Retrench India’s farm economy to sustain it: 

Retrench India’s farm economy to sustain it: 

Context:

Improving farmer efficiency and productivity requires a second level of reforms aimed at inputs.

Introduction:

• In 2007-08, Madhya Pradesh government announced a bonus of Rs150 above the minimum support price (MSP) per quintal of wheat. A large segment of farmers in the state shifted to the crop.
• With Madhya Pradesh’s Bhavantar Bhugtan Yojana scheme being launched on Monday,
• The policies of the agriculture sector have created artificial incentives that are unsustainable, an inefficient drain on public funds , or both.

Bhavantar Bhugtan Yojana:

• It is being implemented as a pilot scheme for eight crops.
• If successful ,the scheme could end up being replicated across India, replacing the old model of minimum support prices.
• The scheme was launched on Monday.
• Farmers across the state will be taking their produce to agricultural markets in the hope that the government will ensure that they get remunerative prices.
• The scheme is being launched four months after farmers in the state went on a strike, leading to a police crackdown that resulted in the deaths of five farmers in Mandsaur district.
• The scheme aims to address the main source of farmer anger: low prices prevailing in agricultural markets and the failure of the government to cushion the losses of farmers.
• Through the scheme, the state government is experimenting with a different model of price support.
• The state government will not buy farm produce from farmers but it will pay them the difference between the market price and the minimum support price.
• Loopholes:
• Lack of government storage facilities and supply chain logistics to the fact that despite the government declaring MSPs for 25 crops, it largely procures only rice and wheat.
• It will be less distortionary, freeing up space for the market to set rates.

Solutions:

Transformative agricultural reforms will require work on three levels:

1– The benighted mandi system has come in for a fair heap of justified abuse here. With the 2003 and 2017 versions of the model Agricultural Produce Market Committee (APMC) Act, successive National Democratic Alliance administrations have attempted to liberalize this system, providing for private markets and integrated state markets as a step towards a national market facilitated by the National Agriculture Market (eNAM).

• What is needed is for the government to get out of the business altogether—and that is only possible with a switch from the public distribution system to direct benefit transfers.
• But, this will affect only farmer remuneration.

2-   Improving farmer efficiency and productivity requires a second level of reforms aimed at inputs.

• The Pradhan Mantri Krishi Sinchayee Yojana aims to extend irrigation cover to all forms and maximize water-use efficiency over a period of five years with an outlay of Rs50,000 crore.
• In a water-stressed yet groundwater-dependent country like India, this is only possible with comprehensive rural electrification, allowing for techniques such as drip irrigation.
• The other major reform needed here is access to formal credit.
• The current dependence on informal credit leaves farmers beholden to middlemen and traders who are often the credit suppliers, thus undercutting the former’s bargaining power.

3-   The number of people participating in it must be drastically reduced and the entire endeavour must be corporatized to the extent possible. As per the last Agriculture Census, the average farm holding in India is a minuscule 1.15 hectares, with 85% of the holdings in the marginal and small categories. Their number has been on the rise since the 1970s and is expected to touch 91% by 2030

4-  Relaxing the rules for foreign direct investment in retail to improve agricultural logistics.

5-  Measures such as enabling large-scale contract farming and corporate farming will help here.

6-  job creation in non-agricultural sectors

7-  Rolling back the tradition of marginal farming will in turn allow for the dismantling of the MSP system—instituted in the 1960s to facilitate the Green Revolution and long past its sell-by date.

8-  Improve its efficiency and allow the market to operate unfettered to the largest extent possible.

Minimum Support Price (MSP):

• Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.
• The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
• MSP is price fixed by Government of India to protect the producer – farmers – against excessive fall in price during bumper production years.
• The minimum support prices are a guarantee price for their produce from the Government.
• The major objectives are to support the farmers from distress sales and to procure food grains for public distribution.
• In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price.

Conclusion:

Our agriculture policy needs to focus on improving productivity instead of price support