May 13 Minister of Finance, 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.
The third installment of Sitharaman is treated agriculture and included landmark reforms such as (a) the dilution of the Essential Commodities Act to exempt agricultural products; (b) bypassing the right-of-way Agricultural Products Marketing Committee (APMC)) so that farmers are free to sell to any buyer, and finally (c) the introduction of a new national law on the marketing of agricultural products, which can attract private investment in agricultural infrastructure, and also offer more competition to APMC.
The common opinion is that agriculture is a beacon of hope during this pandemic and confinement. Given that the grain supply has not been interrupted, all is well, which is misleading according to the data, the lockdown almost coincided with the harvest of rabbi crops. In Punjab, Haryana and western Uttar Pradesh it is mainly wheat, as there is little diversification. But in Maharashtra, Madhya Pradesh and Gujarat, besides wheat, there are also pulses like gram, masoor and moong which are also grown during Rabi season. Harvesting in these states occurs in late March and early April. So, due to which it only benefits wheat and paddy, no other crop has made much profit after selling in MSP.
So last year UP purchases were 3.7 billion tons and Bihar was only 3,000 tons. Punjab manages to obtain 100% of the production, in Bihar; it was not 5%, so Bihar sold its purchases abroad in the open market, which is also lower than the market selling price. MSP only works for farmers in Haryana and Punjab as they enjoy the benefits of MSP. For the rest, it is a very low income despite an exceptional harvest.
Take the gram for example, which is the largest crop of Rabi pulses. A bumper crop is expected with a production of 11.22 million tonnes. The one gram harvest in AP, Telangana and Karnataka starts in March, but in MP and Rajasthan it is in March and arrivals continue until June. Due to this pandemic, farmers have to sell their crops at a very low price, whether it is maize, gram, rice, paddy, they are getting lower prices than MSP for their crops after sold in the market.
The pandemic means demand has plummeted, particularly from hotels, restaurants and catering. This illustrates the main problem. If MSP is not working, we need other ways to supplement farmers’ incomes in this pandemic season. According to several media outlets, many farmers have destroyed their grape cabbage tomato crops and perhaps more due to the very low demand for crops in this period of confinement. Even though the milk is not marketed in the APMCs, milk processors are paying producers a price that is around 25% lower than last year.
During the lockdown, on April 2, 2020, the central government announced that there will be warehouses for crops that will grow in this pandemic through which farmers will not have to spoil their crops. They must register in e-NAM. But it seems only AP, Telangana, UP have done so so far.
But the policies under this 20 lakh crore package announced by the FM will surely prove beneficial to the farmers. But it would be unrealistic to expect that in the next two or three years, buyers will line up in villages to buy their produce directly from farmers. But without demand or supply of crops, farmers can suffer for a very long time.
But there should be an urgent need to increase tax policies for the direct transfer of benefits to farmers who receive no benefit from the Msp, which estimates this will reach around 0.5% of GDP.
So, from that time, Karnataka took the initiative to provide cash assistance in addition to the non-functional MSP to its maize farmers. Thus, all other states should also take the initiative and ensure the direct transfer of benefits to farmers.