Fencing farm risks

Ways must be explored to ensure reasonable returns

Even as the international prices of agricultural commodities are ruling high, the freshly harvested summer (kharif) crops in India are selling at below the government-fixed floor prices. The official farm prices data for October indicates that most kharif crops were traded, on average, up to 33 per cent below their respective minimum support prices (MSPs). Cotton and sugarcane were among the only few exceptions. The rates of some oil-bearing crops like groundnut and soybean also tended to look up in recent months, but the trend was blunted by the government by gradually lowering the basic import duty on key vegetable oils.

True, the decline in the prices of farm products in the post-harvest peak marketing season is not unusual, but this has attracted greater notice this year in view of the ongoing agitation by the farmers. Legally guaranteed MSPs is one of the two main demands of the protesters; the other being the annulment of the three new controversial farm laws. The softening of farm prices, though conducive to keeping inflation down for the benefit of consumers, denies fair returns to the growers, thus, disturbing the much-desired balance between the interests of the consumers and producers. It also affects farm incomes, which determine the rural demand for goods and services.

The situation, as it exists today, has put the very concept of support prices in the dock. What is the point in routinely announcing — and even regularly hiking — the MSPs for over 20 crops if these are to remain only on paper? The national agricultural situation report, released by the National Statistical Office recently, shows that only 24.7 per cent of the total crop produce is traded at higher than the official benchmark prices. Such a state of affairs is avoidable, especially given that over half the country’s total households rely fully or partly on agricultural income for their livelihood. Besides, the government is commitment-bound to ensure 50 per cent profit to the growers over their paid-out costs and the imputed value of family labour (A2+FL formula).

No doubt, the demand for making MSP a legal right cannot be conceded. It is neither practical nor economically feasible. The government cannot be expected to purchase the entire marketable produce at the MSP. Nor can private trade be mandated to do so. But denial of reasonable returns to the farmers is also economically unfair and socially ill-advised. Ways and means need to be explored to ensure reasonable returns for the farm produce. From this viewpoint, it may be worth considering the resurrection of the farmers’ income protection scheme, floated in 2018 but set aside without giving it a fair trial. Named imaginatively the Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-ASHA), the scheme was aimed essentially at hedging the growers’ marketing risks. It had three components, two of which still seem worth trying after suitable revamping. These include procurement-based market intervention by public sector agencies in select areas for key crops, as is being done today; and the price deficiency payment system to recompense farmers for the shortfall in price realisation compared with the “model prices” based on region-specific production costs. Unless some workable mechanisms are evolved to make farming economically viable, it may be hard to pacify the irate farmers.