Minimum Support Prices for Agricultural Produce

[op-ed snap] From plate to plough: If you want to help farmers


Mains Paper 3: Agriculture | Issues related to direct & indirect farm subsidies & minimum support prices

From the UPSC perspective, the following things are important:

Prelims level: Rythu Bandhu scheme

Mains level: Need of an income support policy for agriculture


Farm loan waivers by state governments

  1. The talk of the season on the farm front seems to be loan waivers
  2. Farmer leaders are asking for it and those looking for power are ready to oblige
  3. Newly elected chief ministers of Madhya Pradesh, Chhattisgarh and Rajasthan have all announced loan waivers within their promised time of 10 days
  4. It may cost the state exchequers more than Rs 50,000 crore
  5. A pan-India loan waiver is likely to cost anywhere between Rs 4 and 5 lakh crore, including states that have waived farm loans since 2017

Atonement exercise

  1. It can be called as atonement for not reforming agriculture and following restrictive trade and marketing policies which, as per the OECD-ICRIER report, inflicted an implicit tax on farmers to the tune of 14 per cent of their gross farm receipts over a period of 2000-01 to 2016-17
  2. The loan waiver is only a temporary relief, that too tilted towards larger farmers
  3. It may be noted that institutional credit comprises about 64 per cent of total credit taken by all farmers, the remaining 36 per cent coming from non-institutional sources
  4. The marginal farmers with holdings of less than one hectare, who constitute 68.5 per cent of the peasantry, actually take more than half of their loans from non-institutional sources at interest rates that range from 24-36 per cent, and sometimes even higher

Income support is a better alternative

  1. The alternative is to think of a structured and stable income/investment support policy for farmers
  2. An improvised version of Telangana’s Rythu Bandhu scheme could serve as a starting point
  3. Under this scheme, the government can give Rs 10,000/ha as investment support to cultivators
  4. Payments under this scheme could be inversely related to the holding size, making it more pro-small holders
  5. Farms can be geo-tagged to ensure that only those farmers get benefits who are cultivating the land
  6. Land records will have to be upgraded to include tenants
  7. Government records still show only 10 per cent of tenancy in the country while ground realities are very different
  8. In any case, if this scheme is implemented in over 20 crore hectares of gross cropped area of the country, it will cost about Rs 2 lakh crore per annum, which could be equally distributed between the Centre and the states
  9. The Centre should also include fertiliser subsidy into this and encourage states to transfer their power subsidy through this platform based on per hectare basis
  10. Such a policy can reach the largest number of farmers, be more equitable, the least market distorting, and predictable

Way forward

  1. Striking the right balance between consumers and farmers is the need of the hour
  2. Loan waivers are poll bait. What is needed is a structured and stable income support policy
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