Civil Service Essays –Frm Secto Woes — Can Contract Farming be a solution
Perpetual misery of the farmers – Can Contract Farming address it
Historically, farmers in the Indian subcontinent have suffered hardships due to the vagaries of climate, bumper crop leading to distress sale, poor harvest resulting in decrease of farm income, and many other factors like pest attacks, exploitation by trader cartels, usurious money-lenders, and limited access to technology. Quite disturbingly, farmers, buffeted by one or more of these factors year after year, have become disenchanted with their generations-old profession. Many have fled to cities and towns in search of alternative sources of living, a few have committed suicides, and a large section of them seethe in anger silently. The ongoing, 10-day long country-wide protest called by farmers is a manifestation of worsening agrarian distress. From sugarcane farmers of UP to the marginal tribal farmers of Maharashtra, to the garlic growers of Madhya Pradesh, farmers are angry, and deeply distraught. Such widespread and continuing anger of farmers who feed the country and earn us valuable foreign exchange is very alarming indeed.
Among the plethora of problems faced by farmers, wide fluctuation of prices of their produce, caused by excessively high yield, or pitiably low yield from the field, is the most disconcerting. Such situations are man-made, and can be checked by government intervention and collective action by the farming community.
Governments routinely mop up excess produce of items like wheat, paddy, potatoes, onion, garlic, sugarcane etc. by offering the Minimum Support Price (MSP) to the sellers. However, the MSP has widely been criticized for being too low and un-remunerative. Apart from that, MSP procurement is not done in every nook and corner of the country due to logistical problems, and government’s limited capacity to buy and store the excess produce. At least three different formulas have been proposed to calculate the MSP, but the government has chosen the lowest one. This might be fiscally prudent, but it results in large-scale impoverishment of the growers. As their incomes dip, they get sucked deep into the money-lender’s trap.
The other most common cause behind the acute chagrin among the farmers is the wild fluctuation of prices just after harvest. Of late, the prices of garlic, legumes, potatoes, and tomatoes have fallen sharply. The farmers just abandon the crop in the fields as the low price they get in the mandis don’t even cover the harvesting cost. No doubt, the governments in states and center step in to compensate the farmers for their loss due to distress sale of their produce, but the scale of assistance has been grossly inadequate. Greedy, heartless traders have formed cartels to artificially depress prices. To cite two recent instances, potato price fell to Rs.2 a kg in UP, and garlic prices fell to Rs. 1 a kg in the mandis of Madhya Pradesh.
In M.P, the state government did intervene by offering to pay the differential amount to the garlic growers. It was done under an assistance scheme named Bhavantar Bhugtan Yojana (Price Deficit Payment Scheme) that was introduced in the Kharif 2017. Regrettably, the cunning trader cartel, systemic flaws of the scheme, and its inadequate spread marred the success of the initiative. Nearly Rs.1400 crores were pumped in by the government to the scheme, but large sections of the growers couldn’t avail it. The crooked traders exploited the farmers. The problem became exacerbated because Rajasthan garlic growers also received bumper harvest.
Paradoxically, the farmers produced more and invited misery to their door step. It is SEEN that the farming communities all over the world do worse when they produce more. The plight of African coffee growers is a telling examle of the danger of over production. In different states of India, dejected farmers have thrown tomatoes, beans, milk, and even mangoes on the highways to vent their frustration at falling prices. Such scenes are very de-motivating for the farmers. In a country, where malnourishment is so rampant, there are no takers for milk, mangoes and tomatoes. Obviously, something is grievously wrong with our production, distribution and pricing policies.
What the farmers want is an assured return for their investment in their crops. This can be possible if they get a firm assurance that their produce will be promptly bought by a buyer, either government or private, at rates decided well before the crops are planted. Contract farming, despite its many flaws, gives this critical guarantee to the farmers. Contract farming robs the farmers of their freedom to choose their crop pattern, but assures them cash when they bring their harvest to the Contractor. ITC has successfully done it for Soya farmers of M.P, and expanding it to other crops in different states. Some other private sector companies like Pepsi have also started this model and developed captive farming clusters for the crop they need. However, for a vast country like India, the roll out has been patchy, and grossly inadequate. So, Contract Farming should get a policy boost from the government.
It would be pertinent to mention here that setting up of e-mandi facilities, along with substantial improvement of rural road network will also go a long way to aid the farmer to choose the time, price, and buyer of his choice. Cartels would lose their ability to exploit the farmers.
One can take a leaf out of Bill Gates Africa Aid manual in this regard. He rightly concluded that the African farmers need access to a nearby market before they decide to receive and benefit from the generous monetary, technology assistance from his Foundation. He went to great lengths to promote this crucial underlying concept during his interactions with the African government officials and other farming communities.
Improving the existing crop insurance scheme to make it more efficient can be another plank of the strategy to alleviate the suffering of the farming sector. India would do well to remember that the simmering discontent of the farmers can explode anytime. It would be extremely disruptive for the country. They are the end of the tether, and direly need concrete action on the ground, not platitudes from election platforms.