Shreyas Aabhale is a young farmer from Sangamner in Ahmednagar district in Maharashtra. This 21-year-old farmer was aghast when he found that he had earned only six rupees after selling 53.14 quintals of onions. In frustration, he sent a cheque of six rupees to Chief Minister Devendra Fadnavis. Earlier, another farmer from Nashik in Maharashtra, Sanjay Sathe, had sent a cheque of Rs 1,066 to the Prime Minister’s Disaster Relief Fund. This is all he had earned, after deducting the expenses he had incurred, selling 750 kgs of onions.

In Neemuch mandi in Madhya Pradesh, onion prices had crashed to 50 paise per kg. In several other instances, irate farmers had thrown onions on the streets and some had heaped onions on the roadside, giving it free to people passing by. The plight of onion growers is no exception. For the past three years in a row, reports of angry farmers throwing onion, potato, tomato and other vegetables like peas, cabbage and cauliflower on the streets have appeared regularly. In fact, a video of an angry farmer sitting on a roadside breaking one pomegranate after another in exasperation for not getting a price that covers his cost of cultivation, has already gone viral.

What does one expect farmers to do when open market prices fall considerably below the Minimum Support Price? In November alone, prices for farmers across the board dropped between 15 to 25% approximately. Even in the case of paddy, where the government steps in to procure surplus paddy at the MSP, prices dropped by 20%. In fact, from the very beginning of the kharif harvesting season, prices had begun to decline.

In early and mid-October, prices farmers got were as follows:

Urad – Rs 2000/Quintal against an MSP of Rs 5,600 per quintal at Kota; Maize – Rs 1300/quintal against an MSP of Rs 1700/quintal at Mandsaur; and Rs 1,075/quintal in Punjab; Moong – Rs 5000/qunital against an MSP of Rs 6975/quintal at Ganganagar; Soyabean – Rs 2800/quintal against an MSP of Rs 3399/quintal at Harda; and Cotton – Rs 4,600/quintal against an MSP of Rs 5,450/quintal at Dhamnod.

This is perhaps the third year in succession when farm prices at the time of harvest have crashed. Imagine the plight and resultant suffering it has brought to the farming community. Year after year, farmers toil hard, putting their entire family to work, only to find prices crashing when they reach the mandi.

An estimate by Agrowon showed that by invariably selling at a distress price, Maharashtra farmers have been short-changed to the tune of Rs 2,579 crore alone for pulses, and Rs 769 crore for oilseeds, in kharif 2018. Maharashtra is certainly no exception. The miserable blow that has hit the farmer across the country, and that too despite the hard labour that he and his family had put in, results in losses pushing him to end his life.

 

The terrible agrarian crisis that prevails has brought farmer anger to the fore. Over the years, farmers’ anger has spilled to the streets. Between 2014 and 2016, a period of two years, farmers protests across the country increased by a whopping 680%. In 2016, the National Crime Record Bureau (NCRB) recorded 4,837 protests; roughly a seven times rise in two years. Since then the number and intensity of farmers’ protests have only multiplied exponentially.

After the peaceful Long March in Maharashtra, in which tens of thousands of farmers walked for almost a week to reach Mumbai, the decision to call for a village shut down in some parts of northern and central India was primarily aimed to draw the attention of governments to the problems being faced by farmers. This was followed by a farmers march from Haridwar, which faced water cannons on arrival in New Delhi. And more recently, the massive protest by farmers in Ramlila ground and its culmination in a protest meeting at Parliament Street attended by several opposition leaders drew the nation’s attention to the plight of the farming community.

These protests are symptomatic of the harsh ground reality – Indian agriculture is reeling under a systemic crisis; farmers are being deliberately kept impoverished to keep the economic reforms viable. To illustrate: instead of emphasizing the need to make farming an economically viable enterprise, former RBI Governor Raghuram Rajan had stated that the biggest reform would be when farmers are pushed out of agriculture to the cities, because the cities are in need of cheap labour.

The National Skill Development policy has already spelled out plans to bring down the population in farming from the existing 52% to 38% by 2022. The basic premise is to turn agriculture into becoming economically unviable to force the farming community to migrate to the cities. It is clear that the agrarian crisis we see today is the outcome of an economic design. Farmers have to be paid less for their produce to keep food inflation under control, and this will also help in pushing them out of agriculture.

 

In other words, by denying them their rightful income, farmers are being punished for growing food. Farmers do not realize that when they undertake crop cultivation, they actually cultivate losses. The farmer has been left to live in indebtedness, which keeps on multiplying with every passing year. The economic crisis that farmers face is compounded by a denial of their rightful income for the produce. It is the farmer who has paid the price for keeping food inflation under control. In reality, they have been subsidizing the nation over the years.

A recent report by CRISIL points to the denial of their rightful income as the major reason behind the agrarian crisis sweeping through the country. ‘While the average annual growth in MSP was 19.3% between 2009 and 2013, it was only 3.6% between 2014 and 2017’, the report states. Another Niti Aayog paper has worked out that the real income of a cultivator has increased by less than half a percent every year, 0.44% to be exact, over a five year period, between 2011-12 and 2015-16.

