FARM DISTRESS /FATIGUE
http://epaper.financialexpress.com/c/20134956
FARMER’S FATIGUE
Tejinder Narang
(The very concept of comparing profits of
farmers through MSP is irrelevant because 92% of the produce is dispensed at
market determined values.)
Highly analytical opinions have been ascribed
to the current agitation of farmers for cereals, oilseeds, vegetables. Lower
hike in MSP (Minimum Support Price)during last 3-4 years, has been cited as one
of the major causes and the general public also believes it so. Then the
reasoning of stocks limits, poor warehousing facilities, export bans, lack of
food processing industry and free trading in commodity exchanges is given. The logic
that higher production has led to price crash, is also endorsed as a reason for
farmer’s woes. And last is the rationale of squeeze of cash for the acquisition
of the produce.
MSP
Government of the day is being held liable for
failure in “suitable” increase in MSP thus diminishing the profits of the
farmers. This does not exemplify correct picture.. Except for wheat and paddy (of
rice) -- MSP is a notional value for all other commodities. For wheat and paddy
too, approximately 30% is the official procurement and the rest is traded in
the market. There is no MSP for onions, potatoes and tomatoes. In short only 8%
of the total agriculture produce (including horticulture) is supported by public
procurement –the rest 92% sells at a market determined prices. That is why MP
government futilely and wrongly attempted to suggest that all traders should
buy agro commodities at MSP. After realizing its irrationality, the proposal
now appears to be discarded.
IMPORTS
For whatever reasons, draught or otherwise,
India’s reliance on import of agro-commodities is rising every year. For
example- import of wheat per annum is 3-5 million tons (mts), pulses 5-6(mts),
edible oil 14 mts-- have become a new norm. Recently 0.5mts duty free raw sugar
import are authorized and last year 0.5 mts of corn import was permitted.
Import
prices thus also have bearing on domestic values and volumes that are traded.
·
Market
price of wheat may depend upon landed cost of Australian/Ukraine/Russian wheat .
·
Pulses
will be dictated of Tur/Urad price of Myanmar/ Ethiopia/Tanzania; Chana values
of Australia; Yellow Peas of Canada.
·
Soybean
prices by quotes of CBOT or Brazil or Argentina ; Palm Oil offered in
Indonesia/ Malaysia.
·
Sugar
values by contracts in New York and London exchanges. Raw sugar which was 22
c/pound in November has today dropped to 13c/pound in New York exchange –or down
by about $235/mt.
International volatility cannot be visualized
and built into MSP or FRP( for sugar), especially when imports are rendered imperative. Though the
merits of fixation of MSP itself are debatable, the very concept of comparing
profits of farmers through MSP is irrelevant because 92% of the produce is
dispensed at market determined values.
Should we raise the tariffs to such a high
value so that imports may be blocked!! No. Instead India needs to educate
itself as to how exporting nations are able to produce cheaper and sell with a
landed cost (including freight and handling expenses) + reasonable custom duty,
still remain competitive with international volatility.
Realistically this means that we have macro (including
infrastructural) and micro economic inefficiencies of production. If the case is to raise the tariff –then it
also implies that domestic inefficiencies are also being encouraged. To get out
of the rut of vicious cycle of ascending imports, domestic output has to go up
by technology induction both at the level of seeds and farming practices.
OTHER FACTORS
Other factors that are mentioned-- stocks
limits, poor warehousing facilities, export bans, lack of food processing
industry and free trading in commodity exchanges-- have all pressured prices
downward. But these factors have always prevailed during last 60 years. All
governments took decisions by knee jerk reaction to tame rising prices to
control inflation. All governments targeted intermediaries/middle men directly
or indirectly, but farmers seldom agitated.
Each government of the day claimed sufficiency
of agro production and undertaken ad-hoc imports or allowed imports for the
privates to narrow down supply-demand gap. The paradoxical situation is that
though this government has been stating rising production of wheat and pulses
but it simultaneously facilitated imports thus negating ideas of higher
production by their own actions. Imports though filled the demand and kept
inflation in check, acted contrary to the aspirations of the farmers of
realization of promised 50% profit above the cost of production.
The only factor that is now emerging is the
lack of informal financing. Dr Ashok Gulati in his article in this paper on 19th
June2017 has given the ratio of institutional and non- institutional finance of
the rural household of 2013 in the ratio of 56%to 44%. It would not be wrong to conceive that about
50% is the component of informal financing in Indian farm economy. Pursuant to
demonetization the cash crunch of the trade stands transferred to the farmers,
implying that the farmer’s ability to sell to the middlemen dried up. This is
the mega cause of the current farmer’s fatigue. As and when that cash comes
back in circulation through the trade, normalcy in the fatigue of funds will be
restored.
All other actions of this Government have been
consistent with past practices.
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