Lutyen’s Delhi, home to the central government and Members of Parliament, is sometimes brought face-to-face with the people it purports to serve. Farmers invade the geometric grid of streets to protest against farm-unfriendly policies, disrupting traffic, scattering debris and evoking expletives from motorists. On the following day, it’s business as usual for the denizens of Delhi, the momentary disruption forgotten.
Wednesday’s kisan-mazdoor rally, featuring farmers and workers from Maharasthra, Madhya Pradesh, Uttar Pradesh and Haryana, was one such protest. One of the key issues was the recent hike in minimum support prices (MSP) for kharif crops, which farmers’ organisations dubbed as inadequate. Farmer leaders lobby ceaselessly for higher MSPs and it is politically expedient for governments to succumb to their demands, regardless of the increased burden of agricultural subsidies and further skewing of the country’s food economy.
The Centre is well aware that the MSP mechanism is no substitute for a vigorous open market. Only a fraction of farmers benefit from MSPs, and that too, in selected states. The MSP system works best in paddy and wheat, leading to an overproduction of these two crops. This is undesirable, particularly in geographical regions unsuited for water-intensive crops. Of late, procurement of pulses and oilseeds has picked up, moderating prices of these commodities.
The tendency to apply quick-fix solutions to agrarian distress, such as loan waivers and MSP hikes, is a feature of every government. Let’s face it: our food security strategy has been consumer-rather than farmer-centric. Boosting farm incomes took a backseat to keeping food prices low. Today, there is an urgent need to address the ever-widening gulf between agricultural and non-agricultural incomes. In relative terms, farmers are getting poorer year by year.
More than MSP, they need marketing linkages which can enable them to sell their produce at remunerative prices, good quality inputs, risk-proofing against the vagaries of nature and easy access to credit. The MSP is an emergency mechanism, a sort of safety net during times of excess production. Hiking MSP makes for good optics, whereas putting a sound public crop insurance scheme in place is much harder and less visible.
To its credit, the central government has shown a strong inclination to allow market forces to prevail, through measures such as the National Agriculture Market (e-NAM), which connects mandis across the country. It allows a robust price discovery mechanism, so that the farmer can auction his produce at the best possible rates. Why hasn’t it worked?
Let’s take the example of Haryana, which topped in e-NAM sales last year. The bulk of the trade — 60 per cent — captured on the e-NAM platform was procurement operations for rice and wheat by the state government agencies! Taking into account the total trades and bids received, it seems there were only 1.5 bids per e-trade on the average, most of them offline and local. The middlemen walked away with fat commissions, defeating the objective of the platform, which is to connect the farmer directly to the traders.
In fact, middlemen continue to rule the roost in the state. Government-licensed arhatiyas take home a staggering Rs 15,000 crore each year! Their presence is justified on the premise that they extend loans to farmers who do not have access to institutional credit. This is a specious argument. Why should the state, through commissions to arhatiyas, subsidise informal channels of credit? Why not reform the credit system, which caters to agri-business rather than farmers?
None of these problems is unfixable, but state governments must cooperate and prevent the politically powerful middlemen from hijacking the e-NAM platform. Inter-state and inter-mandi trades must not only be allowed, but actively encouraged. A natural corollary would be to allow farmers to demat their produce, which would then be stored at mandi level and traded when the price is right.
A reveiw of e-NAM by the Niti Ayog has found that mandis are ill-equipped to assay farm produce, without which potential buyers cannot get quality assurance. Most mandis have equipment for weighing and measuring mositure content, but this is not adequate in e-trading. The reveiw also confirmed that auctions were taking place offline and the data was being entered on the e-NAM portal post facto, making a mockery of the platform.
A study of the Unified Marketing Platform (UMP) in Karnataka — a sort of precursor to e-NAM — showed that farmers benefit hugely from online trading. After its introduction in 2015-16, modal prices of agricultural commodities in UMP-linked mandis increased sharply over the previous year — much higher than the increase in wholesale prices in the rest of the country. Many farmers may not even be aware of the MSP mechanism, but they all want better prices for their produce. There’s little doubt that a unified market and online trading is the way to go and a strong push is needed to bring the states, mandis and middlemen in line.
Bhavdeep Kang is a senior journalist with 35 years of experience in working with major newspapers and magazines. She is now an independent writer and author.