Earlier, the Economic Survey 2016 had reported that the average income of a farming family in 17 states of India (roughly half the country) stands at a paltry Rs 20,000 a year. In simple words, a farming family in half the country survives on less than Rs 1,700 per month. One cannot even think of rearing a cow in less than Rs 1,700 per month and it makes one shudder to think how farming families make ends meet.

 

Another recent OECD study has concluded that farmers have been deliberately paid 15% less all these years to keep food inflation under control. Accordingly, when adjusted for inflation, farm prices have remained frozen for the past two decades. Another UNCTAD study showed farm gate prices across the globe remained static in the 20 years period, between 1985 and 2005. To make up for the loss, while US farmers received on an average federal support of $50,000 a year, Indian farmers have conveniently been left in the lurch. All that the Indian farmer gets is indirect support through input subsidies. No wonder the terrible agrarian distress that we witness today is primarily an accumulation of apathy and neglect over the past four decades.

A better way to illustrate how farm incomes have been deliberately kept low over the decades is to make a comparative assessment with income increases for other sections of the society. In 1970, the minimum support price for wheat was Rs 76 per quintal. Forty-five years later, in 2015, wheat prices rose to Rs 1,435 per quintal, an increase of 19 times. In the same period, the basic salary plus dearness allowance (DA) of government employees increased 120 to 150 times; of college/university professors by 150 to 170 times; of school teachers by 280 to 320 times. While the prices farmers get have remained almost frozen in the 45 years period, salaries of other sections of society have galloped.

In addition, under the 7th Pay Commission, employees receive a total of 108 allowances. When was the last time we heard any demand from farmers to include at least four allowances – house rent allowance, medical allowance, education allowance and travelling allowance – in MSP calculations? Further, at a time when average farm incomes in 17 states of India works out to Rs 20,000 a year as mentioned earlier, it is depressing to know that Supreme Court officers are given an allowance of Rs 21,000 a year for washing clothes, and army officers get a washing allowance of Rs 20,000 a year. It makes one wonder whether the farmers have any clothes to wash.

 

Why cannot farmer’s MSP be similarly structured to include the living variables that other sections of society have been provided with? While it may be inconvenient to point out, the recent hike in MSP calculations, claimed to be as per the recommendation of the Swaminathan Commission, are in reality, based on a manipulated cost calculation (replacing C2 cost with A2+Fl), which is yet another attempt to deny farmers their rightful income. According to an ICRIER study, the improved MSP prices that have been announced fall short by 38% of the Swaminathan Committee recommendations.

To illustrate, the Commission for Agricultural Costs and Prices (CACP) has computed the comprehensive C2 cost of paddy at Rs 1,560 per quintal. Add to it 50% profit as recommended by the Swaminathan Commission, the paddy procurement price works out to Rs 2,340 per quintal. Compared with the C2 cost plus 50% profit, the paddy procurement price works out to Rs 1,750 per quintal, resulting in a loss of Rs 590 on every quintal sold.

Similarly, for maize the A2+FL (out of pocket expenses plus family labour) price has been calculated at Rs 1,131 per quintal. Adding 50% profit over A2+FL cost, the MSP for maize has been fixed at Rs 1,700 per quintal. But the comprehensive cost of production (C2) of maize is Rs 1,480 per quintal, so the procurement price should be Rs 2,240 per quintal – a clear loss of Rs 540 per quintal for farmers.

 

All the while the prices of seed, land, equipment, fertilizer and fuel have increased exponentially, but the output price has remained unchanged. In the absence of an adequate income, farmers are left with little choice but to increasingly depend on credit. As a result they have been gradually pushed deeper and deeper into chakravuyah – a never-ending cycle of debt. But little do they realize that the credit policy also has two faces, one for the rich, another for the poor. Denied their rightful income for nearly four decades, farmer organizations have repeatedly demanded a complete loan waiver. This has to be seen in the light of prevailing income disparities, and should be treated as a parayaschit.

Let us first take a look at the credit policy for farmers. In Punjab, the Punjab Agricultural Development Bank has served legal notice to 12,625 farmers threatening to sell their farm-land to recover outstanding dues of Rs 229.80 crore, and hundreds of them are in jail for non-payment of dues. At the same time, the government has written-off Rs 3.16 lakh crore of bad and toxic loans of corporate czars between April 2014 and April 2018, categorizing a proportion of this as a ‘haircut’. The haircut, which in reality is nothing short of a waiver, comes at a time when a 34-year-old farmer, Sukhpal Singh of Mansa region in Punjab, committed suicide in jail for an outstanding loan of six lakh rupees drawn from a cooperative bank.

 

A majority of the farm suicides are actually the outcome of humiliation that farmers undergo. Their names are pasted in tehsil headquarters and banks seize their movable property as a start. In contrast, the Reserve Bank of India is even trying to ensure that the names of corporate wilful defaulters are not made public. We don’t see any change in the lifestyle of the owners of defaulting companies.

