Why Indian farmers need support prices for their crops
January 8, 2022
By Amit Bhaduri*
The year-long struggle of the farmers in India, and their victory, have upset not merely Prime Minister Narendra Modi’s political arrogance, but conventional wisdom in more than one way. It has shown the limitations of class analysis, and has thrown up new ideas for organizing peaceful protests in a democracy.
The fact that the relatively better off famers from Punjab, Haryana and Uttar Pradesh often led the movement should teach us the lesson that class position is not always the determining factor. When pushed to the wall, the farmers dissent spread across the entire agricultural sector and so class inequality, within agriculture, became less important.
Small and marginal farmers, landless agricultural laborers, mostly dalits, men and women, cutting across caste, gender, religion and region joined the movement. The fact that the better off farmers had greater economic staying power was an advantage. To this was added the seasonal nature of agricultural activity, which involves family members. Unlike factory work, men, women and children could share the daily agricultural work. This enabled them to prepare and sustain the protests over a long time. In a game of patience, the Modi government blinked first; its highhanded arrogance collapsed with upcoming state legislative elections in the key state of Uttar Pradesh, as well as other states, looming large in the background.
It would be wrong to say that the farmers were unaware of the class character of the state and its policies. They took no time to point out that the now-repealed three farm laws were primarily meant to promote the interests of the two biggest business houses in the country, namely that of the Ambanis and the Adanis. The role of the government, the farmers believed, was that of a facilitator for these business houses to profit from agriculture at their expense.
Consider that the three farm laws passed by the Modi government were made legal, however dubiously. But this does not negate the fact that they were meant to further hollow out India’s democracy, by making the livelihood of half of India’s population dependent on the profit motive of two large private business houses.
Superficially the farmers’ movement might look similar to the 1974 struggle against corruption and then Prime Minister Indira Gandhi’s undemocratic practices, which was led by the Gandhian social worker Jayaprakash Narayan. However, this misses the mark. Narayan’s “total revolution’’ reminds one of the French saying, “the more you try to embrace, the less you do.”
The farmers rose above the blame game of party politics, and vicious narratives questioning their nationalism. Instead, they forged a solidarity of caste and class, and rejected gender domination.
Now they face the problem of negotiating, with the Modi government, their demand for minimum support prices (MSP) for key farm products. This is in the context of broader objectives of an economy where many different interest groups coexist.
Much of the discussion is about providing legal guarantees for the MSP for 23 crops - seven grains, five pulses, seven oilseeds and four cash crops, focused mostly on the MSP’s role as an income support policy for the farmers. The average per capita farm income is about $25 (Rs1,800) per month, about one third the overall national average.
The MSP of each of the 23 crops has to be set within a band. In general, lower prices in good and higher prices in bad harvest years ought to be set to limit speculation.
The climate disaster has been accentuated by profit-seeking water intensive cropping patterns that are not suited to some areas. This, coupled with low prices and hence low profitability, discourages the production of nutritious, drought resistant coarse grains and pulses. It also undermines food security, mainly of the poor in those areas.
Food grains and pulses, which are climatically suited for farming regions with low rainfall, ought to be set at the higher end of the MSP pricing band to induce change in their long-run cropping patterns. The relative price incentives would lead to a raise in their output.
In addition, India needs higher productivity of land through minor irrigation, innovation in organic fertilizers and water management. Warehousing facilities have to be decentralized in order to minimize transport costs and loss of harvested grains.
The MSP is indeed an urgent priority given the distressed conditions of farmers, which have been all too apparent. Many farmers face mounting debts, at usurious interest rates charged by village moneylenders, since cultivation costs often exceed the prices they receive for their produce. Unable to deal with the debts, roughly 10,000 farmers and farm laborers committed suicide in 2019, according to official figures. Several studies say that the actual number is far higher.
To help farmers, especially small farmers, burdened by debt, banks ought to devise schemes linking grains sold under the MSP program with provision of bank credit. Also, they should offer credit based on per acre of farmland owned.
A higher support price to raise farmers’ income might appear incompatible with the national food security policy (NFSP). The NFSP, which operates through an extensive public distribution system, subsidizes and provides cheap food grains, pulses, sugar and other goods to households. It originated in 1955 as a measure to stabilize prices of essential commodities against speculation and to create adequate grain storage facilities. The government spends about Rs. 3 lakh crores ($40 billion) annually on the NFSP, mostly for price stabilization through public distribution.
If the MSP raises the income levels of farmers, especially small farmers, it would have a tremendous positive impact on the overall economy, raising demand for consumer goods and industrial products, especially for small and medium scale industries. Hence, the non-agricultural population also stands to gain from an MSP policy for farmers.
Also, most economists estimate the cost of the MSP to range between Rs 5 to7 lakh crores per year ($65 to $91 billion.) Does this aid to support about half of India’s population sound astronomical? Or, is it simply because, till the farmers peaceful protests, they did not have a strong enough political voice? Each year, in comparison, the government provides about Rs. 4 lakh crores ($52 billion) in tax breaks and other financial benefits to help a handful of big businesses.
The MSP and bank measures need to be reviewed and, if need be, revised every five years, based on data about crop yields, cropping patterns, loan repayment, and, perhaps, also criteria like gender, caste and religious minority participation.
These measures can only work if implemented through panchayats, village councils, and other local elected bodies. The farmers of India have already achieved a miracle by organizing their successful struggle through the Panchayats.
