In the Chinese calendar, 2019 is the year of pig. Pigs are considered realistic— they act more and talk less. The Chinese consider them as a symbol of wealth. If the new government elected in 2019 talks less and acts more, Indian farmers will also benefit.
Farmers’ bad luck continued in 2018. Farmers in India’s most prosperous states of Punjab and Haryana are considered least prone to risk as they cultivate wheat and paddy, which are procured by the government at a minimum support price (MSP) fixed by the government. In Kharif 2018, the MSP of Grade-A paddy was increased by Rs 180 per quintal, or 11.3%. These two states alone bought 226 lakh tonnes of paddy at MSP this year. So paddy farmers realised Rs 7,322 crore more than the previous year. It is a different matter that commission agents also earned an extra Rs 183 crore without providing any additional facility in mandis.
Hoever, farmers growing other crops were not so lucky. Despite promises of the government, the MSP remained a distant dream for most, except those who grew sugarcane and cotton. Even milk prices collapsed. Due to fear of violence, many farmers found it difficult to realise a good price from their old and out of milk animals. With stagnant wages and limited employment in off-farm activities, farmers’ income would have taken a serious hit in 2018.
What would farmers expect in 2019? I can see the following four major trends:
Loan waiver: In the last four years, farm loans have been written off in Andhra Pradesh, Chhatisgarh, Jammu & Kashmir, Karnataka, Maharashtra, Punjab, Puducherry, Telangana, Uttar Pradesh and Tamil Nadu. This consideration has so far been shown to only the farmers of states going for elections. So, fiscal prudence can wait and we should brace up for another round of loan waivers. It may cost the government more than Rs 2 lakh crore.
Market Reforms: Despite all the tall promises made by political parties during the assembly election campaign in Madhya Pradesh, Rajasthan, Chhattisgarh and Telangana, it is unlikely that governments can expand procurement beyond wheat, paddy and pulses, and that too in some states only. The promise of ensuring the MSP for all crops through procurement by government agencies is therefore unlikely to materialise.
The real mechanism to help farmers get a better price is to open the all India market by making agriculture trade as easy as trade in goods and services. There is substantial variation in prices of farm produce across mandis even within the states. The space for market reforms by the states is rather tight. Maharashtra had to withdraw the ordinance issued in October 2018, freeing farm produce and livestock from the clutches of mandi operators. The most challenging task before new central government will, therefore, be to actually implement market reforms in the states. No one understands why a ‘strong’ Centre could not persuade the states to reform their agricultural markets. Farmers would hope that the new government actually frees up agricultural markets and not on paper alone!
Crop Insurance: In 2019, the monsoon will determine the fate of farmers in rain-fed areas. In 2018, several regions in Rajasthan, Gujarat (Saurashtra and Kutch) and Marathwada faced deficient rains. A second consecutive failure of the monsoons will pose enormous challenges to the agricultural economy in these regions. With the threat of El-Nino looming large, crop insurance can provide them the much-needed cover.
If the states really want to reduce the premium subsidy provided by them, they must make sincere efforts to get lower premium from insurance companies. For this, they should finalise the tenders of crop insurance before the first forecast of monsoon is issued in mid-April. The current July 15 cut off for finalising tenders by states is too late.
The progress of monsoon is already known by that time and the companies will quote higher actuarial rates if the forecast is not good. The states and the insurance companies should also meticulously follow the guidelines of crop insurance scheme so that there is no adverse selection and claims are settled within the prescribed time limits. The states should also gear up for prompt and correct assessment of crop losses so that farmers receive their insurance claims in time.
Direct Investment Support: Once the limitation of delivering remunerative price through the MSP is realised, the other options are likely to be considered in right earnest.
The Price Deficiency Payment Scheme was implemented in MP in Kharif 2017 but it failed in several respects. Therefore, during the run-up to assembly elections, the state government did not opt for it. Instead, a bonus of Rs 50 per quintal was announced for soybean and maize.
Taking a cue from MP’s experience, it is possible that direct support to farmers should be considered by the new government as an option to help farmers. It is efficient, prompt and free of corruption. Moreover, it is not distortionary as it does not favour one crop over another. Telangana ignored tenant farmers in its Rythu Bandhu scheme. So an improved version will have to be designed if it is to become a model for the entire country.
There is a consensus that farmers need State help to survive. The real issue is how it is to be delivered. It is hoped that 2019 will show the way.
Siraj Hussain, former secretary, Agriculture, Government of India, is visiting senior fellow, ICRIER. Views are personal.For more Opinion pieces, click here.