Thanks to government policy and falling global prices, a record crop hasn't translated into a pay-off for farmers.
Those who thought that good crops in the past few seasons made farmers better off need to think again. The truth is that most of them are worse off. The reasons primarily are the fall in the prices of agro-commodities and the government’s policies which seek to protect the consumers by squeezing the producers on the pretext of tackling inflation.
The truly badly hit are those farmers who chose to switch crops to improve their economic lot. For, the products which looked promising because of their higher prevailing prices even at the time of crop planting have turned non-profitable, pushing the farmers back to the wall.
Several examples can be cited to bear this out. Take the case of thousands of potato farmers in Uttar Pradesh who shifted to growing garlic in view of its bullish prices but burnt their fingers in the process. Garlic prices are estimated to have dropped by 80 to 90 per cent compared to last year.
Take another example, of those who razed their traditional coconut and arecanut plantations around Kochi and Ernakulum to grow fancied vanilla in hope of getting higher economic returns. These aromatic beans were fetching over Rs 3,000 a kg a few years ago, but the prices have nosedived to less than Rs 50 a kg, spelling ruin for the planters.
Even if these, arguably, are localised cases, the story is no different for the growers of several mainstream crops like oilseeds, cotton, maize, and the staple cereal rice. Farmers expanded acreage under oilseeds, notably soyabean, in the current kharif as their prices had been ruling high at the time of sowing. But the prices have taken a severe hit in the international as well as domestic markets, leaving farmers ruing their move.
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There are reports that dissatisfied over the prevailing soyabean prices, growers in Madhya Pradesh and parts of Maharashtra are holding back their produce. The groundnut producers of Gujarat are adversely hit as well.
The acreage under maize increased in the current kharif thanks to its high prices and firm demand from the poultry and starch industries. But, once the fresh crop hit the market, prices plummeted below the minimum support price (MSP) in several major maize-growing bowls.
Similar is the case with cotton. Even Maharashtra’s monopoly cotton procuring co-operative is disinclined to pay the MSP to growers, fearing a net loss in this operation. It wants the state government to bear the losses.
That much of the current plight of the farmers the result of the government’s ill-advised moves is becoming evident now, though increased production and global factors are partly to blame as well. In case of oilseeds, the government has not only drastically cut down the customs duty to encourage higher imports of cheaper edible oils, but has also begun giving subsidy on the retail sale of palm oil to put further downward pressure on domestic prices. The move, moreover, has been timed to coincide with the arrival of fresh domestic crop.
In the case of paddy, the MSP was pegged at Rs 850 a quintal, against Rs 1,000 recommended by the Commission for Agricultural Costs and Prices (CACP). The bonus of Rs 50 a quintal was announced only when the farmers resisted selling to the government agencies in several states, threatening the achievement of official procurement targets. Besides, the government also sought to deter private traders from buying rice from farmers at a higher price by further tightening the stockholding curbs. Moreover, the ban on exports has needlessly been retained, notwithstanding adequate official grain inventories and record production.
This apart, there is no worthwhile price risk hedging mechanism for the farmers. The National Agricultural Insurance Scheme (NAIS) is not working well. Farmers’ compensation claims worth around Rs 920 crore are reckoned to have been pending under the NAIS, rendering it a worthless instrument of risk mitigation. Not many farmers, therefore, are keen to get an insurance cover.
While futures trading, which can help in prices discovery, is banned in key farm goods, options trading, which can potentially benefit the farmers by giving them the right without the obligation to sell at the prior agreed price, has not yet been allowed. Unless the government reviews its agricultural policies, we might revert back to the situation where the farmers are forced to commit suicide.