Long Read: Time For Special MSP Treatment For Punjab To Stop
The government must move towards a more standardised and fair MSP procurement system that keeps the interests of other wheat and paddy producing states.
In the early days of the protest, there were reasons to take the farmers sitting there seriously (for the sake of argument, we shall assume they are indeed farmers for the length of this piece), and the government had indeed erred in their communication of the laws.
Today, the protests come across as nothing but a joke and the protesting site at the Singhu border has become a carnival setting with foot massagers, pizza ovens, libraries, and langars. In the garb of protest, the farmers have set up a mini-village on public property of strategic and national importance.
However, after losing a good bargain on 9 December, one that still is available to them today (12 December), the farmers are now threatening to seal off Delhi’s borders one by one, including those on the Delhi-Agra and Delhi-Jaipur highways, hindering the railway traffic, and even causing another Bharat Bandh on 14 December.
More than the reforms, the protests have become a matter of ego for the leaders in the protest, a matter of privilege for the provocating communities abroad and actors back home, a matter of status-quo for the farmers, a matter of major economic inconvenience for the people in the region, and a matter of law and order for the administration.
The government needs to step in now and demonstrate it means business when it comes to law and order.
There is nothing heroic about old women using national highways as their makeshift kitchens, nothing heroic about tents coming up with foot massagers and pizza places, and nothing heroic about brain-dead actors using the protest to fuel their filmy agendas.
This is anarchy sugarcoated in community charity, the cost of which is being paid by the common citizen. Thus, the government needs to remind the farmers of Punjab who the boss is.
The ‘annadata’ rhetoric designed to Punjab’s farmers must be squashed, to begin with. The protesters do not represent the farmers of India, but farmers of one state alone.
MSP (Minimum Support Price) is not applicable to all farmers of India, but merely 6 per cent of them. Six per cent!
If one goes by the agricultural output of FY20, it was worth Rs. 40 lakh crore, of which the total value of MSP operations was at Rs. 2.5 lakh crore. Fruits and vegetables, livestock, dairy products have no MSP support.
The origins of this ‘annadata’ rhetoric lie in the green revolution nostalgia of the 1960s that propelled India to overcome the problem of food security, and the status-quo it resulted in.
Punjab’s Economic Survey of 2019-20 affirms the origin and the resulting status-quo and also indicates why is it so important for the farmers in Punjab to cultivate in an MSP-only regime.
In 2017-18, Punjab’s share of the total national area of cultivation under wheat was less than 12 per cent. Yet, it registered 18 per cent of the country’s total wheat production. For rice, the state’s share was 12 per cent of the total production in India, while the share in the national area under cultivation was merely 7 per cent.
The cropping pattern of the state affirms the dependence of the farmers on MSPs, given the push wheat and paddy cultivation have received. In terms of percentage share of cropped area in Punjab, paddy went from 4.8 per cent in 1960-61 to 6.9 per cent in 1970-71 to 31.3 per cent in 2000-01 to 39.6 per cent in 2018-19.
For wheat, the percentage went from 27.3 per cent in 1960-61 to 44.9 per cent in 2018-19.
However, Maize went from 6.9 per cent in 1960-61 to 1.4 per cent in 2018-19. Bajra went from 2.69 per cent in 1960-61 to almost nothing today. Oilseeds went from 3.9 per cent in 1960-61 to 0.5 per cent today. Pulses went from 19.1 per cent in 1960-61 to 0.4 per cent in 2018-19.
Of the 7,830,000 hectares of cultivable land available in Punjab, 3,520,000 hectares is under wheat, and 3,103,000 hectares is under rice. As much as 75 per cent of the crop production in the state is made up of wheat and rice alone (2018-19).
Thanks to free power and water in the state, the crop-wise yield (in kgs/hectare) for rice went from 1,009 in 1960-61 to 3,229 in 1990-91 to 4,132 in 2018-19. For the same years, wheat went from 1,244 to 3,715 to 5,188. Due to the fertile region, a thriving irrigation network, the state’s crop-wise yields (kgs/hectare) are 4,733 against 2,661 for all India in cereals, are 905 against 841 for all India in pulses, and 1,467 against 1,270 against all India in oilseeds.
However, there is also concern pertaining to the inputs that make these high yields possible. In fertilizers, the ideal ratio for the use of Nitrogen, Phosphorus, and Potassium is 4:2:1.
