By Dr. Nilanjan Banik
India’s agriculture sector is the backbone of its economy, with a significant portion of the population engaged in farming activities. Out of the 93.09 million agricultural households in India, a staggering 82% belong to the category of small and marginal farmers, typically holding less than 2 hectares of land. Despite being the lifeblood of the nation’s food production, the average monthly income of Indian farmers hovers around a mere $125per month, starkly lower than the national average per-capita income of $200 per month.
Notably, Punjab stands out as home to the wealthiest farmers in India, with a per-capita income reaching $322 per month. However, the geographical distribution of small and marginal farmers paints a different picture, with 73% of them concentrated in the southern and eastern states. In stark contrast, Punjab and Haryana are dominated by large farmers, with only 1% of the farmers falling into the small and marginal category.
Out of 93.09 million, Punjab has approximately 1.46 million agricultural households, while Haryana boasts about 1.96 million agricultural households. Together these two states, account for only 3.67% of India’s agriculture household population. Despite their relatively small population within the agricultural landscape, these two states have been at the forefront of farmer protests.
The issue of MSP remains a contentious point in India’s agricultural discourse. While the government procures 23 essential food items from farmers through agencies like the National Agricultural Cooperative Marketing Federation of India Limited (NAFED) and the Food Corporation of India (FCI), the reality is far from ideal for small farmers. MSP often seems like a lifeline, offering a price floor above market rates. However, logistical challenges and limited procurement centres render MSP benefits inaccessible to many. Firstly, it’s important to note that not every village has access to NAFED or FCI outlets. Currently, the NAFED/FCI primarily procures rice and wheat from a limited number of states. Approximately 70% of rice procurement occurs in Punjab, Andhra Pradesh, Chhattisgarh, and Uttar Pradesh, while 80% of wheat procurement is concentrated in Punjab, Haryana, and Madhya Pradesh. Moreover, the timing of procurement dates often clashes with harvest seasons, making it impractical for small farmers to sell directly to FCI.
In India, the average agricultural yield is 2070 per hectare. Small farmers, given their landholding size, can at the most produce 24 quintals. To store their perishable stocks in cold storage, farmers are required to book a minimum quantity of 50,000 quintals for their produce, a daunting requirement for small-scale farmers. Alternatively, farmers may choose to take their produce directly to government-designated local mandi. However, with only 7,700 mandis available across 6,60,000 villages, arranging transport poses a significant challenge. Booking an entire 400 quintals capacity truck for themselves may not be financially viable or logistically feasible for individual farmers.
Consequently, many are forced to sell at local markets or to village-level aggregators, often falling prey to exploitative pricing. Thus, while MSP discussions dominate headlines, its benefits trickle down unevenly, failing to uplift the majority of small and marginal farmers.MSP always stands to make gains for the large farmers, traders, and middlemen (Arthiyas and Banias) mostly belonging to the states of Punjab and Haryana.
The concept of farm loan waivers, though seemingly beneficial, has its pitfalls. In a country where only 15% of marginal farmers have access to formal credit, loan waivers predominantly benefit those with formal loans. Evidence indicates that farm loan waivers often fail to benefit small and marginal farmers. Once a loan waiver is announced, banks typically cease lending to farmers eligible for waivers in subsequent loan cycles. As a result, many small and marginal farmers who are otherwise eligible for formal loans find themselves unable to secure financial assistance. That is, they now have to depend on loans from the informal sector. The cost differential between loan rates in the formal and informal sectors varies from 30% to 45% annually.
Additionally, loan waivers risk fostering a culture of moral hazard, incentivizing strategic defaults among otherwise solvent farmers. Evidence suggests that funds from loan waivers are often diverted towards consumption rather than productive investment, offering temporary relief rather than sustainable growth. Agricultural households that received loan waivers had no significant productivity difference when compared with the households which are not eligible. Even many big farmers from Punjab are highly indebted as they use loan amount for consumption purposes. Thus, while touted as a solution, loan waivers may inadvertently exacerbate financial disparities within the farming community
The farm unions are advocating for a daily wage of INR 700 under MGNREGA, along with a guarantee of 200 days of employment. This proposed wage is more than three times higher than the current MGNREGA wage rates in Bihar, Odisha, and Uttar Pradesh. It’s important to note that Punjab and Haryana have a significant number of migrant workers. If the MGNREGA wage is increased threefold, it may incentivize these migrant workers to seek employment in their native states, potentially leading to a labour shortage in Punjab and Haryana’s farming sectors. On the flip side there is also a direct correlation between market wage rates for unskilled workers and MGNREGA wage rates. A higher MGNREGA wage rate can proved to inflationary with a negative implication of labour welfare.
The debate surrounding India’s involvement in the WTO underscores broader tensions within the agricultural sector. Commitments to reduce food subsidies, coupled with proposed reforms in agricultural produce market committees (APMCs), raise concerns about the corporatization of agriculture. It is costly to procure and distribute food grains and further reforms would entail corporate participation. While proponents argue that privatization could streamline procurement and distribution processes, critics fear it could deepen the grip of corporate interests, further marginalizing small-scale farmers. Furthermore, withdrawing from regional trading agreements and insulating the farm sector may render it vulnerable to price volatility, with direct implications for domestic food price inflation.
Ultimately, the demands of agitating farmers encapsulate broader systemic inequities within India’s farming landscape. While addressing these demands is crucial, sustainable solutions must prioritize the empowerment of small and marginal farmers, ensuring their voices are heard and their livelihoods safeguarded in the evolving agricultural paradigm. (IPA Service)
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