Don’t deny farmers a rightful income

DURING an episode of Kaun Banega Crorepati in 2018, megastar Amitabh Bachchan couldn’t believe his ears when a small farmer from Maharashtra, doing cultivation on four acres, narrated his plight. Asked how much he earned from farming, the farmer replied: “Not more than Rs 60,000 in a year, of which half the money goes to buy seeds. I am able to provide only the evening meal to my family.”

As the hike in MSP still remains below the cost of production and 86% of the farmers are resorting to distress sale, rural indebtedness and suicides have been escalating.

Bachchan was shocked by the answer. Expressing dismay, he urged the people to support the country’s farmers.

The despair in rural Maharashtra has only grown since. Between January and August this year, 1,809 farmers died by suicide, according to news reports. This is slightly less than last year’s figure, but on an average, seven farmers have been ending their lives every day. Fifty per cent of these suicides were reported from the cotton-growing region.

This brings me to the excitement in the media over the recent hike in the minimum support price (MSP) of winter crops. It has been hailed as a windfall or bonanza for farmers, but the question is: Will it provide any succour to distressed farmers? There is hardly any possibility that the hike in prices will turn raging despair into hope.

Let’s first look at the quantum of increase in the MSP that has been announced. With Assembly elections in Madhya Pradesh, Rajasthan and other states around the corner and the harvesting of rabi crops set to take place around the 2024 Lok Sabha elections, the increase in prices for the rabi crops is in the range of 2-7 per cent. The average inflation rise in 2022-23 was around 7.6 per cent. The hike in the MSP, therefore, does not even cover the inflation rate.

Further, the projection of a ‘windfall’ or ‘bonanza’ for farmers is actually based on ignorance of the ground reality. Every crop season, the Commission for Agricultural Costs and Prices (CACP), which recommends the prices to the government, also presents calculations of the percentage change in the input price index that eventually goes into working out the cost of production. Compared to 2022-23, the composite input price index rose by 8.9 per cent this year. This means that while the cost of production was higher, the increase in MSP prices was not commensurate with it. This isn’t a cause for farmers to cheer.

A year earlier, it was worse. Against the composite input price index rise by 8.5 per cent, the wheat MSP had increased by just 2 per cent.

Incidentally, the increase of Rs 150 per quintal this year takes the wheat MSP to Rs 2,275 per quintal. This is the highest increase in wheat price since 2006-07 and 2007-08, when the UPA government was left with little choice but to raise the prices for domestic producers. This had happened after a flawed decision to allow private companies to purchase wheat directly from farmers left a huge gap in public stockholding. The government was forced to import wheat at almost double the prices (that were given to domestic farmers) to meet the shortfall. It was following an uproar from the Opposition parties and farm unions that the MSP for wheat was hiked, essentially to bring in price parity.

Considering that the prices this year will impact major rabi crops of Madhya Pradesh, Rajasthan and Telangana, there is speculation about how the increase in prices will impact the election outcomes. With wheat being the most important rabi crop and other winter crops, including barley, gram, rapeseed-mustard and lentil (masur), the hike in prices certainly has a political dimension.

In January 2021, economists Sukhpal Singh and Shruti Bhogal had clearly shown how the MSP for wheat and paddy was much higher in the years preceding 2004, 2009, 2014 and 2019. These were all election years. The hike in the 2023-24 rabi prices is apparently on similar lines. It is only prior to the elections that the powers that be realise the need to announce relatively higher MSPs for farmers. While some political parties may have reaped electoral dividends, it is time to ensure that in future politics is kept away from determining crop prices.

Farming is not charity, and the crop prices cannot be left to the whims and fancies of the political leadership. Agriculture needs structural reforms wherein, irrespective of the year of elections, farmers get a price based on a legally binding MSP that is drawn up as per the Swaminathan formula of the weighted average plus 50 per cent profit.

In any case, since procurement is largely confined to wheat and paddy, the percentage of farmers who reap the benefit of MSP has over the years risen from 6 per cent to hardly 14 per cent. What has to be understood, therefore, is that with the hike in MSP still largely remaining below the cost of production, and markets paying distress prices by and large to the remaining 86 per cent farmers, rural indebtedness and suicides have been escalating. Farm distress has been deepening.

Moreover, it is time for a relook at the macro-economic policies that have perpetually denied a rightful income to farmers. The criterion of keeping inflation in the bracket of 4 per cent (plus/minus 2 per cent) has hurt farming. Although food and beverages carry 45.9 per cent weight in the CPI (consumer price index) basket, policymakers have shut their eyes to housing, which remains the biggest inflation driver. Yet, while housing is treated as an investment, any hike in MSP is blamed for rising food inflation. This has to change.