The government has announced Minimum Support Price, MSP, for 14 summer crops, chief of which is rice. While the average growth is 6%, rice’s growth is the lowest at 5.1%. This is less than the increase in costs: fertilizer and energy prices have risen sharply in the wake of the Ukraine war, wholesale price inflation is in the region of 15% and consumer price inflation is nearly half that. Opposition parties and farmers’ lobbies protest that the increase in support prices is a sham, and wholly inadequate.
an increase can be seen in support price Underneath the cost escalation in the form of a stealth reform, it provided a market mechanism that would allow farmers to negotiate a guarantee-free regime on their own. However, these, such as a functional futures and options market in agricultural produce – these stand banned – with unrestricted access to global prices through exports (inflation to the general public rather than boosting farmers’ income). ) and the retail buyer lacks facilities for food processing or rapid clearance of fresh produce. The net result is an opportunity to move Indian farming away from the infant formula of expanded state support and allow the market to prove its mettle as a farmer’s friend.
Minimum Support Prices are meant to act as a safety net supplemented by a functional crop insurance scheme. Instead, populist policy has, over the years, turned MSP into a means of farmer prosperity, wherever there is a follow-up to actual procurement, which is wheat, rice, cotton and, after a fashion, commodities other than sugar. rare to. , It needs to be changed.
Farmers receive generous support from governments around the world. It would be futile to pretend that India can treat farmers like producers in other sectors of the economy, figuring out what is in demand, what is their area of competence, the state of the art in any line of production. What is it and can they be successful in this or not. Farmers need and should get some support, but that doesn’t mean the harshness of the market won’t help them improve their earnings.
A fundamental reform is needed to address the systemic pressure to keep the terms of trade between industry and agriculture unfavourable. When industry is protected, raising the price of industrial goods above what they would be in the absence of protection, and exports of agricultural produce are restricted, the prices of agriculture are reduced, the state’s The policy turns the terms of trade in favor of industry and against agriculture: farmers are required to exchange more bags of grain to buy fertilizer or tractors, which will boost industrial prices and increase agricultural prices. It would have happened in the absence of a suppression policy.
Farmers benefit from the knowledge of which crops face increasing demand and which crops face declining demand. This information is taken into the prices of future contracts. In India, some irrational fears of the markets compel politicians to ban futures markets in agricultural produce at the slightest sign of rising inflation.
Markets only work when they can be reached. Telecom revolution means that a farmer from a remote village in Bihar knows that the price of green chillies in a market 50 km away from his village is twice the price he gets from a local trader. But if there are no all-weather roads to reach that market, then making a sole profit from that knowledge will ulcerate.
Product that gets spoiled needs to be stored. Some items, such as grain, can be stored, provided it is free of moisture, in silos without temperature control. Other produce, such as onions or potatoes, call for climate-controlled storage. This demands a reliable power supply. or refrigerated trucks to carry produce along a motorable road.
The government does not invest in the creation of a pre-requisite of a functional market that will help farmers, as it is politically more attractive to subsidize farmers: fertilizer subsidies, free canal water, if the canal does not silt up its Whether broken or not broken Long-standing neglect of embankments, free electricity to draw out groundwater.
And the most obvious symbol of political support for the farmer is the MSP. In the case of food grains, the government has trained farmers in some parts of the country to grow only those crops for which the government provides guaranteed procurement at an ever-increasing support price. Therefore, India has 2.5 times its grain requirement and edible oil or oilseeds is not enough.
Farmers could probably earn far more by growing fruit or flowers, but the allure of guaranteed returns from grain keeps them tied to grain, grown on subsidized water pumped out of the ground using no metered electricity, excessive amounts In subsidized fertilizers and assured procurement by the government at MSP which provides surplus at all costs.
This system should be gone. But the pre-requisites of the market should be created first, the futures and options markets for agricultural produce should function, the international trading system should be stable, the terms of trade should not be against agriculture and the government should have an open dialogue with the society . What is really in the interest of the farmer.
Until then, the increase in MSP will serve as a symbol of the inability of the political system to muster the courage to do what is right, not what is right.