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The Real Kisan Crisis

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Even as the Indian Meteorological Department on Wednesday forecast ‘below normal’ rainfall for the Juneto-September monsoon season and a farmer from Rajasthan committed suicide at an AAP rally in Delhi on the same day, there has been plenty of sound and fury about ‘saving’ farmers over the last few days. On Monday, aday after he spoke at the Ramlila Maidan about the government being ‘anti-farmer’, Congress vice president Rahul Gandhi lambasted a ‘suitboot ki sarkar’ that didn’t care about India’s peasantry in Parliament. Other than the politics, his plan to ‘rescue’ farmers signifies nothing.


Political maneuvering has kept everyone’s eyes focused on the Land Bill and its potential to forcibly dislocate farmers from their property. But no party has addressed the enormous challenge of how to stop farmers from fleeing their profession in droves or from committing suicide.

Like the rest of us, rural families seek sufficient income for a good quality of life. When that income is missing from farming, they find new occupations. The real concern facing India’s 56 million farmers living in its six lakh villages is that we have still not devised an efficient way to cope with the systemic risks that threaten farmer incomes.

Farm incomes are affected by weather, which impacts production. And prices, which impact sales. The marketing year 2014-15 was agriculture’s annus horribilis with a rare double whammy of bad weather and low prices. The consequent rural anger and helplessness is spilling out on city streets through participation in rallies and protests.

Freak weather since January has affected wheat, chana, lentil, maize, cotton, rapeseed, mustard and fruit crops. Even though farmers received weather alerts through text messages and community radio from government agencies, they could do little as the crops were not ready for harvest.

Crop insurance is the solution. But according to an Assocham study, 80 per cent farmers are unaware of it. Insurance companies, too, focus on farmers willing to pay a premium, or those who opt for loans with mandatory crop insurance. Even those who bought weather insurance won’t find succour this year. The insurance is done on an area basis. So, if heavy rain damages only a few acres in a village, the insurance company pays compensation for the average loss of the village instead of the individual farmer’s loss.

The government-owned Agriculture Insurance Corporation estimates that claims from unseasonal rains could touch Rs 100 crore. Compare that with American farmers, who so far have received $8.8 billion in indemnity payments for their 2014 crops. This is a 26 per cent decrease from 2013, when farmers received more than $12 billion in indemnity payments. The US federal crop insurance programme covers corn, wheat and soya bean, as well as fruits and vegetables.

Meanwhile, efforts such as the central government’s direct relief payment, relaxation in the Food Corporation of India’s (FCI) procurement specifications, or Haryana’s proposal to set up its own insurance company appear too little too late. The unseasonal rains came as a final blow after two seasons— kharif and rabi 2014—of prices dropping below cost of cultivation. From producing too little in 2012-13, we seem to have jumped to producing too much. How did that happen?

Over the last one year, farmers were mainly catering to domestic demand, which isn’t enough to absorb the entire supply. And that is the nub of the matter. India is crucially dependent on exports to keep its agriculture profitable.

In 2014, the additional outlet of export was cut off mainly because bumper crops in competing nations and the stronger dollar pushed down prices of corn, cotton, dairy, tea, oilmeals, guargum, basmati, sugar in the world markets. Import of cheaper edible oils kept a lid on domestic oilseed prices. In short, our crops couldn’t compete.

Stocks of cotton and corn procured by the government to shore up prices acted as an overhang on the market. The Rs 500 crore Price Stabilisation Fund remains for potato and onion. Since consumers and the wholesale price index (WPI) were benefitting from falling prices, public action remained subdued. Sensing the seething rural anger, political parties cashed in. For farmers, protests against the Land Bill were proxy for the deeper trauma of falling incomes.

After continuously rising for last five years, India’s farm sector and allied product exports have declined in 2014-15. And this vital but little known fact reveals the real reason behind the widespread rural distress. Farmers urgently need an efficient system to cope with the vagaries of global trade.

The real question before every political party is how can we make Indian agriculture globally competitive? The answers to that can’t be found in the Ramlila Maidan and Bhatta-Parsaul.

DISCLAIMER : Views expressed above are the author’s own.


Author: Nidhi Nath Srinivas

Nidhi Nath Srinivas is the Chief Marketing Officer, Ncdex. The views are personal.

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