Knee-jerk response: Supplement farm incomes to relieve rural distress

Regardless of the outcome of the Maharashtra farmers' agitation, farm distress is a reality that cuts across states and needs to be addressed ardently

The Maharashtra government has managed to defuse the farmers’ stir that was marked by an arduous 180-km long march from Nashik to Mumbai, by conceding most of their demands. But the fulfilment of these commitments is unlikely to be easy. Only some of the accepted demands seem readily implementable, and that too at a heavy cost to the exchequer. The others are more intricate and may face snags. The easily doable ones include providing ownership rights of community or forest land to tribals who are already tilling it; higher compensation for crop losses due to pests and hailstorms; and no acquisition of farmland for infrastructure projects without the consent of farmers. However, the problems will arise in the implementation of the two most critical demands — unconditional waiver of all loans and fixation of minimum support prices (MSPs) in accordance with the recommendations of the M S Swaminathan-headed National Commission on Farmers.

Though the Maharashtra government has agreed to extend the recently announced loan waiver scheme for the period going back to 2001, this move is bound to encounter formidable financial constraints and procedural hurdles. Even in the case of the existing Rs 340-billion loan remission package, no more than Rs 138 billion could actually be written off till now. In any case, loan annulment is a fundamentally imprudent idea that has several unwarranted consequences. Besides spoiling the debt repayment culture and impairing the financial health of already beleaguered cooperative institutions, it makes banks wary of lending to farmers. This will needlessly exacerbate farmers’ reliance on moneylenders.  

On the most vital issue of MSPs, the state government seems to have bought time by agreeing to set up a committee to look into it. The final decision will obviously be guided by the Centre’s move on this issue. The Swaminathan panel had suggested that the MSPs be fixed at 50 per cent above the comprehensive production cost (C2), which includes all expenses, incurred in cash or kind, plus the assumed rental value of owned land and other assets. However, the government later clarified that it would take into account only the paid-out costs (A2) plus imputed value to family labour (FL) while computing the floor prices. Anyway, the C2 is difficult to assess for want of relevant data. Even the National Institution for Transforming India (NITI) Aayog, which has been tasked by the Centre with suggesting means for implementing the Swaminathan formula, is working on A2 plus FL costs. This is unlikely to please farmers.

Regardless of the outcome of the Maharashtra farmers’ agitation, the fact remains that farm distress is a reality that cuts across states and needs to be addressed expeditiously. Its root cause is the erosion of profitability of farming. Maharashtra’s agriculture is passing through a particularly bad patch, clocking negative growth in three of the last four years. The need, therefore, is to integrate loss-making crop farming with lucrative side-activities of agriculture such as animal husbandry and fisheries. More importantly, additional employment and income generation avenues need to be created in the non-farm rural sector to supplement farmers’ income. Otherwise, agitations of the kind witnessed in Maharashtra are bound to erupt in other states as well.