India needs to liberalise an overburdened farm sector by easing onerous regulations, even as legacy systems like the minimum support price (MSP) and Agricultural Produce Market Committees (APMC) persist, said Gunvant Patil Hangargekar, General Secretary, All-India Kisan Coordination Committee (AIKCC). Patil is a member of an expert panel constituted by the government on making the MSP effective and transparent.
MSP refers to state-set prices at which government agencies procure select crops from farmers to shield them from price volatility. About 23 crops are currently covered under MSP.
“The world is changing. Globalisation has helped raise our standard of living but the lack of reforms is hurting agriculture,” Patil told Moneycontrol.
“What can we do to liberate agriculture? The MSP, if you do not want to do away with it, needs to become a price indicator. And even if you retain the APMCs, you need to free up the open market.”
Patil, who hails from Maharashtra, is a veteran farm leader and former president of the Shetkari Sanghatana, a farmers’ movement which gained prominence in the ‘90s.
Patil has been a key part of several pan-India farm agitations, including one in 2007 which preceded the announcement of the United Progressive Alliance (UPA) government’s farm loan waiver.
He, and the AIKCC, had supported the contentious farm laws that sought to ensure freedom of choice to farmers in the sale and purchase of agri-produce, and allowing free trade outside the APMCs.
New Delhi had announced the formation of the expert committee Patil is a part of while repealing the three controversial agricultural laws after the months-long protests by farmers.
The committee, which comprises representatives of the central and state governments, farmers, agricultural scientists, and economists, is also looking at zero-budget farming and changing crop patterns.
India’s vast farm sector employs more than half the workforce in the world’s second-most populous country, but makes up only about 15 percent of its economic output. About half of the farmlands still depend on the monsoon for farming. Changing rainfall patterns and heat waves have threatened farm output in recent years.
Indian agriculture is caught in a complex web of controls, subsidies, and restrictions. While the exchequer subsidies several key inputs, including fertilisers, and promises procurement at a remunerative price, it also curbs exports from time to time and places several restrictions on land use and agri-trade.
Moreover, the lack of adequate agricultural infrastructure for perishable items, and the dominance of wheat and paddy in public procurement further complicate the situation, Patil said.
The farm leader calls for unshackling the system.
“Farmers have become so dependent, that they wait for government handouts,” he said. “I am trying to open the door to liberalisation and finally freeing the Indian farmer.”
What is needed is use of the latest technology, like genetically modified crops, to lower costs and boost production, he said.
Fixing MSP
A scientific approach is needed on the issue of MSP.
“The Shetkari Sanghatana’s stance has been that we do not need MSP. Instead of MSP, mark the produce to international prices,” Patil said, ruing that it would probably be difficult to do away with MSP as of now.
“If the domestic price falls below the international price, we will change the crop. Whatever pays the most, will be grown by the farmer.”
Patil talks about the so-called negative subsidies the Indian farmer faces because he cannot freely sell in the open market at international prices.
For now, the MSP should be used as an indicator to determine market prices and should also cater to inter-state differences in costs of production.
Moreover, the MSP should have a price band, just like for scrips on the stock market, Patil, who is also an engineer and photographer, said.
“The government needs to decide a policy for what it would do if the price falls below the lower end of the price band. We need to think about this.”
If there are no monopolies and distortions in the market, prices will stabilise and farmers will be able to get out of the unending cycle of debt, he added.
One of the items the committee of experts will consider is strengthening the agricultural marketing system to ensure higher value to the farmers by taking advantage of domestic and export opportunities. The panel met for the first time in Delhi in late August and is due to meet next in Hyderabad.
Reconsidering public procurement
Even if the MSP system is maintained, the country needs to think about issues with its public procurement programme, which is overwhelmingly skewed towards wheat and paddy.
“Both are sources of carbohydrates. What about other cereals like jowar, ragi? We need to encourage more crops under MSP,” Patil said.
“You have to think seriously about the public distribution system (PDS). Had the PDS not been there, even the poor would have consumed a diversity of grains, including millets.”
The PDS is distorting the market for foodgrains by supplying wheat and rice at highly subsidised rates, lowering the price at which the farmer ultimately sells in the open market, Patil said.
A better system might be to piggy-back on the government’s digital drive and transfer funds directly to the poor for the purchase of food, something like a food coupon, he suggested.
“Whoever wants to buy whatever, will buy it from the open market. This will boost the prices of local crops and people will start eating a variety of foodgrains,” Patil said. “The government’s headache will ease, leakages will reduce, and so will corruption. The market and farmers will get justice.”
Leave the farm
The need of the hour is to bring people out of farming, which is largely a loss-making enterprise, especially given the small land holdings in India.
“We haven’t been able to shift the economy away from agriculture, the burden on the sector as an employment provider continues unabated. If you continue to seek more employment in the same sector, it will spell suicide,” Patil said.
While initiatives like zero-budget farming are welcome and crop patterns should be diversified, these will not fix the larger issues facing Indian agriculture, the farm leader said.
“We need new thinking and transparency on a pan-India basis,” he said, hoping to meet farmers, scientists, and government officials across the country as part of the consultations for the committee.
Finally, he calls for the freeing up of land regulations.
“If you buy one share in the stock market today, you can sell it within minutes. Can you buy and sell land that easily? Where are the reforms?”
Once you fix the issue of land in India, “only those who want to do agriculture will come in, those who do not want to, will leave. There will be a great reshuffling,” Patil added.