1. How to solve farm crisis: Forget MSP, get a single market

How to solve farm crisis: Forget MSP, get a single market

Even as farmers in Punjab dump their potatoes on the streets in the absence of a reasonable price for them, prices in the neighbouring Delhi are in the region of Rs 15-20 per kg.

By: | Published: February 12, 2018 5:12 AM
budget 2018 india income tax slab, budget 2018 india income tax, budget 2018 tax slab, income tax in budget 2018, budget income tax, Union Budget 2018, Budget 2018 India, budget 2018, Arun Jaitley, Narendra Modi, Modi government, Budget speech 2018, budget speech live, budget 2018 live, Arun Jaitley budget speech And while farmers of urad in Madhya Pradesh (MP) struggle to get Rs 25-26 for their produce, farmers in neighbouring Uttar Pradesh (UP) are getting over Rs 45 per kg.

Even as farmers in Punjab dump their potatoes on the streets in the absence of a reasonable price for them, prices in the neighbouring Delhi are in the region of Rs 15-20 per kg. And while farmers of urad in Madhya Pradesh (MP) struggle to get Rs 25-26 for their produce, farmers in neighbouring Uttar Pradesh (UP) are getting over Rs 45 per kg (see graphic). Such differences are the norm, not the exception, and hold the key to solving the Indian farm crisis. At a time when the central government is toying with the idea of introducing a price guarantee scheme along the lines of MP’s Bhaavantar Bhugtan Yojana for eight crops where at least the minimum support price (MSP) is assured to farmers—Haryana has also introduced this for vegetables like potatoes, onions, tomatoes and cauliflower—and when there is a debate over whether the Centre can afford this, a better solution is to try and ensure as close to a pan-Indian market as possible.

In MP, the government is basing its compensation on the average market price of a commodity in three states and so collects the data regularly. It found that while the price of urad in the state was around Rs 2,600 per quintal, it was Rs 3,367 in Rajasthan and Rs 4,539 in neighbouring UP. So while the state is committed to giving the farmers the central government’s MSP of Rs 5,400 per quintal, just getting them the same price as that in UP would be a big step forward. More so since, to get the MSP, farmers have to register with the government and just a handful have actually done so. In the case of maize, while MP prices are a fourth lower than the MSP of Rs 1,425 per quintal, they are 12% lower than those in Karnataka.

It is, of course, for this very reason that prime minister Narendra Modi has been pressing for a single pan-Indian eNAM market, where a farmer sitting in MP can send his produce to UP or Karnataka if the price there is more attractive. The problem, however, is that despite the government telling us that eNAM is a big success from time to time, there is little evidence of it working—in states like Haryana, for instance, the amount being sold to central agencies as part of the procurement exercise is shown as a sale through eNAM.

Under normal circumstances, there is little that any prime minister can do about this since, under the Constitution, agriculture is a state subject and state governments are by and large not interested in pushing for this. There is, however, a big difference between the situation earlier and that prevailing today. With the BJP in power in as many as 19 states, prime minister Modi wields a power that few other prime ministers do since, if he wishes, he can ask each chief minister to ensure whatever is needed gets done quickly.

Early on during his tenure, Modi got the BJP government in Maharashtra to delist fruits and vegetables from the APMC schedule; and same thing was done in Delhi when the state was run by the Centre during its President’s rule phase. Since Azadpur in Delhi and Vashi in Mumbai are amongst the largest mandis in the country, this should normally have helped farmers, but nothing of the sort happened and farmers continued to bring their produce here. The reason is simple, the government created no other options for farmers to trade in.

Ideally, after delisting, the states should have created several mandis in different parts of the city and ensured that these were not cartelised like Vashi and Azadpur. This, however, never happened, so while the APMC-delisting box got ticked early on, there was no difference to the lives of farmers. It is this that prime minister Modi can fix, by giving his chief ministers targets for setting up new mandis with free land, for instance.

Freeing mandis is one part of the job, for farmers who want to bring their produce there; creating a pan-Indian market, however, requires more. It requires, for instance, an organisation at one end to do the grading of produce and certifying it so that, when another party is buying the goods, it knows what quality to expect—and if the goods are not of the promised quality, the certifying organisation has to stand guarantee. There also needs to be an organisation that ensures smooth payments and a quick reversal in case of a transaction gone bad. Once again, given the strength of organisations run by the government, creating this infrastructure can’t be too tough if the PM is committed to it.

None of this is going to be easy, but apart from the dramatically higher costs—at least Rs 80,000 crore a year going by an estimate made by this newspaper—of the MSP-deficiency-payments-scheme, running that isn’t going to be easy either since prices that will need to be paid to farmers differ across each micro-market in the country. If agriculture has to do well, the government has to get the markets right—deficiency payments are no substitute.

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