NEW DELHI : Thousands of farmers this week joined the ‘Dilli Chalo’ (march to Delhi) to press the government to give legal guarantee to the minimum support price (MSP) mechanism for crops. The protest started from the epicentre of India’s green revolution, Punjab. The police this time were better prepared to avoid a rerun of the violent protest by farmers in Delhi in 2021, with multi-layered barriers like placing heavy concrete structures followed by iron nails beds to puncture wheels and other barricading on roads leading to Delhi. Talks are also on with the farmers to defuse the situation. The next round of talks is slated for Sunday.
Farmers have been on the warpath in Europe as well with hundreds of them hitting the streets of Germany, France, Belgium, Netherland, Romania, Spain, Poland, Latvia and elsewhere, blocking main pathways using tractors to force their respective governments to give them assured income. It indicates that farmers across the board are getting raw deal. A few years ago, European farmers spilled milk on the roads to protest against plunging market prices. Cheap imports from countries like Ukraine and rising input cost forced them to resort to agitation.
In India too, the government curbed export of food products, reduced import duty and flooded the agri-market with cheaper commodities to contain price inflation in the election year. But that adversely affected the income of farmers.
A government report shows that over half of the agricultural households have an average debt of Rs 74,121 and one-fifth of farmers are under the clutch of local money lenders (Table 1).
Indian agitation
India’s agrarian crisis can be baffling. While production of grains keeps on increasing, there is no commensurate rise in the income of farmers. In fact, the average daily earning from crop production is lesser than the daily wage of an unskilled rural labourer under the employment guarantee scheme, MGNREGS.
A latest situation analysis of India’s agriculture households (SAS-77) captures the deep flaws in the national agrarian policy. The report shows that the income of farmers from cultivation has actually gone down, when adjusted for inflation. The resultant distress was so severe that at least one farmer died by suicide every hour in India, as per the 2022 National Crime Records Bureau data.
Over a decade ago, crop production was the largest average source of income of agricultural households. No longer (Table 2). For example, the contribution of cultivation declined from 47.9% in 2012-13 to 37.7% in 2018-19, a drop of 10.2 percentage points. “It is a fact that income from crop production has not only declined as a share of total income, but has declined in real value if we adjust for inflation,” writes Dr Aparajita Bakshi, who teaches at School of Economics and Finance, RV University, Bengaluru. After adjusting 2012-13 incomes to 2018-19 prices using the consumer price index (rural) with base year 2012, the average monthly incomes from crop production declined by 10.4% in six years, she points out.
What triggered the protest
In November 2020, the Modi government brought three contentious farm laws - the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, the Farmers’ (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, and the Essential Commodities (Amendment) Act. All three were rammed through in Parliament with little discussion. It triggered a 14-month long protest at the Capital’s borders before the government was forced to withdraw the three laws.
In its written assurance, the government said it would study the demand of farmers for legalising the MSP mechanism so as to guarantee fixed returns for cereals and other select produce. However, a 29-member committee subsequently constituted under then agriculture secretary Sanjay Agarwal is yet to even file its interim report despite 37 meetings so far. This newspaper tried to reach out to Agrawal. He is yet to respond.
Besides legal guarantees for MSP, the demands in 2021 included procurement of all crops, loan waiver, pension for farmers and agricultural workers, a pro-farmer agri-insurance policy. “None of our demands were met,” rues Jagjeet Singh Dallewal. Dallewal is convener of a group of farmer organisations on protest now under the SKM (non-political) umbrella.
Legal guarantee for MSP
The MSP is a promise the government makes before the planting of crops. While it announces the MSP for 22 crops, it procures only wheat and rice. That helps 6% of farmers, especially in Punjab and Haryana. However, a large number of tillers get indirect benefit as it helps them keep the price up in the market.
The price of commodities crash when there is a supply glut, hence the demand for a statutory MSP. A positive effort was made in Maharashtra in 2018 when the state government directed traders to buy agri-produce at not below the MSP. Violators were warned of fines and imprisonment. However, following a total boycott by traders, the order had to be withdrawn.
Siraj Hussain, former secretary to the Ministry of Agriculture, said there are practical difficulties in implementation of legal guarantees to the MSP. “A large number of small and marginal farmers would not be benefitted as they do not sell their produce to designated agri-produce markets,” said Hussain. Besides, the government lacks physical resources to store and market large quantities of procured produce, he said.
Yogesh Thorat, president of Maha FPC, a Farmer Producer Company, said the country needs a long term strategy to create a robust market ecosystem to support small producers, instead of focusing on MSP. “Our farmers need handholding to integrate in the market ecosystem through cooperatives or Farmer Producer Companies,” said Thorat.
However, agriculture and trade expert Devinder Sharma doubts the efficacy of a market oriented solution. “If market has a solution for agriculture, then why are European farmers on the road? They have the best market ecosystem in the world,” he counters. Market economy favours corporates over farmers, he explains. “In India, in the last 10 years, the government wrote off over 15 lakh crore of corporate debt. However, it keeps arguing that guaranteeing an assuring income to farmers would create a burden on state exchequer. That is a double standard,” Sharma argues.
Who calculates the MSP?
The Commission for Agricultural Costs and Prices (CACP), an advisory body formed in 1965, estimates the cost of cultivation of crops while taking into account the supply and demand situation, market price trends (domestic and global), parity vis-à-vis other crops, and implications for consumers (inflation), environment (soil and water use) and terms of trade between agriculture and non-agriculture sectors. It puts out 3 kinds of production cost for every crop
A2: Covers all paid-out costs directly incurred by the farmer in cash and kind on seeds, fertilisers, pesticides, hired labour, leased-in land, fuel, irrigation, etc
A2+FL: Includes A2 plus an imputed value of unpaid family labour
C2: A2+FL + rental value of own land
Swaminathan commission’s recommendation
The National Commission on Farmers (NCF) headed by late Dr M S Swaminathan recommended that the MSP should be at least 50% above the total cost of production, defined as the sum of all costs, which include the cost of family labour and rental value of own land. Since 2018-19, the government has been trying to fix MSP at 1.5 times of A2+FL, which doesn’t cover the full cost of production as per the Commission’s recommendations.
