Target incomes, not prices

Target incomes, not prices

Article:

1. Puja Mehra, Delhi-based journalist , pointed out failure of India’s farm policy to support most vulnerable farmers

Important Analysis:

2. The author pointed out some of the issues that were involved in the farm sector and led to crisis situation. These are given below.

a. Good rains, excessive sowing and the bumper harvest last year produced gluts in the market, leading to farm incomes crashing.

b. The Economic tools available for protecting farm incomes — the price support scheme, the price stabilisation fund and the market intervention scheme —  were  not successful in solving crisis situation.

c. Steps like quick and precise adjustment to the export and import rules could have address the price fall by diverting the excess supplies to overseas market. But this step was not taken on time.

d. MSP issue:

• This year Budget promised that the MSP would be atleast 150% of production costs.
• Even if the market price fall below the MSP, as they did for major kharif crops last year, the government will procure the produce on MSP.
• If not procure, it will provide a mechanism to ensure payments, equal to the gap between the MSP and the market price.
• The intension of assuring 50% profit margin over the cost of production is to make farming remunerative.
• On formula for calculating production cost , farmers group and government are  yet not on the same platform.
• Author said that simply announcing the higher MSP will not solve the problem.
• For several crops last year, the quantities procured were small portions of the total produce. The procurement is conducted only for paddy, wheat, and sugarcane.
• Procurement frequently take place at prices below the MSP, as a result small and vulnerable farmers do not get paid MSP at all, as they sell their produce to aggregators, not directly to mandis.
• Depressed market prices and mounting farmer losses are a direct consequences of the malnutrition in agri- pricing policies.

e. Demand-Supply mismatch:

• Price differential payments, projects that the MSP of paddy for the 2018-19 kharif seasons will have to be raised 11-14%, cotton 19-28%, and jowar 42-44%.
• To respond this , farmers need to sow more jowar in the next season.
• It will lead to increased jowar production.
• Demand-Supply mismatch would be inevitable which would send the market prices for jowar below the announced MSP.
• Pricing policies distort market prices and send the wrong signal to farmers on what to produce and how much.

3. The author pointed out the following solutions for farm crisis:

• Income support payments, paid on a per hectare basis through direct transfer.
• Example: Telangana- has announced such payments for farmers at the rate of Rs 10,000/ha per season.
• Fiscal space must be found for providing income support to most vulnerable farmers.
• Proper fiscal support to farmers.