Ruining the Tillers

Bibek Sen

Ever since the Bharatiya Janata Party (BJP)-led NDA government has come to power there is a systematic attack on the existing Agricultural policy. Since 2011 the academia close to the RSS ideology has been trying to put the blame on Minimum Support Price (MSP) as a policy and different subsidies following some simple models of microeconomics. They found an easy shooting target in the Arhtiyas, the middlemen in agriculture who indeed control a part of the trade through their money, knowledge, information and connections. For one thing the agricultural price and class relation vis-a-vis the urban sector is much more complex than it looks from a purely academic point of view.

It is a fact that a price floor distorts market. It in one hand sets a social demand of the commodity which is lower than what it would have been, had free market been allowed to reign. On the supply side more would always be produced than equilibrium quantity, scarce production inputs would be wastefully used as free market price isn't allowed to determine the social choice, a nonmarket higher price allocates resources in wrong manner and creates glut.

But this kind of pure economic reasoning is flawed. It fails to treat a major component of production, Labour, as a human quality.

It is an open secret that "Though the government fixes the minimum support price or MSP for 22 crops, this programme has been effective only for wheat and rice" and "of the total rice quantity produced in Punjab in 2019-'20, 91.98% was procured; in Telangana, it was 97.07% and in Haryana 89.19%. In contrast, in Gujarat, only 0.72% of total rice production by the state's farmers was procured. In Karnataka, it was 1.24% and Assam 3.56%... for wheat in 2019-'20, in Haryana 77.19% of the wheat it produced was procured; in Punjab, it was 70.9% and Madhya Pradesh 36.18%. Bihar, on the other hand, procured only 0.04%, Gujarat 0.15% and Uttarakhand 4.19%. There was no wheat procurement in several states such as Assam, Chhattisgarh and Jharkhand."

Certainly the state procurement programme doesn't cover the total production of two or three crops, The Food Corporation of India (FCI) informed "Just over 1/3rd of Rice & Wheat produced in the country is procured by FCI".

The procurement almost as a rule starts late, when the crop has already been harvested and poor farming household is under obligation to repay several institutional and private debts. The procurement is always less than the target and region wise, resulting flooding of one state market by another state which creates a dumping like situation and price anomalies in the state with lesser procurement.

From this well known fact it could hardly be said that the market price of crops, rice and wheat are staked very high.

According to the National Institution for Transforming India ( NITI Ayog) , MSP is the only culprit is without much basis. NITI Ayog was set up to destroy the internationally renowned Planning Commission which strongly endorsed the MSP and allied policies reflecting the State's welfarist commitment. The NITI Ayog is out and out anti-farmer.

Contextually, energy expert Rahul Tongia has given a simple calculation and reached the conclusion that "the true cost of electricity supply is at least Rs. 6/kWh (an estimate, varying among states) which means about Rs. 15 of electricity is used per kg of rice for regions with deep water tables."Certainly the MSP of rice doesn't cover the energy cost of cultivation.

And if one adds other social costs like fertiliser subsidies, cost of procurement, storage, rails and roads for transportation, administrative expenses, credit and insurance subsidies the cost of a kilogram of coarse rice would be something in the range of Rs 38-44. An addition of Rs 20-26. This is a cost the society is bearing at present, it doesn't enter into the price mechanism at all. Can a free market mechanism remove it?

About 87% of India's farmland owners have less than 2 ha of land, 70% have below 1 ha, the national average is 1.2 ha and the median is less. The lowest 70% have a family income of Rs 60,000 or less of which a large share comes from labour income or animal husbandry. Far from being the happy villagers in idyllic villages they are already destitutes who survive on odd jobs available in the villages and nearby small towns, this section moves into other areas and cities as migrant workers in search of jobs as villages can't provide them even 200 days full time work despite the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). Any further fall of agricultural prices would drive them to utter penury and starvation.

On the other hand if one looks into the consumption pattern one would see 44.6% of personal income is incurred in food and beverages in India. It is 34.8% in the urban areas and 54.7% in the rural. The poorest spend 53.5% on food and beverages, the poor do 34.5%, the middle class 21.5% and the rich about 11%. The poor and poorest in India consume 91% of national production of food and beverages. Any further increase in price of food grains would lower their standard of living further. The income effect of lower price of cereals should be seen against the lower income resulting from such price fall too. Here one thing should be remembered, average annual per capita food grains consumption in India is 200 kg and 87% of the poorer farmers we were talking above consume 1.6-1.78 times more than the average which is also much higher than the world average. Their consumption of protein, vegetables, fat or fruits are negligible, any increase in cereal price or fall of income would increase consumption behind cereals and decrease other vital ingredients of food further, causing havoc health crisis.

Labour component of crop production tales the tale of actual sufferers in this low income generation sector.

In the non-mechanised farming of one acre of land paddy cultivation involves human labour in the range of 30-37% of the total cost. Rs3721 to Rs5196 depending upon intensity of the cultivation. India Wage Report 2018 reveals that the rural wages are low in comparison with what the urban workers earn, rural mean wage was Rs175 only and median wage was further below at Rs129. Then caste and gender factors too keep the market of agricultural labourers in a vulnerable situation.

The market for crops has completely failed to safeguard the interest of the workers and the small landowner-worker identities. This has come from a whole range of reasons… high yielding crops and other related production revolutions, growth of population and supply of cheap labour, capitalist urban sectors' failure to absorb excess labourers from agriculture, choice manipulation among the consumers through modern lifestyle and advertisements of happy capitalism.

Indian agriculture has travelled a long way from its low yield days. From food scarcity period it has come to a take off stage where despite a higher consumption of cereals the country has entered into a phase of surplus production. It has further possibilities, the yield is still behind China or Australia, the investment in agriculture is still lower than all developed economies, the use of fertilisers and seeds still not at par with paddy or wheat giants. There is enough scope to improve.

In the name of farm modernisation there is a trend to replace the human labour by machines. The farm lobbyists are calling for a cut in rural workers' number citing examples from the western world… the USA has just 2% of its population involved in agriculture. But they maintain a guarded silence over the fact that Indian industry and tertiory sector failed to absorb the migration from agriculture.

Capitalism has no solution of this cul-de-sac. The top heavy production relations would come down crashing. The farm labourers and marginal peasants should be ready with their picks and shovels.

Frontier
Vol. 53, No. 22-25, Nov 29 - Dec 26, 2020