Best of both sides | Harish Damodaran writes: Why farmers deserve price security

The most fertile farmlands — be it on both sides of the Grand Trunk Road, the Ganga-Yamuna Doab riverine plains or the Krishna-Godavari, Cauvery and Mahanadi alluvial delta basins — are getting diverted for real estate development, if not for building infrastructure, factories and smart cities. Andhra Pradesh’s capital, Amaravati, is coming up on 33,000-odd acres of what used to be lush paddy, banana and turmeric-growing fields on the right bank of the Krishna.

The same goes for farmers. India officially has 146.5 million “operational holdings” (2015-16 Agriculture Census) and 105-115 million beneficiaries under the PM-Kisan Samman Nidhi income support scheme. But the actual “serious” farmer population — households deriving at least half of their income from agriculture — may not be more than 40 million, as Samridhi Agarwal and I have estimated (‘Counting the Kisan’, IE, October 4, 2021). And those numbers are probably dwindling faster than we think.

The challenge before Indian agriculture isn’t just one of feeding 1.7 billion mouths by the early-2060s. It’s about retaining the best available agricultural lands and human talent in farming. How do we ensure that farmers remain in business, rather than look to exit and sell their land for converting acres into square yards and feet?

It is instructive to note that agricultural growth during the first two decades post the economic reforms was primarily driven by improved terms of trade for farmers and new technologies — from hybrid seeds in vegetables and maize, genetically-modified Bt cotton, tissue-culture and high-density planting in fruit crops, drip irrigation and laser levelling, to fast-growing broiler chicken and commercial layer breeder birds.

The last decade, however, has witnessed a reversal of sorts. The official farmers’ terms of trade index (base: triennium ended 2011-12=100), which rose from 87.82 in 2004-05 to 102.95 in 2010-11, has fallen to 97.21 in 2022-23. Also, the flow of innovations has slowed, with more promotion of traditional paramparagat krishi than cutting-edge agricultural research.

The experience of the Green Revolution, and agriculture’s robust growth performance over the first one-and-a-half decades of this century, tells us that farmers invest in their land and in technologies for boosting yields and reducing cultivation costs only when there is some assurance of price — between the time the crop is sown and is ready for marketing.

Agriculture is the only business where both production and price risks are high. Yield losses can happen at every stage of the crop — from dry weather impacting germination and vegetative growth, pest and disease attacks, frost, hail storms, temperature spikes and unseasonal rain around harvesting. There are limits to minimising production uncertainties, which will only increase with climate change. But price risk is something that can and should be addressed. It is a strategic imperative and in enlightened consumer self-interest to make our farmers to farm today, tomorrow and beyond. The world cannot feed us; only we can.

“Legal MSP” is the least we can give to our farmers, who one must assume to be as rational and risk-averse as any businessmen. The way to do it is by paying the price difference when a crop is sold below its government-declared MSP.

A price deficiency payments (PDP) system will spur formalisation and digitisation of the farm produce trade, which is still largely cash-based. Farmers once aware of PDP will start demanding receipts from buyers, detailing both the quantity and price at which their crop has been sold. Just as with GST — where the buyer makes sure the supplier has paid the tax charged on the goods or services purchased in order for him to claim input credit — farmers would insist on recording of their sales transactions through digital payments.

PDP will also incentivise states to set up APMC mandis or even electronic trading platforms outside the physical market yards, where farmers can sell their produce. The farmer only needs the sales invoice to claim the legal MSP via PDP. The onus for creating this market infrastructure for recording of transactions lies on the state governments. Any payment of price difference by the Centre should be conditional upon the states enabling the generation of the necessary sales data.

We want the Punjab farmer to grow soyabean, cotton, maize or arhar, instead of paddy. But we also know that Maharashtra farmers sold soyabean in the current marketing season at Rs 4,000-4,200 per quintal, way below the MSP of Rs 4,892. One wouldn’t be surprised, then, to see them plant more area under sugarcane for the next season.

Without basic price assurance, it is unrealistic to expect any crop diversification by farmers. We mustn’t wait for the day when they opt to sell their land rather than even grow rice or sugarcane.

harish.damodaran@expressindia.com