In 2017-18, the ratio at all-India level was 6.1:2.4:1, but in the same year, for Punjab, it was 28:8.6:9.1. In 1990-91, it was 58.5:21.9:1. Hail subsidies.
The subsidy story does not stop here. Across the last 10 years, close to 30 per cent of the electricity generated in the state has gone to agriculture. At a national level, this share is closer to 20 per cent. The taxes generated from APMC mandis have been instrumental in sponsoring free power.
The procurement justifies the means. In 2017-18, as much as 90 per cent of the produced paddy crop was procured and 66.4 per cent of the wheat crop was procured.
Punjab’s share in national wheat and rice production is 18 and 12 per cent respectively, but in the central pool that year, Punjab’s wheat share stood at 38 per cent and rice’s share was 31 per cent.
Of the 310.6 lakh tonnes of paddy procured in 2019-20, as many as 202.5 lakh tonnes were from Punjab, and of the 389.5 lakh tonnes of wheat, around 127 lakh tonnes were from the state itself.
Thus, as the farmers go on with the protests, the procurement from the state has registered a significant increase this year.
In 2018-19, as much as 35.5 per cent of wheat procurement and 25.5 per cent of the rice procurement in the country was from Punjab.
Wheat procurement went from 55 per cent in 1980-81 to 62.4 per cent in 2010-11 to 94.6 per cent in 2018-19.
The paddy procurement is around 90 per cent for 2018-19, from 81 per cent in 2010-11. The paddy procurement in the state is so good that paddy from Uttar Pradesh and Bihar is smuggled in the state to be sold at the MSP.
The question of status-quo comes in here. The country is now producing far more wheat and paddy than it needs.
For instance, from 534.29 lakh tonnes of wheat and rice in June 2016, the Food Corporation of India’s (FCI) holding went to 680.25 lakh tonnes in June 2018, and in June 2020, to 832.69 lakh tonnes.
In September 2020, it came down to 700 lakh tonnes, given a free supply of wheat and rice was promised under the Pradhan Mantri Garib Kalyan Yojana due to Covid-19.
What happens when the need to supply free food grains runs out?
However, while our wheat and paddy godowns, much like the bank lockers of Punjab farmers, overflow, India is paying high import bills for pulses and oilseeds.
In 2017-18 alone, India’s import of pulses was valued at Rs. 28,500 crore and of oilseeds at Rs. 394 crore. Imagine if the farmers in Punjab tried diluting their obsession with wheat and paddy?
Since the green revolution, and now for almost six decades, the FCI and the Central government has been focussed on massive procurement. However, those days are behind us.
What the protesters and administration of Punjab want are three things.
One, for the MSP, to continue (which it is) for them to be able to continuously grow wheat and rice. Two, for the procurement of rice and wheat, to be focussed on Punjab, even if it means overflowing FCI godowns, and rotting grains as long as the MSP is ensured.
Three, for the procurement, to only happen through mandis, which ensures the state has enough money from the tax levied in transactions to sponsor the subsidies that fuel the cultivation of paddy and wheat.
Hence, any mention of the private sector, contracted farming, private mandis and transactions is as frightening for these protesters as an election result is for Rahul Gandhi.
All in all, Punjab’s dependence on wheat and paddy is no different than the Indian Cricket Team of the 90s on Sachin Tendulkar to chase down 250+ scores.
In 2019-20’s Rabi season, of the total 341.32 lakh tonnes of wheat procured, 129.12 came from Punjab, while only 37 lakh tonnes came from Uttar Pradesh and 67.25 lakh tonnes from Madhya Pradesh.
In 2020-21, due to Covid-19, of the total 389.92 lakh tonnes wheat procured, 129.42 lakh tonnes came from Madhya Pradesh and 127.14 lakh tonnes came from Punjab.
From UP, it was only 35.77 lakh tonnes.
In 2019-20’s Kharif season, of the total 519.97 lakh tonnes of rice procured, 108.76 lakh tonnes came from Punjab.
So, what happens if Punjab is unable to grow wheat and paddy five, 10, or 20 years from now?
Turns out, the conventional Punjabi farmer has failed to see the water bubble they are living in. The assured procurements and MSPs have resulted in a disastrous impact on the groundwater levels.
In Punjab, groundwater extraction for irrigation alone exceeds 90 per cent, more than any other state in India. Barring Rajasthan, the most over-exploited blocks in terms of groundwater are located in Punjab.
