Samachar Manthan | Civilsdaily.com

Mains issue Why are farmers distressed across India? Note4students Mains Paper 3: Agriculture | Transport & marketing of agricultural produce & issues & related constraints From UPSC perspective, the following things are important: Prelims level: APMC Act, Economic survey Mains level: Rural distress and ways to resolve it Context 2017 a year of rural distress 1. The year 2017 was marked by several farmers’ protests nationwide, with a few turning violent 2. The protests highlighted the plight of farmers and the extent of agrarian distress Why the crisis? (a) Long term causes 1.Decline in land-holding 1. The main reason for farm crises is the rising pressure of population on farming and land assets 2. Government data show the average farm size in India is small, at 1.15 hectare 3. The small and marginal land holdings (less than 2 hectares) account for 72% of land holdings 4. This predominance of small operational holdings is a major limitation to reaping the benefits of economies of scale. 2.Lack of irrigation facilities Majority of farming (65 per cent) is rain-dependent. Volatile rainfall patterns lead to lower farm income 3.Low yield Crop production is always at risk because of pests, diseases, shortage of inputs like seeds and irrigation, which could result in low productivity and declining yield 4.Supply-chain inefficiencies Inefficient supply chain management equally contributes to farm distress. In India, if farmers are to sell their produce, they have two options. First is to sell directly to the government at the Minimum Support Price (MSP) in government outlets such as Food Corporation of India (FCI). MSP is the minimum price for a product established by the government and supported by payments to producers in the event of the market price falling below the specified minimum. The second option is to take their produce to the nearby government-designated mandi (market)where in front of state officers they can auction produce to the brokers. Mandis are the markets in smaller towns and cities to which farmers from nearby villages bring their agricultural produce to sell. There are around 7700 government designated mandis spread across India. Typically, MSP is higher than the market price, and one would assume that farmers gain every time the government announces the MSP. However, farmers are seldom able to sell their produce at the MSP. Every village does not have government outlets. FCI has a minimum presence in other major rice and wheat producing states like Bihar, West Bengal, Assam, and Orissa. 5.Lack of formal sources of credit The predominance of informal sources of credit, mainly through moneylenders, and lack of capital for short term and long term loans have resulted in the absence of stable incomes and profits.

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Samachar Manthan | Civilsdaily.com (b) Immediate causes Crashing prices: Food prices have been showing a sharp decline. The overall food inflation, based on consumer price index (CPI), has come down from 6% in December 2015 to 2% in November 2016. The corresponding decline in case of pulses is from a high of 46% to 0.2%—reflecting a much faster decline in the price of pulses. Due to this sharp downward movement in food prices, the farmers have been getting very poor return on their harvests. There are 2 reasons behind crash in prices MSP: Tepid growth in minimum support prices (MSP) of different agricultural products since the National Democratic Alliance (NDA) government took over was one of the major reasons for the current farm distress. While the average annual growth [in MSP] between agriculture year 2009 and 2013 was 19.3 per cent, it was only 3.6 per cent between 2014 and 2017,” said a research report published by rating agency Crisil. It added that limited support from the floor price has further depressed market prices. The falling profitability would continue to distress farmers. Demonetisation: Demonetisation announced by the Central Government in November 2016 had drastic impact on farm inputs and also the prices of agriculture produce in the Mandis. The rural economy, being largely cash driven, suffered and farm input during the Rabi season of 2016 declined due to demonetisation. Later, farmers also witnessed the crashing prices when they took their harvest to the Mandis. Road ahead 1. Given that India has the largest number of poor and malnourished people in the world, increasing food supply is paramount to achieving inclusive growth. 2. The increase in crop area can be achieved by increasing cropping intensity. The cropping intensity of gross cropped area to net sown area has increased from 1.31 in 2001-01 to 1.37 in 2009-10. The increase in cropping intensity has been possible because of expansion in irrigation, availability of suitable crop varieties and mechanisation. However, further increase in intensity is constrained by the extent to which irrigated area can be increased. 3. Since agriculture forms the resource base for a number of agro-based industries and agro-services, agriculture should not be viewed only as farming activity but part of a wider value chain, which includes farming, wholesaling, warehousing including logistics, processing and retailing. 4. The key to offset the disadvantages of declining farm size would be higher productivity per hectare of crop area operated by the farms. 5. Diversion of farmland for non-farming purposes must be stopped. Exceptions should be made only in case of larger national interest. 6. The government also needs to take care that the various schemes for the agriculture and rural sectors get properly implemented. 7. Farm input costs need to be rationalised. The government needs to adopt the recommendations of the MS Swaminathan committee. 8. Farmers need to be incentivised to carry out certain types of cropping. Better returns can be ensured through integration with the food processing industry and Agro product exports. 9. Farm insurance scheme needs to be better implemented. In a study, farmers reported that very often the insurance money paid to them is less than the premium collected. A general belief is growing that the crop insurance scheme benefits the insurance company is more than their benefit the farmers. Steps Modi govt is planning to fix rural distress: Scheme to prevent distress sales by farmers 1. The central government, in consultation with states, proposes to launch a new price support scheme for farmers to prevent distress sales at prices below the minimum support price (MSP) 2. Under the proposed “market assurance scheme”, states will be free to procure all crops from farmers for which MSPs are announced 3. This will be except rice and wheat, which are already being procured by the centre for the public distribution system Working of the scheme 1. Under the new scheme, the centre will compensate states for any losses capped at 30% of the procurement cost 2. It will be the states’ responsibility to dispose of the procured crops

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Samachar Manthan | Civilsdaily.com 3. The proposed scheme will ensure an assured price for the farmer, mitigating the price risks faced by farmers after harvest States have discretion 1. States will take ownership of the scheme, including which crop to procure and in what quantities when wholesale prices drop below MSPs 2. State governments will be free to use the procured crops for targeted nutrition-support programmes such as midday meals for schoolchildren or sell them in the open market Why this scheme? 1. The proposed scheme comes against the backdrop of a record harvest of cereals and pulses in 2016-17, which led to wholesale prices plunging below MSPs 2. The price crash has led to protests by farmer groups across the country since June, with demands for remunerative crop prices and loan waiver

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