Maharashtra must instead consider income support and contract farming to make agriculture profitable
There is no doubt that farmers are in distress. Agriculture has become very risky. Farmers have to contend with weather and price risks. They suffer if the weather turns out to be very good for a crop, and also if it is unhelpful.
In these two years, this correspondent has seen farmers in Uttar Pradesh lose their wheat crop to hailstorms just at the time of harvesting. In West Bengal, a bumper crop of potatoes led to prices slumping and distress sales in 2015, followed by a lean crop and shooting prices in 2016. It is bust once again this year. In Punjab, farmers lost their cotton crop to an epidemic of white flies. In the Mysuru area, there were no takers for tomatoes around October 2016 because of overproduction, as farmers had rushed into the crop, misreading price signals from flood-hit Chennai the previous season. There have been droughts in Marathwada, Bundelkhand, and Tamil Nadu.
Farmers need insurance against the vagaries of both nature and the markets.
The vice-chancellor of an agricultural university in Marathwada who does not want to be named because of the political sensitivity of the issue, says three or four farmers in the region are committing suicide every day. Most are young. There are heaps of pigeon pea or tur in mandis and the government is helpless, he says. There is overproduction of chillies too. The price of chilly has declined from around Rs 10,000 a quintal in 2016 to around Rs 3,000. It does not even cover the cost of picking.
Maharashtra Chief Minister Devendra Fadnavis proposes to provide free inputs. If he has in mind only a few of them, the cost to the state will be less than writing off loans. But if power and water are also included, the tab will be very high — and damaging. Providing relief in kind is a bad idea because of the administrative cost of procuring the stuff, moving it over long distances, and distributing it. Farmers may not get inputs of their choice at the time they want it.
It is better to deposit money directly into the bank accounts of farmers. The Telangana government has announced that Rs 4,000 per acre will be put in the bank accounts of about 26 lakh farmers, irrespective of holdings, so they can buy fertilisers. Maharashtra can do likewise. A report in this paper says the Maharashtra government will provide all agricultural inputs — seeds, fertiliser, pesticide, power, water, and also labour for free. That is a tall order. The government must not provide power and water for free. It will lead to wastage and there will be environment costs, which will make agriculture unsustainable in the long run. It is best to make per acre payments into bank accounts and allow farmers to decide what to buy.
There is an apprehension that farmers may use the money for non-agricultural purposes. One view is that if restrictions are placed on government-provided money, farmers will anyway borrow for other purposes. With cash, farmers can scout around and buy at the best value. This was the experience of a group of consumers in a slum in Delhi, who were given a choice of either direct bank transfers or rationed cereals, in a pilot project when Sheila Dikshit was chief minister. Those who opted for bank transfers fared better. The other view is that there must be strings attached, so that agricultural production increases. These proponents suggest coupons which can be redeemed against agri-inputs. But the cost of printing, distributing, and redeeming the coupons will have to be reckoned with. Dealers might redeem the coupons at a discount, to compensate for the inconvenience of encashing them.
The time for direct income support to farmers has come. This has been applied in the United States as well. But actual cultivators must get the relief. However, land records are not in order. Owners may not be able to prove title. And those who have title may not be cultivators. The purpose of providing relief will not be served if non-owner cultivators get the subsidy and actual cultivators are forced to buy inputs at market prices. The state must digitise land records and ensure that title is proof of ownership, and not just proof of a sale/purchase transaction.
While income support is important, farm incomes will have to improve. This will not happen if farmers using subsidised inputs are compelled to sell their produce to trader-lenders soon after harvest when prices are at their lowest. The nexus between lending and trading will have to be broken. For that, farmers should have access to cheap finance, preferably from banks. They should produce quality grades that are tradable. There should be a network of warehouses where produce can be stored scientifically and whose receipts can be pledged for loans. Not all farm holdings will be viable. For the holders of those that are not, an exit option must be given in the form of land leasing. Contract farming will have to be promoted.
Otherwise, there will be no break from the cycle of loans waivers and relief measures.