The Government must give priority to the farmers’ in its budgetary allocation as their distress is increasing that cannot be mitigated by cash assistance.
Despite giving huge subsidies to farmers on Agro inputs such as, seeds, fertilizer, electricity and water, majority of farmers are under perennial distress causing suicides and agitations. For all practical purpose, the benefits of these subsidies are enjoyed by consumers and not the farmers. Key impediment is “low sale price of food grain” at farm gate which has adversely affected farmer’s income. That can’t be resolved by meagre cash assistance of Rs. 6000/- per year.
After independence, India was facing food shortage and hence, the farmers were getting remunerative prices in the open market. In 1950-51, the share of agriculture was 65% in GDP and 56% till 1965. Unlike the modern industrial economy, the majority of trade and services were also dependent upon Agriculture. Considering food shortage, in 1960, PDS was introduced for urban poor and in 1970 and 1980; it was extended to tribal blocks.
Considering population growth and consistent food shortage, the Government pursued farmers to boost production and built irrigation facilities and several fertilizer plants. The Indian Agriculture Research institute was also established. Farmers responded and the Green revolution started in 1965 and White revolution in 1970. Farmers could produce surplus food and save India from the food crisis but their reward is still overdue upon all Indians.
With surplus food production, the market price was gradually softening and the profitability was declining. Majority of private trade channels also diversified to other remunerative businesses. Hence, in 1964, FCI was incorporated and in 1966-67 MSP was introduced; that gave some relief to farmers. In 1992 and 1997, the PDS scheme was widened and thus, PDS procurement was increased.
In FY-2020, under MSP, the Government had procured 23 eligible crops barely 26% by value. This might be below 15% of all crops. Despite this, unsold stock with FCI is about 32.0 million tons and 24.0 million tons with States. Debt of FCI has exceeded Rs. 4.0 lakh crores incurring huge interest.
Due to prolonged stress, poor farmers can’t afford storing and waiting for the remunerative prices and hence; they sell to trade channels at prices much below MSP. In sequel, farmers are demanding a “guaranteed MSP” for the entire produce. Their demand is genuine. But it is not feasible for any Government or FCI to buy entire production.
Considering complexity, the budget should announce an “out of box” scheme“. By which, farmers will get MSP without major fiscal burden. However, the Government should build storage and logistics infrastructures for FCI from budgetary resources. More so, the Government should extend export incentives to FCI and private channels including processing industries. Fiscal burden due to export incentives shall be gradually compensated by cutting down farm input subsidies. FCI must assist farmers for selling to private channels through auction. Floor price must be kept about 93-95% of MSP. FCI should fix quality standards and provide testing facilities to resolve any dispute by purchaser. Unsold stocks must be essentially stored by FCI and the cheap loan may be extended to farmers up to 90% of stock value at MSP price. Same can be refinanced by Banks to FCI at SLR rate. Failing which, the farmers shall be compelled to sell
at distress price to the
trade channel.
“Goods receipt” (GR) may be issued to farmers against stocks with a six month’s validity. GR must be tradable in the open market, e-NAM and Commodity exchange. FCI must assist and charge a nominal fee of 0.5% of sale value. Interest and storage charges may be levied @ 9.0% per annum on the stock value. That may be recovered from the ultimate buyer or farmer and balance be remitted to farmers. This will eliminate interest and storage cost of FCI.
Generally, the price of food grain increases till the next crop arrives. Thus, farmers shall get better prices after availing storage facilities. After expiry of GR validity, it shall be deemed for sale to FCI at MSP and FCI may use it for PDS, sell to private channel or export. By this, FCI need not keep separate buffer stock for PDS, as is being done now. Thus, debt burden on FCI shall reduce.
By such arrangements, farmers shall certainly get about 95% of MSP on the entire produce. In due course, there are fair chances for farmers getting higher prices. FCI shall also be benefited since; its debt burden and storage cost shall reduce.
At times, due to poor market demand, the stock with FCI might increase. Therefore, FCI must quickly export directly. Government must be liberal in giving export incentives to FCI.
Simultaneously, India must promote food grain processing industries and trade channels near to FCI godown and share logistic infrastructure for exports and onward marketing. Farmers may also pursue crop diversion and adoption of new technologies; that will boost productivity, reduce Agro-imports and enhance farmer’s income.
A composite plan will certainly increase farmer’s income and fetch rural prosperity. With healthy growth of agriculture, India could be a large exporter also. And Agro GDP in combination with food processing shall surge generating additional GDP, consequential revenue and employment.
(The writer is the author of Turn Around India. Views expressed are personal)
