After creating the loan-waiver mess, Centre must push for genuine market reform in the farm sector—eNAM, for instance, is very far from taking off
When news first broke of the farmers’ agitation in the state, and of it turning violent later, the standard response was that the stories of Madhya Pradesh’s miraculous farm growth were bogus. How can, the argument went, a state where agriculture has grown at 10% annually for a decade, and at more than 14% for half this period, have such bloody violence over farmer incomes? Ashok Gulati who, at ICRIER, first highlighted MP’s prowess has been at the receiving end of many such barbs. Even if the growth numbers are a little off, they are probably broadly representative as some, like wheat production that is bought by FCI, are measured independently — in any case, even Central GDP data is viewed with suspicion. As for why the agitation took place despite the growth, even after this, MP’s per capita income was still Rs 56,516 in FY15 compared to Maharashtra’s Rs 134,081, Haryana’s Rs 150,260 and the all-India Rs 86,879—in other words, MP remains dirt-poor, and 30% of its population is still BPL, though less so compared to in the past, thanks to the work done by its chief minister Shivraj Singh Chouhan in growing agriculture through increased wheat procurement, greater emphasis on creating irrigation potential, more roads, etc. In any case, the bloodiness of agitations is not just about abject poverty, it is a complex mix of issues, including political patronage. Keep in mind the richer Haryana’s bloody Jat agitation last year, the numbers killed and establishments burned.
While Rahul Gandhi’s rushing to MP is one attempt by political parties to milk the agitation, a large role—and not just for problems in MP—has to be that of prime minister Narendra Modi who, by promising to waive off farmer loans in Uttar Pradesh, encouraged farmers all over the country to agitate for similar treatment. Indeed, if UP chief minister Yogi Adityanath does not reform the state’s sugar policy, but carries on with the party’s election-time propaganda, you can expect bloodier battles in the state on sugar dues.
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Indeed, there was no real problem in MP in the case of major crops like wheat — the state is now the third-largest producer in the country and wheat procurement has grown from around 2% of all India wheat procurement in the three years ending 2002-03 to 24% in 2013-14. With a large part of farmer risk taken care of by MSP-based government procurement, the wheat farmer doesn’t have too many complaints, even though his yield is about 45% lower than that of a Punjab farmer.
What precipitated matters in Madhya Pradesh was the crash in onion prices to one rupee a kilo as compared to the production cost of Rs 5-6 per kg. While Chouhan promised to procure onions at Rs 8 once the agitation spread, this was probably too late and the fact that it didn’t cool matters suggests there is little procurement happening. In any case, it is not as if onion prices crashed in just MP—they did in other parts of the country, too, in response to a bumper crop and, sadly, the boom-bust cycle applies to other crops like tomato and potato as well, and with increasing regularity. Even if, for the sake of argument, Chouhan does step up onion procurement in the next season, neither he nor other chief ministers can possibly do this for all crops or for all production.
The solutions are well-known since they have been articulated at regular intervals over several decades, and all revolve around greater market-access. While the central government’s agriculture policy seems focused around export bans and stocking limits, what is required is a policy that allows farmers to access more markets. A greater link to organised retailers across the country is required, but the policy on FDI in retail continues to remain stuck; greater development of food processing is required, but the GST Council in its wisdom has kept tax rates high. Futures and options, that are once again being allowed, are a way to let farmers hedge their bets, but suspicious governments have, historically, had no compunctions in banning these. Substituting subsidies like those on fertilisers, that only rich farmers corner, by acreage-based unconditional transfers, similarly, would alleviate farm distress but the government is loath to move on it… the list is a long one.
Given the restrictions on movement of farm produce, and the high state taxes, the government’s e-mandi (e-National Agriculture Market) is a great idea to link the entire country. While it is not clear whether states will be able to maintain restrictions under eNAM, the fact is even trades across mandis in the same state are not taking place—the eNAM trades being recorded today are essentially existing FCI purchases! Getting an eNAM to work requires bringing in professional grading agencies, assayers, dispute resolution mechanisms, payment guarantors—if a party in Bangalore buys potatoes from Nashik, who is going to guarantee their quality or ensure the payments and even refunds? Instead of focusing on quick-fix—and now, quicksand—solutions like loan waivers, the government would do well to carry out some genuine agriculture reform. Or wait for the next Mandsaur.