Though the political class remains focused on farm loan waivers, or increases in MSPs, as a solution to alleviate farmer distress, this is really missing the point. Of course, farmers need assured prices and offtake at a time when there is no pan-Indian market and when the government routinely imposes curbs on stocking limits and bans exports, but the problem requires more structural solutions.
Take MSP first. A lot of the focus in on BJP vs Congress regimes and how the latter raised MSPs by much higher amounts. NDA-1 raised paddy MSP by 25% and wheat by 15% in its tenure vs 54% and 30% in UPA-2 vs 12% and 16% in the first three years of NDA-2. This, however, is missing the wood for the trees as global prices are a big factor in MSPs—in the last three years, for instance, while global wheat prices fell a third, rice fell a fifth. Raise MSPs by too much and traders will import cheaper grain and sell this to FCI!
If, despite that, NDA-2 has raised MSPs, that’s an achievement. But, and this is important, while all governments—Congress, BJP, etc—have focused on MSPs for cereals, and now pulses, they have done nothing for vegetables and fruits that actually account for a higher share of farm output. In FY15, fruits and vegetable output totalled Rs440,000 crore versus Rs360,000 crore for paddy and wheat. And, at Rs490,000 crore, milk output topped them all. With no MSPs, no procurement, little processing and/or storage facilities, it is hardly surprising fruit/vegetable prices are crashing and farmers are agitating as they are.
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But, the obvious question is, how come there is no problem with milk? Because, thanks to Operation Flood, India’s milk production increased from 21 million tonnes in 1968/69 to 156 million tonnes in FY16—facilities like bulk vending and automatic milk collection units and bulk milk coolers at the village level have revolutionised the process of milk collection and preservation. Operation Flood started with linking just 18 premier milk sheds with the four metros and by the end of the third phase of Operation Flood, in 1995/96, there were 72,744 dairy collection centres in 170 milk-sheds in the country with a membership of 9.3 million milk farmers—16 million farmers are covered today.
Focusing on increasing output is important, but as Verghese Kurien put it in his autobiography, “One of the earliest lessons I had learnt was that Amul existed because, barely a few hundred kilometres away, Bombay existed… Indeed, there would have been no Anand if there were no Bombay”. Markets are critical.
What the government needs to do is to create an Operation Veggie. Create a corpus, like it did for Operation Flood, to create processing facilities and cold chains—just look at the price difference between tomatoes and ketchup or potatoes and French fries to understand how this will change the face of farming; subsidising electricity costs or moving cold storages to cheaper solar, for instance, will make potato storage cost-effective. The critical thing here is set targets like, say, 30% of MP’s vegetables will be processed by 2020 and set up an organisation whose job is to ensure this happens. It is not clear how much money is required, but creating a corpus is not difficult given the Centre and state governments spend Rs180,000 crore in fertiliser and water/electricity subsidies every year vs Rs30,000-35,000 crore on productive investment. Alternately, NABARD-type bonds can be floated as they have been for irrigation.
Keep in mind (see graphic), India has too many people on the farm producing too little, and it can’t create enough jobs to shift them, so creating more value on the farm is critical. Shifting the government-support system from cereals to ensuring processing and storage of fruits/vegetables will not only bring stability to farmer incomes, it will create millions of jobs in food processing. Government actions on livestock slaughter will cause large losses to farmers and its price/royalty policies are choking the GM-led cotton-type revolution which contributed substantially to farmer profits—sooner, rather than later, that too needs to be addressed.