Tackling farm distress

Income generation needs market-based solutions

The genesis of the farmers’ unending distress, reflected in recurring protests, can be traced to their poor earnings and the government’s failure to provide an appropriate policy response. As agricultural prices are rising less than others, rural wages are depressed. And analysts have suggested that 70 per cent of India's recent disinflation has been led by the fall in rural inflation. 

When incomes are low, the demand for some food items such as milk and protein tends to be weak, leading to a fall in their prices. 

Chronic income crunch is pushing farmers into a debt trap, leading to a clamour for loan waivers and higher minimum support prices (MSPs) of crops — the common refrain in most farmers’ stirs, including the one in New Delhi last week. The demand for implementing the report of the M S Swaminathan-led National Commission for Farmers also falls in the same league. The panel had recommended that floor prices for crops be pitched at 50 per cent above the comprehensive production costs (C2 cost). Besides, it had sought to shift the focus from farm production to farmers’ income. The response of the Union and state governments to these issues has left much to be desired. Instead of taking total costs (C2) into account for determining MSPs, the government’s much-hyped MSP increase is based only on the paid-out costs and the imputed value of family labour. The bitter truth is that even these prices are not available to most farmers for want of enforcement arrangements. Some novel income assurance schemes introduced by states suffer from implementation glitches, thus, providing only cold comfort to the farmers.

Income generation is, indeed, an economic issue that needs to be addressed through market-based strategies. Efficient, transparent, competitive and hassle-free marketing is a must to ensure reasonable prices to the growers. Only then can production respond effectively to demand, thereby, restricting surpluses and shortages to manageable levels. The arbitrarily fixed prices, as is the case now, tend to cause distortion in production, perpetuating a glut and depressing prices to the detriment of producers. This aside, most of the agricultural development schemes launched by the Centre or state governments are misdirected. They aim largely at boosting crop productivity and production, disregarding the negative impact of higher output on prices in a surplus situation. The government’s external trade policies, too, are focused more on managing inflation than on maintaining the price line to safeguard the farmers’ interests. An export window is imperative to siphon off the surpluses. This is usually denied for farm products by imposing import and export curbs and modifying duties and minimum export prices on the pretext of controlling inflation.

A recent discussion paper brought out by the NITI Aayog reveals that about two-thirds of rural income now comes from non-agricultural sources. This bears out the earlier finding of the National Sample Survey Organisation (70th round) that wage employment — not farming — is the principal source of income for 56 per cent of small and marginal farmers. Clearly, expanding job avenues in and around rural areas is imperative to boost farmers’ earnings. Promoting relatively lucrative allied activities of agriculture such as horticulture and floriculture also helps boost farm incomes. A multifaceted income-generation game plan, rather than MSP hikes and loan waivers, can mitigate farmers’ disquiet.