Even though the agrarian crisis has taken a political turn with every party trying to portray itself as the saviour of the farming community, there is no serious thought from any of them on how to revive the agrarian economy. All of them have been parroting the usual prescriptions of farm loan waiver and a more generous and better implemented minimum support price (MSP). Most of these are time-tested schemes that have been offered for decades. The irony is also that most political activists and farmers’ organizations have also bought these ideas as the only ways of saving the farmer and agriculture.
It is now well known that farm loan waivers are no solution to the problem of credit defaults in agriculture. Between 2008, when one of the largest farm loan waivers was announced by the United Progressive Alliance (UPA), and 2018, nothing seems to have changed. Neither did the 2008 loan waiver do anything to improve repayment rate of farm loans, nor did it prevent farmers from falling into debt trap a decade later. But it has now become a competitive game with every party trying to outsmart the other by being generous in waiving farm loans. The cycle continues because it is always accompanied by a decline in investment in agriculture.
Already for the central government, agricultural investments have declined in real terms by 3.5% per annum, the sharpest decline in last three decades. But such a scheme is also anti-farmer with a majority of small and marginal farmers out of institutional credit. For these farmers who are also the most vulnerable, farm loan waivers actually increase the cost of cultivation with declining investment.
So is the case with the MSP announcements, which have remained paper tigers except in the case of rice and wheat. But even for these two crops, the regional variation in the beneficiaries has always been skewed in favour of richer states of Punjab, Haryana and Andhra Pradesh and, within them, it has always been the rich surplus farmers who have benefited out of it.
For the remaining 23 crops, for which MSP is announced, there has neither been a stable policy regime of procurement and disposal, nor has there been any substantial effort in ensuring availability of marketing infrastructure.
The announcement of MSP for kharif crops this year with an eye on the election has not managed to raise prices for a majority of crops, whose prices have declined in recent years. For a majority of these crops, including pulses and garlic, the market prices continue to remain below the MSP in the absence of market intervention by the government.
It is not that the state and central governments are unaware of the deficiency of these measures. State governments have tried innovative ideas and methods to address these concerns. Madhya Pradesh tried the ‘bhavantar’ scheme, which was meant to provide income support by providing the price differential to farmers. Within two years, the scheme is not only on the verge of closing down with many farmers yet to get the promised money, but also because the cost has been too much for the government with no impact on market prices.
So is the case with the income transfer scheme of Telangana, which promised to pay ₹8,000 per acre. The scheme, expected to cost ₹10,000 crore to the state government, hasn’t cheered farmers with claims of exclusion and inadequate payment troubling the scheme. But it doesn’t help the agricultural labourers and the share-croppers who have been kept out of the scheme. Nor has it helped the farmers to get out of the debt trap with the incumbent party also promising farm loan waivers.
The problem really is not a dearth of ideas and the willingness to experiment. The real problem is lack of acknowledgement that the crisis in agriculture is not about incomes alone. Those who are focussing on doubling farmer incomes and providing income support to farmers are only looking at the short-term palliatives.
The real problem is an understanding of the changing nature of agriculture. Indian agriculture is now much more diversified with highly intensive agriculture. Increasing monetization and mechanization of agriculture has also increased the cost of cultivation. The long-term solution requires investment in agriculture to make it viable, along with a price support mechanism which takes care of the market inefficiencies. Such a policy will require large scale investments in building infrastructure, market access, storage, technology and revival of non-farm sector to absorb the excess labour from agriculture. While none of the stakeholders are willing to talk about these, the central and state governments have actually reduced the real investment. The problem really is the lack of political will to solve the agrarian crisis. Until then, farmers’ distress is a hot political currency that everybody wants to encash during the elections without doing anything.
Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi