Farm Reform. What farmers want from policy-makers

Agriculture is not a profitable business in India. About 70 per cent of the country’s farmers are struggling to make ends meet. In 2012-13, the NSSO’s ‘Situation Assessment Survey of Agricultural Households’ showed that farmers who own 1 hectare or less of land see an average monthly income of ₹5,247, which doesn’t even suffice to meet their household expenses.

Prime Minister Modi’s ambitious target of doubling farmers’ income over the next five years looks a challenging task. The Budget has proposed various means to achieve this objective, including market-linked price to farmer, encouraging contract farming and more funding for eNAM. But these measures will yield the desired result only if supported by the States.

BusinessLine spoke to farmers and farmer representatives for their take on how farm income can be increased.

SavitriBai from Lohrapur in Bundi district of Rajasthan joined the Samriddhi Mahila Producer Company a few years back, from a women’s self-help group. She is now the Chairperson of the company and assists several self-help groups in the area in joining the producer company and getting better price for their produce. Speaking to BusinessLine , she said, “Today, farmers are forced to sell at the agent’s price. If the government fixes a price for our crops and ensures that we get that price, it will be of great help….” Asked what price she wanted for her crops, SavitriBai said, “We will be happy if we get double the cost of cultivation, only then will farming be a viable business…”

In 2006, the National Commission for Farmers (NCF) headed by Prof MS Swaminathan recommended fixing MSP for crops “at least 50 per cent more than the weighted average cost of production”. This found mention in the BJP’s election manifesto in 2014. But till now, this hasn’t been implemented. In 2015, to a PIL filed by the Consortium of Farmers Association asking for its implementation, the government replied that it cannot do it as it would distort the market.

While MSP (minimum support price) is announced for 23 crops, it is practically applied only to rice, wheat and cotton, and, even in these crops, the procurement effectively happens only in a few producer States, says a Niti Aayog report. So, it is not about just coming up with a price, but about ensuring that procurement happens at that price so that the middlemen in the trade accept it, say experts.

Asked about NCF’s MSP recommendation, Prof Swaminathan said, “Calculations were made by taking the marketable surplus available to a small farmer and his holding capacity. Most small farmers have hardly 20 to 30 quintals to sell. Their cost of production is also high due to lack of adequate irrigation. If we want the farmers to come out of the poverty trap, we have to increase their income by an attractive price as well as through crop-livestock and post harvest technology enterprises...”

Another way to ensure remunerative prices to farmers is by encouraging contract farming, the advantage being that the farmer will have a guaranteed price and also have access to quality inputs. In the recent Budget, the Finance Minister said a model law on contract farming would be prepared and States would be asked to adopt it.

The Centre’s other initiative, eNAM (electronic National Market), can also help farmers get a better price by connecting them to the consumer directly. But this initiative has been stuck because of implementation glitches. Of the 2,477 APMCs, only 250-plus have enrolled under eNAM. Even in these, only gate entry is happening electronically, the auctions are still through open outcry system.

The commodity derivatives market can be used as a tool to hedge price risks but farmers don’t go directly to the futures platform, due to various reasons. One, there is very little awareness and two, there are stringent KYC norms. Margin requirements and the large lot sizes on contracts are also deterrents. This is where Farmer Producer Companies help. By aggregating the produce of small farmers and taking positions on that stock in the futures market, they save the farmers from volatile prices.

Souvik Dhar, Project Executive of SRIJAN, an NGO, said, “We take positions in future contracts in soyabean and mustard in NCDEX for farmers in the producer company linked to us. But as prices could move in any direction, we don’t take position for all the stock we have on hand, we do it only for 50 per cent of the stock.”

NCDEX, the largest agri commodity exchange of the country, has futures contract only in a few commodities, and this is a limitation, said Dhar. “Last year, the price of urad was around ₹10,000/kg and during harvest, it came to ₹7,000/kg. We thought the price may improve slowly but now it has come down even further. Had there been a contract on this crop, it would have helped farmers …”

So, who decides which commodities are traded on the derivative exchange? It is SEBI, the commodities derivative market regulator. In September last year, the list of notified commodities was released, covering 91 goods including rice, millet, tur, urad, maize, coffee, tea, eggs and potato. But given that many of these are essential commodities, the government and the regulator are not keen to introduce them in the derivatives platform.

In Pali district of Rajasthan, a tribal area, SRIJAN worked with farmers last year and promoted tomato cultivation. In the January harvest, the yield was very good but the Garasiya Tribe farmers were not a happy lot as the price of tomato dropped to ₹1/kg. In November last year when they started cultivation, the price was ₹10/kg. Babli Bai, a tribal woman farmer from the region, says, “It felt like all our efforts went in vain…” There is need for infrastructure facilities by way of cold chain and warehouses that even small farmers could use. Today, there is very little interest for cultivation of fruits and vegetable mainly because of inadequate storage facilities. Fruit and vegetable cultivation can increase income for farmers significantly.”

CSO data shows that in 2013-14, fruits and vegetable crops generated ₹3.30 lakh worth of output per hectare on an average compared with ₹37,500 in the case of cereals and ₹29,000 in the case of pulses.

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