Make MSP legally binding, empower landless farm workers to spread all-round cheer

Imagine if a report by the Organisation for Economic Cooperation and Development (OECD) had shown that the Indian industry had in 2022 suffered a cumulative loss of Rs 14-lakh crore ($169 billion).

All newspapers without exception would have carried bold headlines on the front page, and the TV anchors would have been shrieking 24x7 calling it as clear cut case of policy paralysis. The demand for an economic stimulus package to the industry would have grown by now. Just like what happens when the stock market is down, the Finance and Industry Ministers would be seen reassuring industry captains of adequate support.

But nothing like this has happened. Not because there has been any change in the corporate media policy, but because the staggering loss that the OECD depicted was actually not for the industry but for Indian agriculture.

Agriculture being a downmarket subject for the Indian media, it is often treated as nothing more than a filler. If there is nothing important happening that day, editors normally try to fill the pages with reports on agriculture. That’s how agriculture, where 70 per cent of the rural households remain dependent on for their livelihoods, is given a short shrift.

However, this article is not about how the media treats agriculture but how the massive loss for agriculture that OECD has worked out further worsens the plight of the farming community. For several decades now, agriculture continues to be in a severe distress.

My attention was drawn to a report in Down to Earth magazine (Oct 31, 2023) entitled: ‘Indian farmers taxed $169 billion via export bans or restriction in 2022: OECD report’.

The report said that Indian farmers are being continuously taxed negatively for the past two decades, right from 2000, to be precise. The author had gone through the long report available on the web, and sieving through numerous charts and figures, brought out the salient features in a form that could be easily understood.

Following the Russia-Ukraine war, India had imposed restrictions on export of wheat, wheat atta and subsequently on non-basmati rice. In addition, there were restrictions on pulses, sugar and a hike in onion and basmati minimum export prices. This may be important for stabilising the domestic price as also to ensure food security, but at the same time ‘exacerbate the persistent challenge of low farm incomes’.

Using the framework of Producer Subsidy Equivalent (PSE) that it has developed, OECD has been annually monitoring the farm incomes (whether positive or negative) in 54 countries, including 11 of the emerging economies, examining the production support and trade-distorting policies.

As far as I can remember, since 2000-02, if we look at the chart depicting the producer support, India has figured invariably among the three or four countries where the farm incomes have been negatively taxed, but fluctuates markedly. This should put to rest the flawed economic thinking, prevalent among a section of the urban elites, who feel that agriculture receives huge subsidies in one form or the other. In reality, it is just the opposite.

To put it in the right perspective, imagine if your income had remained in the negative zone for over 20 years now, and you were in reality being heavily taxed instead of the expectation of a profitable assured income (like the government employees), it would have been remains a miracle to pull through.

Just imagine how the farming populations have survived over the years. And yet, despite the overall market support to farmers (MPS) being in the negative, agriculture production still performed well giving the country a reason to cheer by keeping annual growth in agriculture hovering between three and four per cent. In fact, during the pandemic years, agriculture remained the brightest star of the Indian economy.

Interestingly, what comes out more shockingly to the fore is that while in the other emerging economies, budgetary support to farmers (in addition to how much the consumers make up for the gross farm receipts) would offset the losses, in case of India budgetary support hasn’t been able to cover up farm losses. This is a trend that has been seen since the year 2000, for which the data is available.

Most of the budgetary support in India has been in the form of input subsidies like fertiliser, pesticides, seed, irrigation and credit, but even a direct income support of Rs 6,000 per year under PM-Kisan has not been able to neutralize the mammoth loss that farmers continue to suffer.

In other words, this vindicates my argument that India has deliberately kept agriculture impoverished. Substantiating it with another study that OECD did with the New Delhi-based ICRIER some years back, it had worked out a loss of Rs 45 lakh crore that Indian farmers had suffered in 16 years, between 2000 and 2016, meaning that on an average farmers suffered a loss of Rs 2.64 lakh crore every year during the study period. Add to this the loss of Rs 14 lakh crore in 2022 alone and it becomes clear as to how severely agriculture has been hit, year after year.

But here is a catch. The OECD works out the losses comparing with the average international prices. The fact is that international prices are already subdued with huge agricultural subsidy support that rich countries provide. Simply put, it means that the losses that have been worked out for Indian farmers would have been much more had OECD compared it with real prices. While many experts will compare Indian agriculture with China, the fact that needs to be understood is that lately China has emerged as the country that provides the highest support to agriculture.

Earlier OECD countries were the biggest providers of agricultural subsidies, a position that is now with China with a 36 per cent share of the global subsidy support.

In India, since consumer prices cannot be hiked to offset the losses that food producers are incurring, only budgetary support can meet the shortfall. That is why I think the only way to make farmers atmanirbhar is by following a two-pronged approach.

First, make Minimum Support Price (MSP) for farmers legally binding. This should be expanded to cover the 23 crops for which prices are announced every year. The MSP should serve as a benchmark price below which no trading should take place. Secondly, use PM-Kisan outlays to provide more income in the hands of the landless farm workers to cover up for the losses.

Let me reiterate that direct income support should be raised from the existing Rs 500 to Rs 5,000 per farmer per month for those farmers who do not get the benefit of a legal MSP mechanism, including the landless farmers.

This is the transformation that Indian agriculture is crying for. After all, the more the money in the hands of farmers, the more flow into the markets. In other words, more demand will be generated making the wheels of development run faster.