Farmers are hurting themselves – The Hindu BusinessLine

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Farmers have taken over not just Delhi’s roads but also the mind space of the nation. Their courage, persistence, organisation and politeness have won them many admirers. Their siege of Delhi has, as yet, only inflicted considerable personal sacrifices. But the earlier rail roko imposed large costs on Punjab. And if they escalate similarly in Delhi and elsewhere, there is the risk they will lose the public sympathy they have gained.

There is a danger they will be recognised for what they are: A private interest group that because it is well-organised and vocal, fights to force acceptance of its demands even if that hurts society and, most sadly of all, themselves. The debate is confused because they started out as a group that made a major contribution to the country. In the mid-1960s the Green Revolution in Punjab transformed India from grain deficit to grain surplus and brought food security to millions. Punjab, with its high land-man ratio and rural infrastructure, was best able to use the new technologies and deliver. It and its farmers earned the nation’s praise and gratitude.

Price distortion

The transformation was based, however, on incentives from subsidised inputs, from State procurement and offer of minimum support prices (MSPs). This encouraged lazy farming. There was no pressure to improve productivity. Given the regional concentration, there was every incentive to organise politically, agitate for and get better prices every year.

Since the MSP always rose and never fell, and food had a large share in the consumption basket, it became the anchor around which India’s inflation coalesced and became entrenched.

The State government and market intermediaries also enriched themselves at taxpayers’ expense, raising costs further. The distinction between the procurement and support price was lost after the 1970s, and the support price, at which farmers could make assured sales, approached the market price.

In the 1990s, it had overtaken the latter. In the 1980s, the rate of increase was kept low to share the gains of better productivity with consumers. In the 1990s, as productivity growth slowed, more rapid price increases were granted. In the more open economy, when the gap between border prices and domestic prices rose, there was strong pressure to raise domestic procurement prices. This created a clear pattern in procurement price increases, rise in stocks, and domestic inflation impulses.

The worst aspect was Punjab’s agriculture turned from its natural diversity to a harmful monoculture. Rice was not a natural or a native kharif crop given Punjab’s hot summers. Growing it involved flooding fields. Chemicals that were released turned fields infertile and sharply raised the incidence of cancer. Overuse of groundwater lowered the water table raising resource costs of extraction.

A law prohibiting rice planting in summer in order to reduce water use left very little time between the kharif and rabi crops. Farmers began to burn crop residue to quickly prepare fields for the winter wheat planting. Air quality plunged in the North.

After enjoying the fastest rates of growth in the Green Revolution years Punjab has become a laggard. Since the 1990s its agricultural growth rate is below the national average. Any growth accounting that includes the harm to natural resources will give it negative growth rates.

Bihar, whose population density is much higher and whose APMC was abolished in 2005, has much higher agricultural growth rates. There is no procurement of wheat and rice but diversification to high-value crops gives Bihari farmers higher income per acre, even though the Punjabi farmer still has the highest subsidy per acre.

Therefore the Punjabi farmer is suffering the most from her own political power.

The vigour, ability and commitment devoted to protest if directed to using new opportunities in agriculture would give her much better results.

Negotiation

This is not to say the three farm laws the government has brought out are perfect. They are, however, in the right direction and follow the recommendations and deliberations of many committees, agricultural experts and all parties made over 20 years. But since farmers suffer from a fear of freedom, they do need to be amended to give farmers more protection and a gradual weaning from the crutches they have become habituated to.

The government is open to negotiation but farmers are insisting on full repeal. But they are only hurting themselves in more ways than one.

When the nation is holding too much grain and rotting excess stocks are imposing a huge cost on taxpayers can farmers ask for more incentives to produce grain? When the production of that excess is harming the land and air, which is the source of their life and livelihood, can they persist with that excess?

The government remains committed to the MSP and has expanded it to other crops. But the days of MSP are numbered not because of the new laws but because India’s per capita income has crossed the level after which the WTO can bar price distorting polices.

MSPs at which assured sales are made should fall below market price for rice and wheat and rise for oilseeds, pulses and coarse grains to correct distortions. The limited procurement that is required can be made at higher market prices. Having been enticed to grow wheat and rice, Punjab’s farmers could now be paid lumpsums to migrate to other crops as input and output price support is withdrawn. Green box subsidies are WTO compatible.

More agricultural markets and market infrastructure are required not less. Freer entry can be allowed for traders with taxes imposed on every sale but strictly impounded for development of market infrastructure. If State mandis have to compete for business they may start offering better facilities. More avenues can be created for farmers to appeal against sharp trade practices. Farmer producer organisations should be strengthened to give them greater bargaining power against large purchasers. Perhaps, reforms can be staggered giving time for these protections to develop.

There is, of course, a section of society that welcomes any agitation and is egging on the farmers. But farmers are canny enough to realise they are not their friends and to resist being used. Agitating farmers need to direct their political power to clear the road into a better future, not cling on to an unsustainable past. That is the way for Punjab to regain its tag as one of the most dynamic and progressive States.

The writer is member of the RBI’s MPC. Views are personal



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