Assuring Higher Farmer Income: Centre Passing the Buck to States Yet Again

The proposed Market Assurance Scheme should not leave states to fend for themselves when it comes to price support for farmers, especially as the agrarian crisis is one that is caused mainly by central policies.

The Budget season, that too in the last full year before the 2019 general elections, brings the debate back to agriculture in the country. Apart from several farmers’ struggles across the country, including the unprecedented unified struggles witnessed in the Kisan Mukti Sansad on Parliament Street in November 2017, the recent election results bring the agrarian crisis to the forefront yet again.

Assured remunerative prices for all kinds of agricultural commodities have been a main demand by farmers’ movements across the country for many years, centred around the implementation of the recommendations of the National Commission on Farmers headed by M.S. Swaminathan, of having a price formula that provides at least 50% profit margin over the comprehensive cost of cultivation. Farmers have been reminding Narendra Modi of the pre-election promises made by him on this front.

Ironically, the government of India has been talking about doubling farmers’ incomes (consciously moving away from doubling farm incomes), where there is no talk about price-centred interventions, while there are volumes of proposals on efficient markets. However, it is clear that the government is unable to ignore the direct and proximal role that prices play in delivering incomes to farmers.

A new scheme, called the Market Assurance Scheme (MAS), is now being proposed that would subsume the existing Market Intervention Scheme, Minimum Price Support (MSP) Scheme and the Price Stabilisation Fund. In the concept note circulated to state governments on MAS, the agriculture ministry begins by stating: “An efficient agricultural marketing system is sine qua non for ensuring remunerative prices to the farmers on their produce. However, no market in general and much less in case of agriculture sector can be perfect, and hence cannot always be relied upon to find optimal value for farmers’ produce. As a consequence, government supported market intervention schemes become inevitable”. Now, that is a major admission, which vindicates the stand of farmers’ movements across the country.

Also read: Why India Must Go Beyond Loan Waivers to Free Farmers From Debt

A section called ‘Honouring MSP’ states that “it is more important to honour the assurance that is the obverse of MSP notification….the system as exists now leaves much to be desired’’. It points out that even in a year like 2016-17, which was “historically one of the best years of government intervention”, procurements (which make the MSP an actualised reality and not just a paper announcement for farmers) accounted for 33% of paddy and wheat, 8% of pulses and 1% of oilseeds in terms of their production. “This demonstrates the less than desired depth and spread of procurement operations of agri-commodities, for which annual MSPs are notified by government”, the note says.

What is MAS? It is a scheme where the decision to procure and its actual operation shall be decentralised and vested with the respective state/union territory governments, who shall assure the farmers that their agri-commodities (as notified by the state/UT governments) would be procured at MSP (notified by the Centre for the season) if prices dip below it. It shall be the responsibility of the state/UT to deal with and dispose of the procured commodities in an appropriate manner. Losses, if any, shall be compensated by the Centre up to a maximum value of 30% of MSP for that particular commodity procured. The concept note then goes on to explain why 30% losses are being indemnified, and how that figure has been arrived at.

The proposed scheme is basically passing on a significant burden and onus of procurement of crops other than paddy and wheat on to the state governments. This is a clever move, especially in a year approaching the elections. While the scheme’s proposals are a move in the right direction, the scheme itself could be a non-starter, except for additional PR hype for the Centre, for various reasons.

For one thing, the scheme does not address the fact that farmers need a margin over and above the MSP to be able to survive and meet basic needs of the family. Just recovering the cost of cultivation (if at all) in the form of MSP, to be re-invested back into cultivation the next season, will not help.

Two, it is presumed that state governments have financial resources as well as storage and other infrastructure facilities to intervene in the market on their own, as much as they should. Readers would recall how procurement operations are hit by even simple things like gunny bag shortages, which state governments don’t equip themselves with.

Also read: Centre’s Plan to Boost Pulses and Oilseeds Production Becomes Victim of Its Own Success

The other issue is of streamlining data systems to ensure that actual cultivators of a given state benefit, and not traders with old stocks, or stocks for which they are notching up margins by selling to the government procurement agencies.

This ‘passing the buck’ is the same tactic that was deployed by the Centre in the case of debt relief. State governments (including Bharatiya Janata Party governments) are breaking up the debt relief scheme promised in a few states into several small instalments (in addition to drastic gate-keeping to shut out beneficiaries, and to reduce the real benefit in terms of amount of relief too) which make the whole affair a meaningless one for farmers, who find that after the so-called loan waiver, they are back in the same position as they were, with the interest on past loans building up significantly.

Three, the scheme’s concept note does not clearly specify if state governments can freely go ahead and cover multiple commodities.

Four, the scheme presumes that the losses incurred by the state governments in such procurement and disposal schemes will not exceed more than 30%. This could be a wrong presumption since multiple commodities have not seen market intervention being taken up on a large scale so far, and the critical element might be in the disposal timing and process.

The MAS proposals talk about disposing stocks within a period of about nine months’ holding, as the normal practice. This means that disposal of large stocks of earlier years could happen at a time when fresh harvests start coming in. This appears to be happening right now in Karnataka, bringing down market prices of tur dal even though large-scale procurement of current season produce is underway, that too with an attractive bonus (Karnataka’s assured price for tur is Rs  6,000/quintal, which is higher than the central MSP).

What might be needed is a MAS that takes the above constraints on board, and rolls out the scheme with autonomy given to states, but also financial resources from the Centre to set in place systems and infrastructure that allow for efficient procurement and disposal. The capping of loss indemnity at 30% would also have to be re-visited after gaining experience of large-scale interventions on multiple commodities. When the crisis is one that is caused mainly by central government policies, especially related to free trade, inappropriate pricing and procurement policies, and ineffective disaster relief and insurance schemes, state governments should not be left to fend for themselves when it comes to such support to farmers.

Kavitha Kuruganti is a national co-convenor of Alliance for Sustainable & Holistic Agriculture (ASHA).