure fiscal or monetary aimed at reining in price rise would work.

The farmers want the government to withdraw from the WTO and all FTAs (Free Trade Agreements). In a globally interdependent world where India depends 'substantially' and 'inevitably' on international trade and investment to sustain the momentum of its economic activities, withdrawal from these global platforms that set the multilateral rules of trade is unthinkable.

During 2022-23, India exported agri-products worth Rs 435,000 crore (US$ 53 billion) and that goes to help farmers. They use chemical fertilizers which are mostly imported. If, India gets out of these trade agreements, none other than the farmers will be hit.         

Apart from having free access to electricity for farming operations, Punjab farmers camouflage high household consumption (including ACs/coolers etc) under use for farming. To prevent

misuse, the Centre has proposed reforms such as the installation of smart meters and direct transfer of subsidy by the state government to farmers' accounts instead of the current system of asking power distribution companies or discoms, in short, to supply free of charge and latter claiming reimbursement from the former.

The protestors want the Centre not to pursue these reforms. They want debt waiver - a demand ritually mentioned every time a charter is presented. They also don't want to be held accountable for burning crop residue. They want MGNREGA workers to be deployed for farming and paid a minimum wage of Rs 700 per day. In short, protesting farmers want almost everything that can denude the state exchequer, devastate the economy, affect soil health undermine climate mitigation efforts and yet bring no relief for the majority of the poor/small and marginal farmers. One wonders whether the protestors represent farmers!

(The writer is a policy analyst, views are personal)

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