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NDA’s Agri-pricing Politics

Where is the room for farmers in the government’s farm-price policies?


The Central Statistics Office’s latest agricultural growth estimates, based on the 2011–12 gross domestic product (GDP) series, have revealed that the nominal gross value added (GVA) of agriculture in the October–December 2018 quarter dropped to a 14-year low of 2.04%. With the farm production in this quarter being nearly 3% higher than that in October–

December 2017, this abysmal performance of agriculture in current value terms is indicative of tumbling farm prices, which, in turn, put a question mark on the National Democratic Alliance (NDA) government’s agricultural pricing policy, particularly the ostentatious hike of the minimum support price (MSP). While various reports have already documented that the crops covered by the MSP had sold at prices that were 20%–30% lower than the declared prices, empirical estimates show that even with augmented government procurement of pulses and oilseeds, MSP can benefit only about a fifth of the farmers in the country.

The proponents of this government would, however, argue that pricing agriculture and food is a perpetual dilemma of governments in developing countries. High prices that can stimulate production are also deterrents for consumers, especially the poor. On the other hand, dwindling prices are distressing for the farmers and, in extreme situations, have even led to farmer suicides. So, it is indeed a delicate balance of affordable prices and stable incomes that governments must maintain, which is no cakewalk. And, looking at the gamut of support schemes that the current government has declared for the farm sector in recent times, one should not doubt its ardency to strike such a balance. Yet, the political will underlying this enthusiasm is contested by evidences. An example at hand is the Pradhan Mantri Annadata Aay SanraksHan Abhiyan (AASHA) that sought to provide income support to farmers through price support, price deficiency payment, and the private procurement and stockist scheme. While none of the states—even Madhya Pradesh under its Bharatiya Janata Party (BJP) regime—had (fully) implemented AASHA, the disproportionately meagre budgetary provisions for such an ambitious mission clearly indicate the BJP-led NDA’s intention of using it only as an electoral plank.

For 70% of the Indian farmers, who are sheer price-takers in the agrarian markets, price shocks are exacerbated by a weak and asymmetric price transmission mechanism. While distress sales remain historically true for the Indian farm sector, instances of farmers destroying their produce due to market gluts are also common. Concurrently, when retail prices hit the roof during shortages, farm prices can barely match up to the rise. These occurrences are crying hoarse of the lack of concerted policies for agricultural market reforms. India’s conventional mandi system, governed by the Agricultural Produce Market Committee (APMC) Act, is characterised by the arthiyas and their high rates of commissions and margins that distort price transmission. The APMC-notified official commission rates, which vary across states, are as high as 4% in Punjab and 6% in Delhi. But, there are also ample evidences suggesting that these move upwards frequently during produce auctions. In some parts of North East India, these rates are found to be as high as 12%. It goes without saying that no price support can produce the intended results, given such inefficiencies. Ironically, the NDA’s Model Agriculture Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017 facilitates the retaining of these exploitative middlemen as the central marketing agents on the APMC market yards.

A joint report of the Organisation for Economic Co-operation and Development (OECD) and the Indian Council for Research on International Economic Relations (ICRIER) in 2018, however, have pointed out that domestic marketing regulations and restrictive agricultural trade policies, with their in-built bias of controlling consumer prices, have implicitly taxed the Indian farmers for almost two decades now, contrary to the rhetoric of protecting their interests. Between 2000–01 and 2016–17, the producer support estimate (PSE) for India, as per the OECD’s standard PSE methodology, stood at -14% of gross farm receipts per annum, implying that every year Indian farmers received prices that were on an average 14% lower than the global prices. In fact, 70% of the major agricultural commodities in India received such low prices between 2014–15 and 2016–17. In the face of these policy-induced distortions, none of the support schemes of the government provide even the “minimum” support to farmers. Rather, these are crumbs of contempt thrown at a clamouring lot who matter to the government purely for their numerical effects at the ballots.

The pro-consumer bias in the NDA’s agricultural policies is explained by the fact that this “consuming class” is not too far away from the “middle class” population whose pro-BJP swing had brought the current government to power in 2014. Keeping consumer prices under control is thus politically expedient. The opinion-shaping character of the urban electorate can then be exploited to champion the NDA’s “pro-common man” rhetoric, and further alienate the distraught rural voices from mainstream politics.

Updated On : 12th Mar, 2019


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