Forget MSP hike, govt needs to implement existing prices

The government seeks credit for protecting the interests of farmers at the WTO and displays callousness when it comes to supporting its poorest farmers at home


Photo: Hindustan Times
Photo: Hindustan Times

Recently, Union minister for road transport, Nitin Gadkari, publicly embarrassed Maharashtra’s minister of state for agriculture Sadabhau Khot, a firebrand farmers’ leader. Attending a public function in Nashik with Khot, Gadkari asked him to give up his demand for support prices for agricultural produce. Prices, Gadkari said, are now determined in the international market and are beyond the government’s control.

Khot represents the Swabhimani Shetkari Sanghatana, a militant farmers’ organization, now a political party, which is a part of the Bharatiya Janata Party (BJP)-led coalition government in Maharashtra. The Sanghatana is built on the single-point demand of remunerative support prices for farm produce. Gadkari, thus, took a dig at the core philosophy of Khot’s party. Politics apart, Gadkari’s statement reveals several contradictions.

One, Gadkari’s talk about international prices gets hollowed out against the backdrop of denial of international prices through frequent export restrictions being imposed on onion exports. He was also silent when onion prices crashed and farmers were left to fend for themselves.

Two, none other than Narendra Modi himself provided the biggest political support for the demand for state-controlled prices in recent times. In all of his pre-election rallies in rural Maharashtra, Modi promised minimum support prices (MSP) for farm produce that would ensure 50% profit.

Usually, the promises made during an election campaign don’t retain their political sway for too long. But here was the future prime minister giving his unambiguous support to a demand that had already caught farmers’ imagination, and at a time of severe drought.

The third, and the most tragic, contradiction is that leave alone the promise of raising MSPs, the Modi government is displaying complete callousness in protecting even the existing MSPs. This is in spite of nationwide agricultural distress.

While Gadkari was preaching free-market philosophy, Kusum Thote, a farmer in Wardha in Vidarbha, was selling her soybean at Rs2,200 a quintal, even though the government-declared MSP is Rs2,775. Without irrigation facility, she had about 17 quintals of soybean from her three acres of land. Soybean is not a water-intensive crop and is harvested after monsoon. The crop doesn’t require intensive use of fertilizers but needs pesticides.

Thote spent around Rs30,000 on the purchase of seeds, pesticide and labour. Thus, she ended up getting barely Rs7,400 in profit. Had the state honoured its promise of MSP, she would have got an additional Rs9,775.

But Kusum was lucky as her soybean was not affected by showers just before harvest. In many parts of the state, these showers blackened soybean and farmers had to sell them for as low as Rs1,700 a quintal.

This apathy is not restricted only to soybean. Pulses like moong and urad are also sold below their MSPs. This does not happen in states like Punjab and Haryana on account of the political pressure applied by the farmers’ lobby.

Gadchiroli and Bhandara districts are rice-producing districts of Maharashtra. But farmers there often sell their produce below MSP as there are no procurement centres. Even in Gujarat, the home state of the prime minister, farmers sell groundnut below MSP. Farmers engaged in dry-land agriculture are already deprived of all state support in the form of subsidies for water, electricity and fertilizers. This is because in the absence of irrigation facilities, fertilizer use is limited and electricity for pumping is irrelevant. For these farmers, crop insurance and floor price set by MSPs are the only support available. These farmers also do not have the option of shifting to high-value crops such as vegetables and fruits.

Gadkari is right in that prices are determined by global demand and supply equations. But what he ignores is wide price fluctuations, an inherent feature of globalized trade. Small farmers in countries like India cannot withstand such fluctuations. This is precisely the reason why the World Trade Organization’s (WTO) Agreement on Agriculture allows government intervention in the market through MSPs. The Union government has been in power for almost three years now. This is a long-enough time for setting up infrastructure required to honour the promised floor price.

In this context, Brexit and Donald Trump’s victory warns us that the grievances of those who are adversely affected by or left out of globalization should be a matter of greater political concern. Or else, this class will revolt against the same process that has the potential to alleviate their poverty.

It is unfortunate that the Modi government seeks credit for protecting the interests of farmers in the WTO negotiations and displays callousness when it comes to supporting its poorest farmers at home through WTO-approved measures. This does not bode well for a government that came to power with tall promises on support prices.

Milind Murugkar writes about contemporary economic and political issues.

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