With the agriculture sector in some amount of distress, despite two successive good crops, the prime minister has called for a brainstorming session to try and find ways to alleviate the stress and ensure farmers get a good price for their produce. The broad strategies that need to be pursued to boost farm productivity and incomes are well-documented, thanks to reports from agriculture experts over the years. What could have been more useful at this point is a meeting of the state agri ministers. As this paper pointed out since the BJP rules in as many as 19 states and since farmers are an equally big constituency for state governments, the PM could have prodded these local governments to focus on agri reforms. If necessary, they could have worked out a common agenda that would have helped the states help the farmers; all that states seem to be doing to placate farmers is to resort to loan waivers—Uttar Pradesh, Maharashtra and Rajasthan have announced loan waivers.
Some states such as Madhya Pradesh (MP), where elections will be held this year, have announced schemes that compensate farmers if they get a price which is lower than the minimum support price (MSP). It would have been useful to discuss the MP government’s experiment since other states might be toying with the same idea. The scheme, as this paper has pointed out, lends itself to manipulation with the local traders and officials ending up as the beneficiaries rather than the farmers. Indeed, the Union budget for 2018-19 mentions a similar price support mechanism for farmers; the scheme envisages compensating them for their produce if they are unable to get the prescribed MSP. This paper has argued against deficiency payments since not only are they likely expensive, the money is also likely to leak. The scheme will not be easy to implement since farmers will need to be compensated according to the micro-markets they are in. A discussion with the states could help avoid overlaps.
Also, while the Centre has attempted to push reforms—the electronic market or e-Nam is aimed at enabling farmers to sell on an exchange—this has not taken off. The states that need to do much of the heavy-lifting, seem to be less enthused about it probably because they do not want the crop to leave the state. Again, Karnataka’s experience with technology could have been educative—the application of simple technology to auction farm produce using electronic platform and simple market reforms can increase price realisation by farmers in a short span by 13.4%, according to one report.
Again, while the Centre has realised the potential for horticulture, and fruits and vegetables have been de-listed from the APMC Act, the states don’t seem to be providing land to create smaller mandis, where farmers could sell their crop; right now the middlemen at the big mandis leave them with little profit. As has been well documented, growing high value crops—fruits and vegetables, fibres—can be highly profitable for farmers. A shift of one hectare area from staple crops to commercial HVCs has the potential to increase gross returns by about `1 lakh per hectare. However, they are reluctant to shift to such crops because they are unsure of the prices. The Centre, of course, must do its bit by allowing exports; that will give farmers the price cushioning they need in times of oversupply.