By Satish Singh
A few months ago, the government passed 3 bills in the agriculture sector, which aims to improve the existing system of marketing, sale and storage of agricultural produce across the country. These bills will increase the availability of buyers for farmers’ produce and allow competition to trade freely without licenses or storage limits, thereby increasing competition among traders, forcing them to pay better prices to farmers.
Farmers are agitating against the new agricultural bills, the concentration of which is limited to some states. Some opposition political parties are also involved in this. Farmer leaders are talking about enactment of minimum support price (MSP) so that private traders are also forced to buy the produce of farmers on MSP. It is notable that every year, the government; announces MSP for 23 crops, but all crops are never procured due to limited resources & other reasons.
Leaders of the peasant movement say that the new agricultural bills will eliminate the MSP. They are adamant on withdrawing all the three bills. Even though MSP is at the heart of the farmer movement, this system is not available in all the states and where there is also no purchase on the MSP. Thus, not all farmers in the country are benefiting from the MSP.
Till December 11, 2020 Punjab accounted for 55 percent of the purchase of Kharif crop on MSP, while it was zero in West Bengal and 8 percent in Uttar Pradesh. However, Punjab ranks third among the paddy producing states in the country, while West Bengal is at first and Uttar Pradesh at second place. Andhra Pradesh ranks fourth in the country in paddy production, but farmers of Andhra Pradesh 1 percent purchase on MSP. Farmers of Punjab and Haryana account for nearly 70 per cent of purchases at MSP. In such a case, the justification for opposing the agricultural bill by West Bengal and Delhi is beyond comprehension. Paddy is not even produced in Delhi.
Analysis of the data also shows that in the last years only 25 to 35 percent of wheat procurement was done on MSP, of which Punjab and Haryana had the largest share. It is noteworthy that most of the government procurement centres in Punjab, Haryana and some other states are located within the Agricultural Produce Marketing Committee (APMC) mandis.
Farmers fear that by encouraging tax-free private trade outside the APMC mandis, the current notified markets will become unstable, leading to a reduction in government procurement. Farmers are also demanding that MSPs be universalized within and outside the mandis, so that all buyers, government or private; treat these rates as minimum prices, i.e. the produce should not be sold below MSP. Obviously, private buyers would avoid entering government mandis in such a system. The analysis of the data also shows that even though the MSP is visible at the core of the peasant movement, the reason is different, as some states are supporting the peasant movement fearing the closure of mandi taxes. Currently there is a 6 percent mandi tax and 2.5 percent tax is related to the management of procurement process. Thus, some states may suffer 8.5 percent revenue loss from the new agricultural bills. For example, Punjab is earning about Rs 3,500 crore annually from these taxes.
Small and marginal farmers should not be ignored during making agricultural policy, but small and marginal farmers are not getting MSP right now. Through new agricultural bills, the government has tried to remove the existing anomalies. With the new agricultural bills, small and marginal farmers will be able to sell their produce outside APMC mandi at a reasonable price and can also store their produce when needed, as the new agricultural bill restrict contracts farming. The bills also propose to abolish the ECA Act, which restrict private investment in post-harvest storage
The practice of contract farming in India is not prevalent in most states. However, it is popular abroad, such as Malaysia and Thailand. The Federal Land Development Authority (FELDA) has been established to pursue contract farming in Malaysia.
The suicide committed by the farmers is directly related to the self-reliance of farmers. According to the National Crime Records Bureau (NCRB) data, farmers and agricultural laborers in Maharashtra and Karnataka are committing 13 times and 6 times more suicides than Punjab respectively. The income of farmers in Punjab is also 2.3 times higher than the farmers of Maharashtra and Karnataka.
The Kisan Credit Card (KCC) scheme was started by the Reserve Bank of India in the year 1998. Under this loan, farmers fulfil their production needs such as cash and purchase of agricultural products. KCC is the most popular among all agricultural loans, as it presents solutions to the economic problems of the farmers. Under this, the Government of India gives 4 percent interest subvention to farmers who have taken loans up to Rs 3 lakh and are paying instalments and interest on time. At the end of March 2020, all Scheduled Commercial Banks (ASCBs) had a surplus amount of KCC loan amounting to about Rs 7095 billion, which was about 40 per cent of the total agricultural credit and by March 2020 had 6.7 crore active KCC card holders.
To make universal access to concessional institutional credit accessible, government of India has asked banks to provide KCC to all 11.39 crore PM-Kisan beneficiaries. During February to April 2020, banks received 75 lakh KCC applications, out of which 36 lakh KCCs have been issued to farmers. A study by NABARD shows that the KCC scheme has a significant contribution in strengthening the farmers financially. In six states such as Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Bihar and Uttar Pradesh, only 28 per cent of PM-Kisan beneficiaries have KCC accounts. Therefore, there is a need to give KCC loan to the all PM-Kisan beneficiaries, so that they can become self-reliant. If the Reserve Bank of India brings flexibility in the structure of the KCC, then the economic situation of farmers can improve. In this context, promoting agricultural start-ups can accelerate the marketing of agricultural produce, as this will strengthen the supply chain. The cumulative capital outflow to this region till 2019 was Rs 15,000 crore, which is still at the same level due to the Corona epidemic.
Increasing the yield of crops is one aspect of the farmers’ problem and saving it from ruin is another aspect. After production, agricultural produce passes through several stages to consumers. In this journey, a large part of the agricultural produce is wasted due to lack of proper handling and storage of the produce, which causes loss to the farmers as well as shortage of food grains in the country.
A 2015 report showed that 4.6 to 6.0 percent of grains, 6.4 to 8.4 percent of pulses, 3.1 to 10.0 percent of oilseeds, 6.7 to 15.9 percent of fruits, and 4.6 to 12.4 percent of vegetables before reaching consumers after harvesting are wasted. After an estimated harvest; The monetary loss in cereals is about Rs 27,000 crore, while the loss of oilseeds and pulses is Rs 10,000 crore and Rs 5,000 crore respectively.
It can be said that even guarantee of MSP is not a solution to the problem of farmers in any way, because the benefit of this is largely to the farmers of Punjab and Haryana only. That too not for all crops. Today, more important than MSP for farmers is to save crops from disaster like drought, flood etc., to provide timely financial assistance to farmers. Also, there is a need to strengthen APMC market infrastructure, promote contract farming and make KCC norms more flexible and distribute more KCC loans among farmers.
(Author is Chief Manager at State Bank of India, Mumbai and editor of “Aarthik Darpan” an in-house journal of SBI. Singh is also a freelance writer. The views expressed are personal opinion of the author. He can be reached at satish5249@gmail.com and singhsatish@sbi.co.in.)
