Agri sector needs course correction

From Mandsaur to Mumbai to more recently in Delhi, agitating farmers have repeatedly knocked on the doors of the government, pressing for their demands, including waiving of loans. These protests, silent marches, farmers spilling milk and dumping onions on roads cannot be sidelined as ‘political drama’ anymore. It might be projected as a mob, but it’s most definitely a movement. A movement asking the government to take notice of the agrarian crisis that the nation is reeling under.

Uttar Pradesh, Maharashtra, Karnataka, Punjab and most recently Rajasthan, Chhattisgarh and Madhya Pradesh have rolled out their versions of farm loan waivers, in all amounting to Rs 1,82,802 crore. As per agricultural economists, that amount is projected to increase manifold in 2019 as general elections approach.

Although credit to the farm sector has been increasing, loan waivers are a temporary solution to a wider problem that has been plaguing the nation’s agrarian sector. To understand why loan waivers are not a permanent solution, it is imperative to grasp the magnitude of the malaise in agriculture in India today.

The agriculture sector in India is suffering from instability in incomes, lack of irrigation, high risks involved in production, market and prices and climate change. Due to these factors, a majority of the farmers end up taking loans from formal or informal sources or both, either for agricultural purpose or to make ends meet.

The aim of loan waivers is to lessen the farmers’ debt burden. However, loan waivers only cover a small fraction of the farmers — only those who borrowed from formal sources. Also, these loan waiver schemes do not count farmers who invested from their savings. Such farmers are also equally vulnerable to weather and market risks.

To save farmers from the grim situation, there is a dire need to overhaul the farm sector towards sustainable solutions through the benefits of technology, trade and training on advanced agricultural practices. Prof M S Swaminathan proposed the implementation of the Minimum Support Price (MSP). He advocated that farmers be given an MSP that is 1.5 times the production cost. However, the concept of MSP is contested as not being economically viable.

More than 80% of farmers in India who have borrowed loans are small and marginal farmers. They make distress sales after harvest because they have to repay their loans. Also, they are also the consumers of much of their own produce. The MSP doesn’t help them and they remain ill-equipped to support themselves. Hence, all farmers cannot be categorised in one group for MSP to solve the issue. One size does not fit all.

The MSP is definitely a great idea but farmers need to be treated individually and not collectively. Policymakers must look at a formula that makes farmers’ income stable and secure and strikes the right balance between production costs and profits earned.

Production costs can be reduced by introducing subsidised agricultural inputs and agricultural equipment. The tools will be of no help if you lack in knowledge. There is a dire need to sensitise and train farmers across the nation about the kind of crops they should grow as per the climate, ill-effects of climate change and to practise intra-crop adaptation. Increased knowledge and training will result in better implementation and yield better results.

Agriculture in India is highly dependent on monsoon. Farmers face losses when the rains fail or are untimely. Hence, rather than spending on loan waivers, government should invest in better forms of irrigation. A better irrigation investment will protect the crops from the vagaries of weather.

Increased adoption of kisan mandis and e-mandis at district levels will help remove the middlemen, whose existence is the farmer’s bane. The long chain of middlemen has become the monopoly buyers of agricultural produce. This enables them to take advantage of rising prices, the spurt in demand, etc. They do not pass on the benefits to the farmers. By eliminating middlemen and increasing access to mandis, farmers can get a better deal based on the demand for their crops. They can directly sell to wholesale and retail consumers.

There is no denying that loan waiver is the need of the hour, but it’s a temporary measure, short-term relief. Following the first spell of loan waivers in 2008, there is no evidence that it has helped in reduction of agrarian distress. The concept of ‘evergreen revolution’, proposed by Swaminathan, constitutes a healthy amalgamation of integrated pest control, nutrient supply, training for farmers and scientific water management.

In the long run, the focus should be on strengthening the repayment capacity of the farmers by improving their income. Structural reforms in Indian agriculture to empower the farmer is the need of the hour. It’s imperative that we quell the vicious cycle of loans and make our agriculture sustainable.

(The writer is with the Pleasin Strides Foundation)