Why is the bhavantar bhugtan yojana far from ideal?

For the second year in a row, farm incomes are on a steep decline. Coming after two years of back-to-back drought, the crash in farm prices has only worsened the agrarian crisis. 

Indian agriculture is on the verge of a major crisis. 

What makes the agrarian distress more appalling is that it is happening at a time when stock markets are on an upswing. While the BSE Sensex rose by a record 56 per cent in the year ending June 2017, farm incomes have plummeted sharply in the same period. According to the Central Statistics Office, rural wages for ploughing and tilling operations, which means essentially for the male workers, have come down heavily from 17.1 per cent in October 2013 to 6.6 per cent in October 2017. Each drop in wages by a percentage point is a pointer to the aggravating crisis on the farm. It negatively affects the livelihood of millions of farm workers. 

A bountiful monsoon in 2016, after two consecutive years of drought in 2014 and 2015, had resulted in a record harvest. But the high expectations from a rich harvest were belied with an unprecedented crash in prices across crops, and across spectrum. From tomato to potato, from groundnut to pulses, and from spices to cotton, the wholesale prices plunged. While some dumped potato, onion, tomato, chilli on the highways, angry farmers took to the streets. The sudden spurt in farm protests in various parts of the country reflected the growing despair.

The slump in prices has continued for the second year in a row. In October 2017, the modal price for urad dal for instance was fixed at Rs 3,000 per quintal in Madhya Pradesh against the procurement price of Rs 5,400 per quintal. Since the State had announced a price deficiency payment scheme called bhavantar, the trade was quick to take advantage, form a cartel, and bought urad for prices as low as Rs 500 to Rs 900 per quintal from farmers. 

While farmers were paid the deficit, even belatedly, the fact remains that the modal price against which Madhya Pradesh had compensated the farmers was actually a distress price. It was less than the procurement price by Rs 2,400 per quintal thereby severely hitting profitability. 

In December, reports of cold stores owners throwing the stored potatoes came from Uttar Pradesh, Punjab and Madhya Pradesh. Farmers had kept potato in the cold stores hoping for better prices later but with the storage cost being higher than the market price, they were reluctant to lift the stored stocks. And now, with the new potato crop ready for harvest, once again potato growers will face the chill as the prices are expected to tumble. 

Meanwhile, prices of tur dal have fallen by about 20 per cent below the support price. In Chhattisgarh, prices of tomatoes in January have already come down with the arrival of new crop from Karnataka. 

According to news reports, prices of onion, jeera, coriander are expected to come down as the season progresses. Onion, potato, mustard and pulses prices are also expected to fall. Milk prices too are low. Imagine the plight of a farmer who puts in his best for three to four months to produce a bumper crop and when the time comes for better returns commensuration with his production, he finds the wholesale prices crashing. The deadly blow he receives is not easy to fathom especially by a class of economists and policymakers whose monthly salaries are assured.

Under such a depressing farm scenario, anyone would expect the government to step in and come out with a mechanism to assure farmers of a profitable price. But what is being proposed is more of the same. In the name of efficient markets, the proposal is to extend the reach of eNAM (electronic National Agricultural Market) platform. From the existing 585 eNAM market yards, the proposal I hear is to expand its reach to 1,000 markets by 2022. But since the eNAM also operates on the principle of providing farmers with a modal price, which is invariably lower than the support price, it ends up adding on to farmer’s distress.

Finance Minister Arun Jaitley has already acknowledged that eNAM is a step towards building Spot Markets. The efforts to dismantle APMC regulated markets, and the policy shift towards building terminal markets is aimed at laying out the necessary infrastructure to privatise agricultural markets. The bhavantar scheme too is a step in the same direction with the underlying objective to help commodity trading. The trade buys the produce from farmers at a lower price, and the difference with the modal price is paid to the farmer from taxpayers’ money.  

A model contract farming law is on the anvil allowing leasing and pooling of farm land with room for external participation, meaning companies. In other words, Niti Aayog is getting ready with a blueprint for ushering corporate agriculture as the way to address the acute agrarian distress. World over the experience has been that corporate agriculture has only displaced small farmers thereby leading to further marginalisation of farming.  

The author is an agricultural policy analyst. Views expressed are personal