On 13th May Finance minister, Nirmala Sitharaman gave us details of the ‘fiscal stimulus’ and reforms that are part of the twenty lakh crore package announced by the prime minister.
Sitharaman’s third installment dealt with agriculture and included landmark reforms such as (a) diluting the Essential Commodities Act to exempt farm products; (b) bypassing the stranglehold of the Agriculture Produce Marketing Committee (APMC) so that farmers are free to sell to any buyer, and finally (c) ushering in a new national law on the marketing of Agri products, which can attract private investment in agri-infrastructure, and also provide more competition to APMCs.
The common view is that agriculture is a bright spot during this pandemic and lockdown. Since the supply of the grain has not been interrupted it’s going all well which is misleading according to the data the lockdown almost coincided with the harvesting of rabbi crops. In Punjab, Haryana and Western Uttar Pradesh, it is mostly wheat, since there is little diversification. But in Maharashtra, Madhya Pradesh, and Gujarat, in addition to wheat, there are also pulses like gram, masoor, and moong which are also grown in the Rabi season. The harvesting in these states is in the latter part of March and early April. So due to which it only benefits the wheat and the paddy no other crop did not gain much profit by also after selling in MSP.
So last year UP’s procurement was 3.7 billion tones and Bihar was just 3,000 tonnes. Punjab manages to procure 100 percent production, in Bihar; it was not 5 percent so Bihar sold its procurement outside in the free market which also rates below the market selling price. The MSP only works for the farmers of Haryana and Punjab as they get the benefits of the MSP. For the rest, it is very low income despite a bumper crop.
Take gram for instance, which is the largest pulses Rabi crop. It’s expected to be a bumper crop with a production of 11.22 million tones. Harvesting of a gram in AP, Telangana, and Karnataka starts in March, but in MP and Rajasthan, it is done in March, and arrivals continue till June. Due to this pandemic farmers have to sell their crops at a very low price be it maize, gram, rice, paddy they get low prices than the MSP for their crops after selling in the market.
The pandemic means that demand has fallen, especially from hotels, restaurants, and catering. This illustrates the main problem. If MSP is not working, then we need other ways to supplement farmer income in this pandemic season. According to several media reports many farmers have destroyed their crops of grapes cabbage tomatoes and may more due to the very low demand of crops in this amid lockdown. Even though milk is not traded in APMCs, milk processors are paying the producers about 25 percent lower price than last year.
During the lockdown, on 2 April 2020, the central government announced that there will be the warehouses for the crops which will grow in this pandemic by which farmers don’t have to spoil their crops. They have to register themselves in e-NAM. But it seems that only AP, Telangana, UP has done so far.
But the policies under this package of 20 lakh crores has been announced by the FM will surely prove beneficial for farmers. But it would be unrealistic to expect that in the next two or three years, the buyers will line up at villages to purchase their produce directly from farmers. But without demand and supply of the crops, farmers may suffer this till a very long time.
But there should be an urgent need to increase the fiscal policies for direct benefit transfer towards the benefit of the farmers who are not getting any benefits by the Msp which estimates that this will goes up to around 0.5 percent of the GDP.
So as of this Karnataka has taken a lead in providing cash assistance over and above the non-functioning MSP to its maize farmers. So all the other states should also take lead and provide the direct benefit transfer to the farmers.