Several countries, especially the G-20, support their agriculture. But in a democratic system, policies are not always framed on scientific basis.
They are often influenced by various lobbies, including politicians who, at election times, offer freebies like free electricity, farm loan waivers as ‘doles for votes’.
This short-sightedness results in sub-optimal or even irrational policy choices, which, in due course, harm the economy, environment, and even farmers.
The UN projects that the world’s population will reach 9.7 billion by 2050, causing global agricultural production to rise 69% between 2010 and 2050.
To meet this demand, farmers and agricultural companies are turning to the Internet of Things for analytics and greater production capabilities.
Importance of Farming and Agriculture:
- Farming is done from ancient times, and farmers are the backbone of farming. Farmers working hard in producing food in the fields for the world.
- In olden times, farming was a total labor-intensive technique that involved huge amounts of time and effort.
- As time changes, labour intensive techniques turn into capital intensive that provide high production with less effort.
- Smart Farming or smart agriculture in India is necessary that can help farmers to enhance their production and income.
- In this 21st century, where phones are smarter than humans and our farmers depend on monsoon, which determines whether they can sow their crop or not. That shows an extreme need to elevate Indian farming.
Issue of Minimum Support Prices (MSP) and demand of Legal Instrument:
Let us discuss here the case of minimum support prices (MSP), which many political parties are demanding to make a legal instrument.
- Legality of MSP means that no one is allowed to buy a MSP crop below MSP. If this demand is accepted, this will not only mess up the economy but also ultimately turn out to be anti-farmer.
- The reason is simple: It ignores the basic logic that prices are largely decided by the overall demand and supply.
- In case of surplus, which usually happens at harvest time, the prices fall to clear the market. If MSP is above that market clearing price, no one from private sector will be willing to buy.
- In that case, the government will have to become the buyer of last resort. Else, farmers will be left high and dry with no buyers for their produce, making farmers worse-off.
- The issue is how much government can buy of how many commodities, and what will be the cost to the government.
- As of today, the Centre declares MSP for 23 crops—seven cereals (rice, wheat, maize, bajra, sorghum, ragi and barley), five pulses (tur, moong, chana, urad and masur), seven oilseeds (soybean, groundnut, rapeseed-mustard, sesamum, safflower, sunflower and nigerseed) and four commercial crops (sugarcane, cotton, jute and copra).
- The main procurement, however, happens largely for rice and wheat to feed the public distribution system (PDS).
- The PD-issue-prices of rice and wheat are subsidised by more than 90% of their economic cost to the government.
- In 2020-21, the food subsidy bill was almost 30% of the net tax revenue of the central government, reflecting clearly a huge consumer-bias in the system.
- Unless this PDS is reformed either by restricting this to, say, the bottom 30% of the population or raising the issue-prices to, say, half the economic cost of rice and wheat, giving a better deal to farmers is likely to blow up the fiscal of the central government.
Concerns of farmers:
- More than 86 percent of India’s cultivated farmland is controlled by smallholder farmers who own less than two hectares (five acres) of land each.
- The new rules remove many of their safeguards. Small farmers fear that they just do not have enough bargaining power to get the kinds of prices they need for a decent standard of living when they negotiate to sell their produce to larger companies.
- The new laws also do not make written contracts mandatory. So in the case of any violation of their terms, it can be very hard for a farmer to prove that he or she has been aggrieved, giving them little recourse.
- The new rules do not guarantee any minimum price for any product, and farmers worry that the existing MSP will be abolished at some point.
What’s the way out to give a better deal to farmers?
- It may be better to use an income policy, on per hectare basis, to directly transfer money into farmers’ accounts without distorting markets through higher MSPs or PDP.
- This can be improvised by better identification of tenants and owners, through transparency in land records. There is no easy substitute to ‘getting the markets right’.
- Research evidence tells us that the best way to support agriculture in a sustainable and competitive manner is to invest in agri-R&D, agricultural-extension systems, and connect farmers to lucrative markets, domestic and external, by building efficient value-chains.
- Giving farmers their right to choose best technologies and best markets is fundamental to robust functioning of agri-systems and augmenting farmers’ incomes.
Other measures to increase Farm Productivity:
Farmers must be made free to determine the best mix of resources, land, inputs, technology, and organisational forms for their farms.
The state has too long subjected the farm households to top-down production, marketing, and distribution schemes.
Farmers, just as entrepreneurs in the non-farm sector, must be allowed to enter and exit agriculture, on their own terms and contract with whomever they wish.
Need fundamental reforms that allow for greater mobility of farmers and agricultural resources across the country.
Within a true decentralised polity, a farmer in Assam ought to benefit as much from the “Punjab model” as do farmers in Punjab, and vice-versa.
The required reforms if implemented, would help India improve food security for its vast population, advance the quality of life of its millions of smallholders, overcome severe resource and climate pressures, while generating sustainable productivity growth and creating a modern, efficient and resilient agro-food system that can contribute to inclusive growth and jobs throughout the economy.