With three new chief ministers waiving off farm loans within hours of taking oath in three states, the Modi government has received a strong message: do not take farmers for granted! No wonder the Modi government is mobilising all its political capital to woo the farmer votebank. This has become especially evident in the aftermath of BJP’s loss of three state assembly elections, and in the months leading up to the Lok Sabha 2019 elections.
“We are relooking at the farmer distress situation and farmer income issue,” said a senior Agriculture Ministry bureacrat. Although agriculture is a state subject, the centre takes key decisions on determining Minimum Support Price (MSP) for over 22 foodgrain commodities. Yet the two phased raises in MSP, the first one in July and the latter in October, for procurement in 2018-19, have left many questioning Modi’s claim to have raised the MSP by 1.5 times.
What has the government done thus far
The centre announced a hike for the Rabi harvest: a raise of Rs 105 per quintal for wheat, Rs 225 per quintal for masur dal, and Rs 220 per quintal for gram. This has earmarked a total outgo of Rs 63,000 crore in the current fiscal, while other issues were left out of the ambit of the agreement with the protesting farmers.
Earlier in July, the cabinet had announced a massive across-the-board hike of 1.5 times the cost of production of kharif crops. But the fact remains that the farmers are still not satisfied! In an election year when the Modi government is targeting a fiscal deficit of 3.3%, the total outgo for the government amounts to about Rs 1,20,000 crore on account of MSP hikes. Out of this, Rs 60,000 crore is on account of the hikes in kharif MSP, and another Rs 63,000 crore in the recent hike in rabi MSP. Yet the fact remains that the farmers opine that the hike is not substantial enough to compensate for their losses. In the kharif MSP raise too, a similar anomaly has emerged wherein a shortfall between the MSP and the market prices is evident in a big way.
In revising the kharif MSP, the Modi government had computed 50% over and above the A2+FL formula of the commodity, but this is far from truth. For instance, paddy prices were pegged at Rs 1,750 per quintal after the July’s government’s hike but this is still short of the Swaminathan Committee’s recommendation of Rs 2,340 per quintal.
Where is the mechanism faltering
There is widespread discontent amongst farmers who point to the hike in the diesel prices as well as the GST implementation, which have pushed up their costs of production, which has not been taken into the government’s consideration while announcing the prices. Inputs costs like in fertilisers and farm equipments, electricity tariffs have constantly risen. Fertiliser prices, for instance, has shot up due to the GST being pegged at 5%, while pesticides and agriculture equipments draw an additional GST of 18%—which have added to the costs.
Beyond this, a ground report suggests that the Food Corporation of India (FCI)—which is the official government procurer of foodgrains like paddy and wheat—is not able to reach all the farmers. This inability of the FCI to cover each and every farmer forces the latter to sell off to middlemen catering in the vicinity of their farms. About 31% of paddy farmers and about 39% of the wheat farmers in the country were unaware of the MSP mechanism. Out of this, only 13.5 per cent of the paddy farmers and 16.5 per cent of wheat farmers actually made use of the FCI procurement mechanism.
The problem of plenty
And this is depsite the fact that FCI godowns are overflowing with stocks of foodgrains which are either rotting or are exposed to the weather elements. In August 2018, the total stock of FCI amounted to 62.7 million tonnes, which is far more than the mandatory requirement of 20-22 million tonnes to be maintained as buffer stock. So now the problem is of plenty for the govt.
For 2018-19, FCI has a budgeted amount of Rs 1.40 lakh crore for operational, transportation, and procurement costs out of the total budgeted amount. Up until now, the government has had to fund FCI costs to the tune of Rs 2 lakh crore from National Small Savings Fund at a whopping rate of 8 per cent per annum. This apart, the farmers have demanded that their pension as well as compensation for their crops need to be on basis of C2+50 of the costs.
With five states under drought and the recent spate of farmer protests, clear signals have been sent to the Modi government on addressing the farm distress issue from a new perspective. That is, if Lasalgaon’s Sanjay Sathe’s gesture of sending a money order worth Rs 1064 to the Prime Minister’s Office, after selling 750 kilos of onion, did not register.
Sanjay Thapa Jeet is an independent journalist.