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India’s farmers and its farm sector do need “reforms”. However, we need reforms of a kind suitable to India and its realistic development trajectory. Our reality is that farmers displaced from agriculture are not getting absorbed into other sectors due to a lack of opportunities there (caused by jobless growth or even a decline in growth in some sectors); that the size of landholdings is shrinking as time passes and that a majority of citizens counted as workers in our economy are still in agriculture, shifting from being cultivators to agricultural labourers.
What we need is a reforms agenda that incorporates a ‘sustainable livelihoods’ perspective from the bottom up. Such reforms should embrace “diversity” as a key feature of Indian farming, both of production systems and of markets.
This reform agenda should incorporate highly localised, farmer-centric support systems with the aim of creating a comprehensive ecosystem that includes credit and disaster compensation systems too; one that assists in a transition to better natural resource management and regeneration, aims at nutritional security for the malnourished (at both ends), addresses climate change in every possible way and ensures dignified livelihoods for all farmers, including the invisible ones like women and tenant farmers.
Coming specifically to market-side reforms, the needs are vast. We need remunerative MSP to be made into a legally guaranteed entitlement to all farmers. Food prices have been kept low for decades and farmers have cross-subsidised other sections; it is time to return the favour.
There are three aspects to this: First, improving cost estimates for arriving at cost of production figures; second, adopting a MSP fixing formula that provides at least a 50% margin over and above the C2 (inclusive of the imputed cost of capital and rent on the land) cost of production and third, putting into place a basket of modalities for making the guaranteed MSP a reality for all farmers. The onus is on the government to make good any difference between the MSP and the realised price.
The basket of interventions needed would include expanded procurement; smarter market interventions by government agencies; a re-designed warehouse receipt scheme; price deficit payments, especially for perishables but vastly different from the way Madhya Pradesh designed its Bhavantar Bhugtan Yojana; a legal mandate that price-bidding can begin only at MSP; investment in farmer-controlled Farmer Produce Organisations (FPOs) that are considered as sellers and not traders in the market; the widespread adoption of agro-ecology to reduce the cost of cultivation and so on.
A key intervention is about predictable export-import policy decisions from before the sowing season till the end of marketing season for any commodity. This would ensure that the landing price of any product is not below MSP, where our farmers are likely to be priced out. Price levels should also be used as a policy tool that incentivises sustainable cropping patterns and induces import substitution.
There are several other reforms needed on the markets front:
1. The Agricultural Produce Market Committee (APMC) system needs several reforms. More mandis need to be set up all over the country since we need many more regulated markets with adequate infrastructure close to farmers. What’s more, all such mandis should keep women farmers in mind when facilities are created.
When it comes to these regulated markers, all multiple taxes and fee collection issues need to be removed. Reforms also need to ensure that full freedom exists for farmers (which it did on paper in almost all states) and that in practice, they are never harassed. They must also ensure that the fees collected are ploughed back for market-related infrastructure only and are brought under the state legislature.
Moreover, the reforms must ensure that “licensing” requirements for traders are eased into those systems which will ensure oversight and some security deposits. By this, more players should be brought into the regulated markets so that contestability increases and prices for farmers improve.
2. Reforms must support direct marketing between farmers and end-consumers, as happens in ‘Rythu Bazaars’ in Telugu-speaking states and in ‘Uzhavar Santhais’ in Tamil Nadu. Studies indicate that 90-92% of the consumer price goes to farmers here.
3.The warehouse receipt scheme needs to be redesigned in a manner that farmers have a right of forfeiture of their stored produce when prices don’t improve within a given time period, wherein retention is expected to improve prices. At that time, the government must pay the MSP plus interest to the farmers.
4. The government must invest in FPOs, not to make them into aggregators of big capital, but to make them empowered players in the market. The FPOs must be exempted from fee requirements in regulated markets since they are, after all, producers selling collectively and looking for buyers. They should not be treated on par with other traders.
5. Procurement regimes should be changed to include a diversified food basket and also lead to decentralised and further localised procurement. Procurement from real cultivators should be eased even as governments and procurement agencies try to keep traders out of the picture. This can be done when community institutions at the village level manage procurement operations.
It is important to keep in mind that regions currently dependent on the ongoing procurement regime for their livelihood will require a special diversification support package, even after an MSP guarantee regime is brought in, since a new end-to-end ecosystem will have to be built for that diversification to happen.
Kavitha Kuruganti is a farmers’ rights activist.