Unwise counsel

The suggestion by the Commission for Agricultural Costs and Prices (CACP) to make access to minimum support prices (MSPs) of crops a legal right of farmers is not only impractical but also unwise. Despite sizeable expansion in the last six decades, the crop procurement infrastructure has failed to reach out to more than one-third of the producers of a handful of crops in limited areas. Stretching it to all areas and all the 23 crops for which the MSPs are ritually announced annually seems unfeasible. But that does not mean that after pushing up the MSPs to 50 per cent above the basic production costs, these rates are not actually provided to the farmers. The present open-ended procurement-based system is really not the appropriate way to do so. This is an inherently loss-making mode of price support that is relatively more beneficial to the big farm owners who have large marketable surpluses. The ill-effects of this system are evident by way of distortions in the prices and cropping patterns as well as the piling up of stocks of food grains, such as rice, wheat and, of late, even pulses, which are difficult to offload.


Indeed, there is no dearth of alternatives to procurement-based market support. In fact, the CACP itself has referred to some of the options that are deemed better than the present system. The government’s policy think tank, the NITI Aayog, has also come out with some novel propositions that seem worth a try. One method that has found favour with both the CACP and the NITI Aayog is the price deficiency payment scheme introduced in Madhya Pradesh and a few other states. Under this, only the price loss is reimbursed directly to the farmer without affecting rest of the market dynamics. The CACP has found the system to be cost-effective and has, therefore, commended it for pan-India adoption. Even though this scheme is beset with teething troubles, the glitches do not seem insurmountable.


All government-sponsored schemes aimed at ensuring lucrative prices to farmers are bound to have some financial costs, which would vary from year to year depending upon the market rates and the extent of crop coverage. The unrelenting menace of post-harvest price crash is chiefly due to market inefficiencies and inadequate farm market infrastructure. Unless agricultural marketing is suitably reformed, the farmer would continue to be exploited by either the middlemen in the mandis run by the Agricultural Produce Marketing Committees (APMCs) or the traders in rural haats (informal local markets). The network of mandis, too, has failed to grow in tandem with the spurt in agricultural production over the last few decades. Official estimates indicate that over 80 per cent of the small and marginal farmers have to dispose of their produce in village haats in the absence of regular mandis in their vicinity. This year’s Budget has, therefore, done well to propose an upgrade for 22,000 haats, with proper link roads, but keeping them outside the purview of the APMC Acts. There is also the need to incentivise direct transactions between farmers and retail chains as well as other end-users such as agri-processors to ensure good prices to producers without fanning inflation. But unless production is allowed to respond to the demand to check over-supplies, it would be hard to avert post-harvest price slumps that deny remunerative prices to farmers.

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