Lessons From Mandsaur: Something Smells Wrong And Loan Waiver Is The Last Thing The Farmer Needs

In fiscal year 2016-17, wheat production rose by 5.6 per cent to reach an all-time high of 97.44 million tonnes. Rice production increased by 4.5 per cent, taking the total output to record 109.15 million tonnes. Coarse production saw a jump of 15.2 per cent to reach its highest ever production of 44.39 million tonnes. Pulses production grew by 37 per cent, crossing the 22 million tonnes target. Total food production, as a result, stood at 273.38 million tonnes - Indian agriculture’s best performance to date.

However, if the highly visible farmer protests which started early this month in parts of Maharashtra and Madhya Pradesh are any indication, then one would think that they are not just unhappy, but violently angry. In fact, looking at the violence seen on TV screens, we are forced to conclude that the farmers of the country have suddenly come under unbearable stress due to highest ever, record setting food grain production. Curiously, they were probably not so angry when two back-to-back monsoons failed and agriculture growth came crashing down. At least that’s the story we are expected to believe now.

Maharashtra Chief Minister Devendra Fadnavis threw caution to winds and announced a likely farm loan waiver worth Rs 30,000 crore - the highest ever for the state’s farmers. But farmers are still not satisfied. Pressure is also building in Madhya Pradesh, after Mandsaur violence. Chief Minister Shivraj Singh Chauhan’s achievements in agriculture sector are astounding: the sector grew at 9.7 per cent per annum during the decade long period between 2005-06 and 2014-15. The last five years have been even more spectacular when the agricultural growth rate stood at 14.2 per cent per annum. According to this Business Standard report, farmers in MP have seen their cumulative incomes rise by 32 per cent in the past one year. However, they are spilling milk and throwing vegetables on the roads. Is it because of the problem of plenty or anger, one is hard pressed to understand.

On a serious note, it is no one’s case that bountiful production must mean better incomes for farmers. The prices may crash too. Indian farmers also face all kinds of problems: lack of credit, inability to opt for higher quality seeds and technology, poor irrigation infrastructure, adverse weather conditions and so on. No one can deny all these problems but such thuggish behaviour by some ‘farmers’, especially in an year when the gods have given a generous blessing of harvest, tells us to be cautious on this score.

When such protests start to get out of hand, lesser politicians tend to give in too easily and announce new subsidies, or worse, a loan waiver. The same policies that have kept farmers poor for decades get perpetuated. No one dares take the agriculture sector out of a vicious cycle that we sustained for too long for our own good.

We need to fix structural problems.

India has total operational holdings of 138.35 million hectares. The average landholding size is 1.15 acres. Eighty-five per cent of farmers have two hectares or less. This figure will be 91 per cent by 2030. What all this proves is there is no getting out of this mess until we get more and more people out of farming. Now, imagine how many new jobs an investment worth Rs 30,000 crore (the cost of Maharashtra’s loan waiver) could’ve created? The reality is that both states are bankrupting themselves by trying to help marginal and small farmers remain on the farm, when the resources would be better used to ease the transition of small farmers away from this curse. Farmers and farm hands need to be coaxed to sell their land, learn new skills, and move into rural and urban jobs in industry and services. Farmers selling land would not only get a good price in today’s conditions, but also help create more jobs by enabling investments in rural and urban infrastructure.

Our economic strategies should be focused on getting people off farms and into industry and services in semi-urban and urban areas.

Excess subsidisation of farms also leads to uneconomic land use. It prevents them from selling their small unproductive farms and finding their fortunes elsewhere. Subsidies also result in overuse of cheap fertilisers and degradation of soil, and wastage of water (and power and diesel) in producing water-guzzling crops like sugarcane or rice.

The interests of consumers and farmers are often in conflict. In 2015, when the shortage of pulses raised prices to Rs 220 a kg, farmers made a killing. This shortage was one factor that affected the BJP’s prospects in the Bihar elections. The government then moved heaven and earth to import pulses, build stocks and increase the minimum support price for farmers to grow more pulses. Result? Prices have crashed due to the increase in production. Consumers are happy but farmers aren’t. It isn’t easy to keep the balance. Farmers are just too many to enjoy the limited pie meaningfully.

We need an exit policy for farmers, not ones which keep them in farms.

What keeps farmers stuck to unviable farming is the lack of a robust land market where they can leverage their best asset to raise capital and invest in themselves, including by giving themselves an annuity income. Land has low value when it is meant only for agriculture, but when land use laws can be changed to make farmland near cities or major infrastructure hubs available for other uses, its value soars. Currently, the premium available from changing land use goes to middlemen and crooked politicians, who then buy agricultural land cheap and then make a killing themselves when urban development zones are extended. Why not make all land multiuse, so that farmers can leverage this for their own gains and raise capital?

Also, it may be time to open up multi-brand retail for all domestically-sourced goods, including food and agri-products. If retail outlets like Wal-Mart or Reliance Fresh can enter into long-term contracts for vegetables and staples, the farmer will know the price he can get when he sows, and not when he reaps. The consumer will also benefit by cutting out the middleman’s margins. There would be no need to throw onions on the road and smash them to pulp in anger.

Or demand loan waivers.