Of the 138 assessed blocks in Punjab, stated in the Dynamic Groundwater Resources Assessment of India – 2017 report, 109 are over-exploited, two as critical, five as semi-critical, and only 22 as safe.
The total annual groundwater recharge of the state was assessed as 23.93 bcm (billion cubic metres), annual extractable groundwater resource as 21.59 bcm.
Still, the annual groundwater extraction was at 35.78 bcm, putting the extraction at 166 per cent, highest for any state in India. Even for Rajasthan, it’s less than 140 per cent.
If one goes by the Dynamic Groundwater Resources Assessment of India – 2017, of the 35.78 bcm groundwater extracted, 34.56 bcm goes to irrigation.
For domestic use, it’s merely 1.01 bcm.
Turns out, the groundwater used by Punjab for irrigation is almost equal to that used by Gujarat, Haryana, and Rajasthan, and merely 5 bcm less than what Uttar Pradesh, a state 4.9 times bigger than Punjab, uses.
All this water goes to cultivating MSP-assured wheat and paddy.
The problem, however, lies in the future. The net groundwater availability in 2025 for Punjab is not even enough to compensate for its domestic requirements.
Other states suffering from the same issue include Delhi, Himachal Pradesh, and Rajasthan.
Thus, Punjab’s obsession with MSP-assured wheat and paddy will not only become impossible in the next 10 or 15 years (being optimistic) but make water-intensive cultivation almost impossible too, threatening the livelihood of countless farmers.
So, even if the protesters get the government to bend on repealing the three farm laws and going on to live in their MSP cocoon, they are soon going to run out of wheat and paddy cultivation options.
It’s a certainty.
So, what can the government do?
The NDA government, minus the Shiromani Akali Dal (SAD), is not politically invested in the state, so it has all the incentive to think about the larger picture.
BJP’s vote share in the 2012 and 2017 Punjab state elections was a mere 7.2 and 5.4 per cent respectively. In the 2014 and 2019 national elections, it was only 8.8 and 9.7 per cent. The BJP can think beyond the state elections of 2022 for now, for there’s no way it can win it.
The government can make the protesters two deals. One, continue with the amendments that were offered on 9 December, which include transaction tax and registration of private mandis, necessary for the state to secure revenues for power subsidies for wheat and paddy.
This is a good bargain for the protesters, even though it shall amount to troubles stated above in the long run. The Centre, however, should start decreasing its procurements for the cost of these amendments in a gradual fashion.
The silver lining here is that the farmers of Punjab may wake up to the groundwater realities and diminishing MSP returns and start cultivating other crops.
Two, it can agree to repeal the farm laws on the condition that the Centre procurement shall no longer be inclined towards one state, and instead be linked to a state benchmark like number of landholdings, the area under cultivation, quality of produce, etc.
Even if Punjab’s MSP procurement comes down by 15-20 per cent, it shall be a huge dent to the state's coffers.
This will dent Punjab’s wheat and paddy fortunes, making it an unthinkable deal for the protesters. The proportional procurement must start from 2021-22 itself, while the BJP-governed states introduce the same three laws through the state Assembly.
Let the private sector thrive where the ease of business is ensured.
The private sector would have been a blessing for Punjab, eager for both tech investments and employment. However, now that the state has allowed its long-term agriculture interests to be controlled by a few, led by the Congress Chief Minister himself, it’s time for the Modi government to bite the bullet and end the special MSP treatment for Punjab.
Ending the special MSP treatment for Punjab will also be critical in solving the problem of farmer income disparity that exists. While an average Indian farming household earns Rs. 77,124 each year, the one in Punjab earns close to Rs. 217,000.
For Uttar Pradesh and Madhya Pradesh, the average annual income for a farming household is Rs. 58,944 and Rs. 74,508, below the national average, even though both are major wheat producers.
All farmers are equal, and it’s time the government’s MSP procurement factors that in and ends the special treatment for the state with immediate effect if the protesters refuse to end the senseless blockade.
Punjab, which has pegged its fortunes to merely wheat and paddy, must realise it is not in a position to bargain for long.
Punjab’s annadata is neither selfless nor godly, but one that thrives on the FCI buyout sponsored by the taxpayers, free power and groundwater that has an environmental cost to be paid by the future generations, and the generosity of the Centre it has taken for granted for decades now.
Punjab needs to overcome its Green Revolution hangover now. It’s 2020, not 1960.
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