The efficacy of farm loan waivers as a solution to agrarian distress is debatable. Pushpendra Singh, president of Kisan Shakti Sangh, in a conversation with Sanjiv Shankaran explains why some farmers view waivers as return of money owed to them:
Why are we seeing agricultural distress?
All governments first try to control cost to consumers. We have seen governments fall on account of onion prices. In consumer price index (CPI), food has a weightage of about 46%. Even international ratings are affected if inflation targets are breached. Controlling food prices is important for governments. The minimum support price (MSP) of wheat has grown around 21 times since 1970. Salaries of government employees have increased much more. It’s not that we are not growing more food – foodgrain production has increased from 50 million tonnes to about 280 million tonnes. Yet, agriculture with about 50% of population dependent on it makes up only about 15% of GDP. Why is this so? Because we are not getting fair remuneration for our produce as governments want to control food inflation.
In 2004, MS Swaminathan’s report came which recommended farmers should get 50% above their cost of production (the committee submitted five reports between 2004 and 2006). The commission for agricultural costs and prices (CACP) recommends two to three kinds of costs. One of them, C2, is the comprehensive cost. We should have got C2 plus 50% when the report came. That was not given. The current government in its 2014 (election) manifesto promised a return of 50% above cost. For four-and-a-half years they did nothing. Once they suffered electoral losses in rural Gujarat during last year’s assembly election they said they are giving 50% above cost. But they did not include rental value of land and interest cost on capital employed. The cost formula used by this government (A2+FL) was used by the earlier regime. What’s new?
The burden of controlling food inflation is borne entirely by farmers. If they had fixed MSP based on comprehensive costs over the last five kharif and rabi seasons at least an extra Rs 1 lakh crore would have reached farmers every season.
Farmers all over have debts but only a few benefit from procurement at MSP.
Yes. As per Shanta Kumar committee report only 6% of farmers benefit from MSPs and mainly in paddy and wheat. But we have (lost) Rs 1 lakh crore in every crop season because of the cost formula. This is around the extent of loans farmers have. We don’t want loan waivers; we want payment of arrears.
Can a new cost formula help when procurement itself is limited to a few regions?
The government said all farmers will benefit from procurement but that didn’t happen. Isn’t it the government’s promise to purchase at MSP? We are in debt because of government policies. Banks write off loans by corporates who haven’t repaid and then say it’s just a technical entry because recovery process continues. However, recovery of these loans is less than 10%; it’s as good as waived.
Now, consumers are not at fault here because they pay for produce but we get only a fraction of it. Governments have failed to control middlemen.
What would you advocate?
One, storage facilities are not in proportion to production. Production has a small window, maybe 10-21 days. But consumption is spread over the year. Middlemen have storage facilities and control release of stock. Second, food processing facilities are inadequate. Fruits and vegetables are wasted every year in this country which also faces a malnutrition problem. Another reason for farmers’ distress is government’s import and export policies. Bureaucrats in Delhi make these policies and farmers pay the price. Another problem is present in milk economy, which is larger than paddy and wheat combined. Milk economy is characterised by daily or frequent cash flows which help meet small expenses. Now, milk prices have dropped and farmers are dealing with a loss situation. Then there is the “gau raksha” issue. When our cows or buffaloes no longer produce milk we have to sell them somewhere. It’s our economic activity. Selling them is now difficult because nobody wants to take them. This market has been finished.
An OECD report said because of government policies between 2000 and 2016, farmers have lost 14% (on average) of their income. It’s an implicit tax on farmers. We actually want the government monkey off our backs.
What is a better option for farmers: loan waiver or a scheme of income support?
It’s not loan waiver we are asking for but promised MSP. We are talking about arrears. But the best option is direct benefit transfer to farmers. Telangana’s Rythu Bandhu is a good scheme where farmers get per hectare upfront support. But even this scheme won’t work if I don’t get fair price for my produce. For this the middleman’s role has to be controlled. Consumers and farmers need to unite in this matter.