Farmers Protests And The Way Forward

As the Government prepares for dialogue with the farmers today, led by the Defense Minister, Rajnath Singh and joined by the Home Minister Amit Shah and the Agri Minister, NS Tomar, the experts have yet again got into the brainstorming sessions to suggest as to what could be accepted and what will be the costs and long term trade and  market implications. With the delay in dialogues the issue has become more political now than economic, while the core of the issue leading to agitations still remains economic. The situation has become more tricky now as farmers have gained psychological advantage due to the consistency of their demands, delay in dialogue and gathering the strength by protests sites shifting to Delhi. This has also helped in broad basing their protest constituency from Punjab to Haryana to Uttar Pradesh. And also the farmers in rest of the country now lending their support and sympathies.
In the previous, two formal and three informal dialogues between the Government and the farmers, while farmers were sticking to withdrawal of the Acts as the bargaining chip, the government response was restricted to educating farmers on the benefits of the Acts. Both sides largely stuck to their grounds. While experts, industry and FPOs are in support of the legislations, the farmers lobbies are up against the same, especially in the Green Revolution area of Punjab, Haryana and Western UP. The Government stand so far has been of holding on to its conviction that these Acts are good, which was made clear by the PM’s speeches in Varanasi yesterday too. But having protested so long farmers are no longer in a mood to listen to the benefits of the legislations, but to bargain hard and go back triumphantly with some solid gains. Thus the question arises what could the Government offer without much financial costs and also without compromising anything about the Acts and the potential benefits that the Acts promise for the agro sector.
In the last two months of my intensive engagement with the farmers lobbies the two main demands have emerged, which can be addressed by;

1. MSP to be enforced on Trade:
Out of 200 million MT of wheat and rice production;
a. 50 million MT is retained by farmers for self consumption
b. 90 million MT is procured by the Govt under MSP
c. 60 million MT is handled by trade

The cost difference between MSP and traded price is generally Rs 500 for rice, Rs 250 for wheat and Rs 1,000 for others, which together makes couple of million MT only, minus cotton. Thus the average price difference works out to be approx Rs. 5000 per MT. Thus if the buying on MSP is made binding the cost difference will come to Rs 30,000 crore on trade. Given the value involved and the margins in trade this amount will hardly make much difference on market sentiments or functioning or final consumer pricing. Therefore this demand can be favourably looked at, either as Centre owning it up or leaves it to the states on the pattern of sugarcane formula of State Advisory Pricing, under FRP.

2. About MSP being made part of the legislation;
Since the Government is clear on its continuation there should not be a problem in either giving in writing of its continuation, if acceptable to farmers lobbies, or bringing out an Ordinance.

As the positive effects of three Acts start showing up results by more open trade, improved exports, increased investments, slowly the prices of trade will match or surpass MSP. While efforts of the Government in long run should be to incentivise and promote diversification from rice and wheat and also rationalise MSP, reducing the costs to the Government on MSP procurements.

Views expressed here are those of Dr. M.J. Khan, Chairman, Indian Chamber of Food and Agriculture

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