Farmers in Punjab and Haryana blocked roads and railroads on Friday to protest against three new legislation that they say could pave the way for the government to stop buying grain at minimum support prices (MSP) set by the federal government. leaving them vulnerable to exploitation by agro-industries.
Prime Minister Narendra Modi has backed the bills, recently passed by Parliament, as landmark reforms, which will open up farmers markets, giving farmers more options, in addition to notified market yards, to sell their produce.
Modi has said that the new laws do not dismantle existing markets, known to function as cartels, nor do they in any way jeopardize minimum support prices or minimum market prices for staples such as rice and wheat. These guarantees have failed to reassure millions of farmers in Punjab and Haryana.
Farmer groups fear that the new changes could cause existing notified markets to collapse on their own and give rise to new markets, where big capitalists will dominate. In fact, this will be undesirable. But reforms were long delayed because the current system is monopolistic and prone to corruption.
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Agricultural protests have been loudest in states like Punjab and Haryana, states where the procurement system and the MSP mechanism are robust. However, the PEM mechanism is neither fair nor adequate to offer remunerative prices to all types of farmers, experts say.
The key determinants of EMP are supply and demand, cost of production, price trends, both domestic and international, the terms of trade between the agricultural and non-agricultural sectors, and a minimum 50% margin over the production cost.
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However, production costs vary greatly from state to state. MSPs are calculated using a methodology based on all weighted average costs for India. “This does not necessarily guarantee remunerative prices for all farmers in all regions,” states a 2018 paper by PK Mishra of the international food policy research institute and T Haque, former chairman of the land policy cell of NITI Aayog.
Input costs, or the expenses incurred by farmers for inputs, such as fertilizers, have recently increased at a faster rate than EMPs. From 2004-05 to 2014-15, the average annual growth rate of the C2 cost of production of rice was 11.2% in Bihar and 11.9% in West Bengal, while the MSP of rice increased by only one annual rate of 10.6%. The cost of production C2 is the broadest measure of a farmer’s cost of cultivation, which includes the imputed rental value of the land, depreciation, and interest on capital.
One of the main reasons why the farmer protests on Friday are being witnessed more in some states, and not others, has to do with where SMPs are implemented. The government procurement system and the MSP mechanism do not benefit all farmers. While the government announces MSP for 23 crops, only wheat and rice are bought in large enough quantities.
In the case of wheat, the MSP mechanism is robust only in Punjab, Haryana and Madhya Pradesh. In the case of rice, only farmers in states like Andhra Pradesh, Chhattisgarh, Punjab and Haryana benefit. Farmers in other states hardly benefit from support prices because these states lack the government procurement infrastructure.
The 70th round of the National Sample Survey for 2012-2013 revealed that only 32.2% of rice producers and 39.2% of wheat producers in the country were aware of SMP. The survey also showed that only 13.5% of rice producers actually benefited from the MSP, while only 16.2% of producers sold their products to public procurement agencies at MSP prices.
In the case of cash crops such as cotton and jute, the state intervenes through the Cotton Corporation of India and the Jute Corporation of India only when market prices drop sharply.
Economist Ramesh Chand, member Niti Aayog, argued in a 2012 document that “it is not feasible for public agencies to obtain the traded surplus of each and every commodity nationwide to prevent prices from falling below the minimum level; it would not be desirable either … Therefore, it is necessary to design new mechanisms to protect producers from prices falling below the threshold. ”
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