Inefficient supply chain, marginal land holding, untimely procurement, high labour costs and inadequate rainfall, all contribute to farmers’ woes.
Farmers committing suicides is not a new thing. Although these can happen for personal reasons, it is the economic ones that gain prominence. Crop failures, the inability to get the right price and insurmountable debt are the factors that may drive farmers to take this extreme step. Interestingly, every time, in wake of a number of suicides, it is the political class which debates out the reasons. The ruling party argues that enough has been done in terms of farm loan waiver schemes, higher minimum support prices (MSPs), fertiliser subsidies and tax-free agricultural income, while the opposition parties slam the government that not much is happening on the ground. The fact of the matter is, many of the factors leading to a farmer’s death are outside the control of anyone. Why?
Woe 1: Crop failures
The World Bank data shows that only 35% of India’s agricultural land is irrigated (artificial application of water to land or soil). This means that a huge 65% of farming depends on rain, something on which the government has no control. In fact, as the accompanying figure shows, the probability of a farmer committing suicide is more during bad-rain years. To have a meaningful comparison, we standardised rainfall and suicide data with respect to mean and variance, to make them unit-free (read, standard rainfall and standard suicide).
Working with agricultural output and rainfall data, we find evidence in favour of association between them (N Banik and B Biswas, Food Price Inflation and Weather God, The Empirical Economics Letters, February 2013). The results from our regression analysis point out that, for the states of Bihar, Uttar Pradesh and West Bengal, inadequate rainfall has significant effect on lower crop production. This also holds congruence with the fact that these three states lack in basic irrigation facilities. The dependency is less for the state of Punjab, with a relatively better irrigation framework.
To check the robustness of our result, we did a counter-factual experiment by surveying market managers employed with the wholesale food and vegetable association in Chennai. The survey points out that, in the event of poor harvest and bad rainfall, the number of trucks bringing vegetables to Chennai city wholesale market from the neighbouring states of Kerala and Karnataka falls drastically. There is a high correlation between the bad harvest/poor rainfall year and the number of trucks bringing produce to the wholesale market. In fact, there are instances of hoarding by big retailers and middlemen during bad harvest years.
Woe 2: Inefficient supply chain
In India, if farmers are to sell their produce, they can sell directly to the government. The central government procures 24 essential food items from farmers through its agencies such as the National Agricultural Cooperative Marketing Federation of India (NAFED) and the Food Corporation of India (FCI).
However, in reality, things are a little different. Typically, the MSP is higher than the market price, and one would think that farmers gain every time the government announces the MSP. However, seldom farmers are able to sell their produce at the MSP. Every village does not have NAFED or FCI outlets. In fact, FCI currently procures a major portion of rice and wheat from a few selective states—70% of rice procurement is done from Punjab, Andhra Pradesh, Chhattisgarh and Uttar Pradesh, while 80% of wheat procurement is done from Punjab, Haryana and Madhya Pradesh. Other major rice and wheat producing states such as Bihar, West Bengal, Assam and Odisha have lesser FCI presence.
Even if there are NAFED or FCI outlets, the government may not procure if farmers bring their produce before or after the dates of procurement. The government generally announces the dates of procurement, and many a times farmers are not aware of these dates. Worse still, sometimes, the government announces procurement dates a month or two after the harvest period.
In India, as many as 80% of farmers are small, with less than a hectare of landholding. These marginal farmers do not have access to cold storage (and hence waiting capacity), and have no option but to sell their produce to the middlemen or traders. It is impossible for them to get a space in the state godowns offering storage facilities without any political connection.
What about items such as fruits and vegetables that, typically, the central government does not procure? Farmers have the option of taking these products to nearby government-designated mandis. So that farmers get a fair price and are not exploited, the Agricultural Produce Market Committee (APMC) Act was enacted. In reality, middlemen facilitating procurement through APMC form a cartel, and at the time of auction offer a substantially lower price to farmers. Many states do not want to bring in reforms to the APMC Act because such reforms will derail many of the middlemen who also happen to be full-time state-level party workers.
Woe 3: Higher input cost
Small and marginal farmers also do not have access to institutional credit. Most of them depend on village traders, who are also moneylenders, giving them crop loans and pre-harvest consumption loans. The superior bargaining power of village traders and the middlemen means that the prices received by farmers are low. Higher farm labour input price and depleting ground water resources (which means higher prices of generator sets) add to their woes.
The way out
The first is to rise above party politics and reform the APMC Act, which will ensure farmers realising the right price. The second is timely procurement through MSP. The third is imparting necessary skills, which will ensure adequate employment opportunities for 54% of people dependent on agriculture. The fourth is that, instead of spending on subsidies, we should invest in rural infrastructure such as electrification and building canals—electrification will help setting up rural-based small-scale industries, and canals will help reduce dependence on the weather God.
The author is with Mahindra Ecole Centrale. He is also fellow, CUTS International, and researcher, ARTNeT, UNESCAP.