At a time when policy makers are determined to stop farm loan waivers, terming them as a moral hazard, the former Chief Economic Adviser Arvind Subramanian justified the writing-off of corporate loans as leading to economic growth. Arundhati Bhattacharya, the former chairperson of the State Bank of India has blamed farm loan waivers as leading to credit indiscipline. The former RBI Governor Urjit Patel had found farm loan waivers a moral hazard upsetting the national balance sheet. If this is true, it is difficult to understand why waiving farm loans would not lead to economic growth. After all, both farmer as well as industry borrow from the same banks. How come corporate loan write-off does not upset the national balance sheet while loan waiver turns into a moral hazard?

With income and credit not in the farmers’ favour, many believe that removing state control in marketing is the surest way to bring efficiency thereby allowing ‘price discovery’ by private markets. The underlying objective is to disband the CACP, which works out the MSP for different crops, and to dismantle the APMC mandis, considered to be monopolistic. This ready-made prescription is accompanied by an emphasis on increasing crop productivity and expanding irrigation, not realizing that even in the western countries, including the US, markets have failed to prop up farm incomes.

 

As an illustration, let us look at what Mike Callicrate, an American farmer, wrote in his blog saying that the price at which his father sold corn some 44 years back, on 2 December 1974, was $3.58 per bushel (equal to 25.40 kg). In January 2018, he sold corn at $ 3.56, down two cents from what he earned 44 years ago.

If for 44 years, the markets failed to discover the real price of corn that a farmer needs to get in the US, it is quite obvious that markets even in the developed countries are far from efficient. In England, farmers are no better; they get only 4.5% from all food sales according to Professor Tim Lang, who has been working on food and agriculture for several decades now.

Further, Dr Robert Johannson, Chief Economist of the US Department of Agriculture (USDA), while addressing the 2018 Agricultural Economic and Outlook Foreign Trade Forum in March 2018, stated explicitly: ‘Real farm prices, when indexed for inflation, have fallen sharply since 1960.’ Yes, you heard it right; it is happening in America. This is despite the fact that the US has the largest commodity stock market in Chicago and also where a vast network of supermarkets operate. That is the reason why OECD countries continue to provide huge agricultural subsidies, including direct income support to farmers.

Now let us look at the two often repeated prescriptions coming from Niti Aayog and the Ministry of Agriculture. The thrust of doubling farm incomes by 2022 approach relies on increasing crop productivity and expanding irrigation. If true, then Punjab offers a test case to understand that addressing agrarian distress needs thinking that goes much beyond productivity and irrigation.

Public investment in expanding irrigation and productivity is definitely required, but is not a sole prescription for removing farm distress. Punjab has 98% assured irrigation, and with the highest productivity of cereal crops – wheat, rice and maize – in the world, hundreds of farmers have still been forced to commit suicide every year.

As per a house-to-house survey conducted by three public sector universities – Punjab Agricultural University, Ludhiana; Punjabi University, Patiala; and Guru Nanak Dev University, Amritsar – more than 16,600 farmers had committed suicide in the 17-year period between 2000 and 2017. If productivity and irrigation were the answer to the prevailing agrarian crisis then there is no reason why Punjab farmers should be dying. This only shows that the reasons behind the terrible agrarian crisis that prevail lie much beyond crop productivity and irrigation.

 

It is unlikely that a little tinkering will address the agrarian crisis. It needs a holistic approach, a paradigm shift in economic thinking. It needs massive public sector investments primarily aimed to raise farm incomes. To begin with, the effort must be to make farming economically viable and environmentally sustainable. After all, at the end, it all boils down to how much net income a farmer gets in his hand. Therefore, five steps that immediately need to be considered are:

1. The Commission for Agricultural Costs and Prices, which works out the MSP for crops, should be directed to factor in four allowances in the MSP paid to farmers – house, medical, educational and travel allowance. So far, the MSP only covers out of pocket expenses and family labour. Compare this to government employees, who get a total of 108 allowances.

2. A cost accountant needs to head the CACP. They have experience in computing the cost of industrial products; a similar approach is now needed to work on farm costs.

3. As the Shanta Kumar Committee reports, MSP benefits only six per cent farmers. Hence it needs to be understood that the demand for providing 50% profit over MSP will only benefit these six per cent farmers. For the remaining 94%, who are dependent on exploitative markets, the CACP needs to be redesigned as a Commission for Farmers Income and Welfare. Its mandate should be to provide a minimum assured monthly income package of Rs 18,000 to a farmer’s family. Whether it is through an FPO, Price Deficiency Scheme or by way of MSP, the average income of a farm family should be worked out for every district. The remaining gap in income, if any, should be paid through direct income transfer.

4. Public sector investments are urgently required for expanding the network of APMC mandis, and also for storage godowns. At present there are roughly 7,700 APMC mandis; what India needs is to set up 42,000 mandis for every five kilometers radius. And like in Brazil, where it is mandatory for a market yard to procure anything a farmer brings, APMC mandis should be similarly equipped.

5. Encourage cooperative farming, start-ups and incubation in agriculture to attract modern technology and improved skills into farming. With landholdings getting smaller, encouraging farmers to form cooperatives remains a valid strategy to enhance the collective business strength thereby raising farm incomes. This must also be accompanied by redrawing a sustainable agricultural map, moving from chemical to non-chemical farming.