New Delhi: The farmers protest at the national capital borders demanding a repeal of three new farm laws is now in its third week. But any resolution to the deadlock between the farmers and the Narendra Modi government is still not in sight.
As tension continues to persist, ThePrint’s editor-in-chief Shekhar Gupta noted the six tough realities of farming and its economics in India, and the five dangerous myths surrounding it, in episode 640 of Cut The Clutter.
According to Gupta, these realities are: the farmer is always right; agricultural GDP is about one-fourth its impact on politics; farming is a low-yield business (about 60 per cent of Indian families depend on farming, about 45 per cent of labour depends on it, but the sector only contributes 15 per cent to the GDP); food and nutrition debate in India is outdated; state intervention and support in agriculture is inevitable; and farmers may get value for labour inputs and profits over that in MSP, but they don’t get value for their land.
“Use of land is tightly controlled by the state in our country. Farmers can’t convert their land in most of their country into industries, apartments, hotels or hospitals. For converting into each one, they have to go through the government, urban planning authorities etc,” Gupta said.
“If 60 per cent of Indians or Indian families depend on agriculture, that agriculture may be 15 per cent of India’s GDP. But each member of that family has a vote. So 60 per cent of voters in India depend on 15 per cent of GDP. So if agriculture’s contribution to national GDP is one x, its contribution to political GDP is 4x,” Gupta added.
Myths — subsidies, procurement, food security
According to Gupta, there are five major myths surrounding Indian agriculture, the prime being that farming is ‘subsidised’ in India.
“There is a belief that farming in India is subsidised. But every country in the world subsidies farming, they can’t function with them,” Gupta said.
OECD (Organisation for Economic Co-operation and Development) reports say that the champion of all subsidies is Japan where nearly 50 per cent of the value produced by its agriculture is subsidy. Japan also protects rice farmers by levying customs duties of up to 800 per cent (varies year to year). All grains have high customs duties too, said Gupta.
WTO says farming subsidies need to be within about 10 per cent. India is one of those countries that has to keep a large buffer stock for food security and has a levy to go above 10 per cent, he said.
“The question here is, if India is giving the right amount of subsidies and are they going to the right hands and put to the right use and getting the right yield for the subsidies,” Gupta said.
The second myth is that Indian farmers are too pampered, and state governments should incentivise the farmers, particularly those dependent on minimum support price (MSP).
“So state governments where farmers benefit from MSP must lean on them to change their ways. This is completely counterintuitive and unreasonable to ask for because vested interests in this bad economics of MSP and grain production… vested interests extend to the state governments,” Gupta said.
Punjab and Haryana are the biggest beneficiaries of MSP, and every state doesn’t get it.
A look at grain procurement in India reveals that only 6 per cent of the farmers in India are able to sell it on MSP, most of them in Punjab and Haryana. Nearly 43 per cent of what the government purchases under MSP is rice, 36 per cent is wheat, pulses are 12 per cent and coarse grain is 1 per cent.
According to 2019-20 figures, 85 per cent of all wheat procured in India comes from the three states of Madhya Pradesh, Punjab and Haryana. Punjab and Haryana produce 14 per cent of India’s rice but account for 38 per cent for all of India’s rice procurement. Nearly 72 per cent of Punjab’s wheat, 78 per cent of Haryana’s and 11.5 per cent of Uttar Pradesh’s is procured on MSP.
Punjab and Haryana are the only states in the country where 50 per cent of the agricultural output is grain. “FCI pays a cess to Punjab and Haryana for every tonne of grain, which comes to Rs 7,500 crore,” Gupta said.
The third myth is that India needs more and more grain to get food security which arrives from memories of food shortages. Another myth is that MSP solves the farmers’ problem.
“Problems of some farmers may be over to the extent of maintaining status quo, but problems of India’s agricultural economics will not be over because India has a unique agricultural economics that is distorted at all three levels,” Gupta said.
India’s urea is very cheap, selling at $76 a tonne. In Bangladesh, it’s $192 a tonne. It’s $254 in Pakistan, $224 in Nepal, and $312 a tonne in China.
This makes farmers buy a lot more urea, leading to nutrition disasters due to high amounts of nitrogen. It also goes to the water table, and also sets up smuggling markets.
The last myth is that if any land is moved from agriculture to something else or from grains to other crops, India’s food security will be threatened.
“India has, say, a ballpark of 200 million hectares of land available for farming which produces 297 million tonnes of food grain. China has only 156 million hectares of arable land of farming but 660 million tonnes of grains are produced,” Gupta said.
“It is important to accept the myth and then work on increasing yields and freeing up more land to grow other value-added and nutritional crops as India is short of protein and micronutrients,” he added.
According to Gupta, among solutions to these issues is subsidy delivery directly to the farmers.
The 15th Finance Commission report said India’s agricultural subsidies are roughly about Rs 2,35,000 crore, as of a couple of years back. Last year, there was a loan waiver that added another Rs 1 lakh crore. There are unstated subsidies, for example MSPs.
“Let farm products discover their price in the markets, have a lot more markets and mandis and regulate those well,” Gupta said. “All inputs should be at market prices so that farmers, instead of feeling incentivised to use urea, because it’s mostly for free, may in that case use better healthier NPK fertilizers.”
The government must not take these savings but use it for irrigation and agricultural technology and support healthier agriculture. India must also accept that drought is inevitable, he said.
“You need genuine farm insurance where 70% of India’s agriculture is insured,” Gupta added.
Watch the full episode of the CTC here: