We have heard a lot of good points from both sides on the new Agri trade laws. None of these have provided a clear way forward. If we sacrifice the interest of subsistence farmers in favor of commercial farmers by removing MSP, then India becomes competitive, but it is too painful to see the subsistence farmers get poorer and poorer. If we provide MSP support, then how do we ensure that our food processing still remains competitive by buying raw materials at high prices.Also Read - Hardik Pandya in Our Plans For Captaincy Role to Manage Rohit Sharma's Workload - BCCI Selector CONFIRMS
It’s a fallacy that international prices would have still remained subdued even if India hadn’t its granaries full and had approached international markets to import a fraction of its requirement. Obviously, the prices would spiral to much greater heights if such a large country started buying. However, this import would be different from the import of wheat that we do in normal years just to keep our domestic prices subdued, for the world knows that it’s a tactical buying and not really a true demand. Hence, the world markets don’t react. So, the argument that the MSP is always higher than the international prices do not hold true because the prices do not reflect the other scenario of ‘no MSP and low production’. Also Read - Alia Bhatt's Pregnancy: Neetu Kapoor Shares Unseen Romantic Photo Of Alia-Ranbir, Check Out Mom-To-Be's Adorable Reaction
In the ideal scenario, a commercial farmer dominating the agriculture scene provides the necessary competitiveness to the food processing sector. But India comprises largely of subsistence farmers who cannot be brushed aside under the diktat of an economist. For good economics is not always good politics and bad politics is always anarchy and social unrest. It would be cruel to simply apply the principles of economics of disintermediation, parity with international prices and coercive transition from subsistence to commercial farming. These can have draconian impacts on human lives and if not implemented with a humane approach would end up descending the country into chaos. Also Read - Gold Rate Today: Prices Rise By 10,000! Check Revised Rates In Your City On June 28 Here
The ongoing farmer agitation has surprised many as to why would they oppose something that gives them more choice. Contrary to the popular impression, the mandi has captured the trust and support of farmers in all parts of India. Private mandis are not so new, there are already about 100 such out of which 25 mandis are already operational. Most of these mandis which have come up at lucrative places, are not mandis in a true sense – for they do not comprise large number of buyers and larger number of sellers and are merely procurement outfits disguised as private mandis. As per the recommended radius of a mandi, the country needs thousands of more mandis than the 7000 odd we have so far. It’s a strange paradox that many of the present mandis need investment and modernization to be fully successful and yet farmers need a mandi not so far from their farm for correct price. That means this sector needs a lot of investment and private sector can really play a part, but we can’t rely completely on private sectors to go to the far-flung areas which may be unviable in the initial years. This is where the new Agri trade laws, though futuristic, yet do not offer the complete solution.
Now that the matters have precipitated, and farmers are refusing to go back what if we give them what they are asking. Will it cost more than Rs. 1 lakh crore of market intervention costs to guarantee the MSP on private purchase? Some experts on this side of the divide have said that it would cost much lesser. In a bumper year it may cost a little more, and some more to support the food processing sector which would get affected due to higher prices, because everything will have to be bought at MSP. But not something beyond 5-7% of our budget, something that we can afford. All that the government needs to do is to outsource the procurement operations to the private sector, link banking sector to fund and just take the price risks on its shoulders. These operations will sure result in losses here and profits there but supported by an active regulation through quantitative restrictions on exports and imports – the situation wouldn’t get that bad. Any other solution, like direct cash transfer would cost the exchequer several times more. This way FCI need not handle so much additional produce and yet can bring in the private sector investment. A new policy research institution may be set up by farmers to advise the government on active regulation and putting necessary pressure. This democratization of regulation should percolate down to farmer and consumer associations and local bodies for seamless enforcement to check excessive hoarding.
This way the old and new systems can thrive in perfect harmony. Yet another question is to be answered – how do we transition from cereals to other crops? And to more sustainable agricultural production keeping an eye on degrading soils, falling ground water levels and increasing chemical residues in the food. Should the government redeploy the entire fertilizer subsidy program, policy measures and other incentives to focus on above priorities?
Let’s hope that this solution would encourage the private sector and yet deter it to be exploitative. Government will be able to assure MSP to the farmers and yet not be dazzled by the mammoth size of operations. Subsistence farmers would be cajoled and incentivized to be more entrepreneurial and yet not fall on the wayside if they do not wish to.
The present situation is such that the farmers are getting so much sympathy and a yummy home cooked meal at the Singhu border that they are not in a hurry to get back home. The initiative lies with the government.
(Sanjay Sethi is Senior Vice President – Food, Agriculture & Sustainability Technopak Advisors Pvt. Ltd.)
[Disclaimer: Views expressed here are of his own and not of India.Com.]