Farmers will benefit more from price insurance, not higher support prices
NITI Aayog's Ramesh Chand on land consolidation, reforming agricultural markets, govt's intent to fix agrarian distress
New Delhi: Farm expert Ramesh Chand, the newly-appointed member of NITI Aayog, the successor to India’s Planning Commission, believes that consolidation of land is critical to ensure better farm incomes, and that reforming agriculture markets is more of a priority than higher support prices for farm produce.
The appointment of Chand this week as the third member of NITI Aayog, the other two being an economist and a scientist, signals the present government’s intent to fix the agrarian distress situation. Edited excerpts from an interview:
Agriculture is in a precarious situation with the second consecutive year of deficit rains. How should the government respond?
There is no doubt the situation is turning adverse for agriculture, party due to natural factors, as the last kharif and rabi (winter) crops suffered. It rarely happens, and this is the third season when we are facing it. Clearly, climate change is showing its impact, and these weather uncertainties are not one-off events. We need solutions so that farmers’ interest in farming does not diminish, which means mechanisms to cope with risk and immediate compensation (for crop damage).
Also, economic factors have turned very adverse for agriculture. Look at international prices—in dollar terms, prices are at least 25% lower compared to 2012. So, farmers are being hit on both fronts: economic and physical (weather).
The other challenge would be to revive growth rate in agriculture?
During the 11th Plan (2007-2012), we succeeded in achieving 4% growth rate in agriculture. It appears that during the 12th Plan (2012-2017), growth will fall to around 2%. It’s a serious concern, but not an impossible challenge to address. The solution lies in technology—you have to diversify the cropping pattern and develop drought-tolerant technology for crops. We need to develop institutions and infrastructure which will enable people to cope (with drought) through water conservation and better irrigation facilities. There are distortions in the cropping pattern also, accentuated by policies; like there is so much support for sugar cane, but not for coarse grains, oilseeds and pulses.
If it isn’t adverse weather, the farmers’ refrain is that crop prices are so low that it doesn’t pay for the costs. Do you support their demand of implementing the report of the Swaminathan Commission, which recommended support prices at costs plus 50%?
It is a misplaced conception that implementing Swaminathan Commission’s recommendation will solve all problems. The ultimate solution will come from development of markets and competition. Just increasing support prices, when there is no physical procurement (like in the case of pulses) will be of no use. The government cannot buy everything, everywhere—that will lead to nationalization of agricultural trade.
We need reforms in agriculture markets. Nothing has changed here, except that 30 years back, farmers would bring their produce in bullock carts and now they use a tractor trolley. There are many intermediaries; (mandi) taxes have become more regressive. There are problems of persuading states, but this cannot be delayed anymore. As agriculture becomes more commercial, marketing needs to be more efficient.
I am not suggesting that the government withdraws from price support operations, it has to act in certain situations, but it needs newer tools of intervention. Minimum support prices may be outdated in the new context. They are there for staples (rice and wheat), but we need to do something about other crops.
So how do you do it? Say, to make farmers grow more pulses?
There is a system of deficiency price payment. Whenever price falls below a threshold level, you can provide farmers the gap. Many countries like the US use this like a price insurance tool for farmers. This is a price guarantee system without the government procuring crops, which is costly. We need to refine and adopt it to particular situations where price volatility is high like in the case of pulses.
The last budget slashed funds in programmes like the Rashtriya Krishi Vikas Yojana (RKVY) and the National Food Security Mission (NFSM) that was responsible for high growth rates during the 11th Plan period. Do you think NITI Aayog will be able to persuade states to put money into these programmes out of the increased transfers from the finance commission?
The job of NITI Aayog is to guide states on the right set of policies. The Aayog will guide them on priority areas for investment. Not that allocations (under RKVY and NFSM) have been reduced, the money is going to states under the new formula for devolution. I understand that states are interested in development (of agriculture) and they will attach a lot of importance to advice coming from expert bodies like the NITI Aayog.
India is a vast country and you cannot expect everyone to behave in a particular manner. Some states like Madhya Pradesh and Chhattisgarh made good use of these programmes and that shows in their growth rates. Of late, growth rates have also picked up in Karnataka and Maharashtra.
Farmers often complain that the government is more cautious about price rise (say, in pulses and onions) and cares more about the urban consumer than the farmer.
If the government is targeting inflation, it does not necessarily means it is adverse for farmers. In many cases, prices rise during off-season. Exports are restricted during violent price rises, but that rarely happens during the harvest season. Curbing prices is keeping traders’ profit in check. It does not affect price realization by farmers. Now, duty on edible oil has been increased—as international prices have fallen very low—so here, the government is also acting to protect the farmers’ interest.
But I agree that knee-jerk reactions should be avoided. We need to have a mechanism for the market and price intelligence in the food and agriculture ministries that would address this in a planned way. Early warning systems are important, say, after three months, shortage of onions is likely, so better start preparing for imports.
What is the solution to the rising number of farm suicides across the country?
There are two dimensions: sudden crop failures and long-term issues. Farming is not earning enough (for a family) and the cumulative effect erupts one day—nothing terrible has happened, but debts have piled up. Compensation for climate hazards is a short-term solution. In the long run, reasonable incomes to farm households cannot come from small-sized farms. Rural non-farm sector needs to be developed. At the NITI Aayog (task force on agriculture), we discussed land leases at length—how marginal farmers can expand the farm size, and how uninterested farmers can have exit options, so that they can continue to earn by leasing out.
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