MP scheme for farmers brings profit to traders

NK SINGH

The government also realises now the gravity of agrarian crisis in Madhya Pradesh. A desperate chief minister acknowledged that when he announced a slew of sops for farm sector at a State-sponsored gathering of farmers last week.

The 23 promises made by Shivraj Singh Chouhan in his 50-minute speech will cost state exchequer almost Rs. 10,000 crore, about one-third of agriculture budget. 

The massive largesse admitted a paradox of development in MP: the farmers’ lot has worsened even as yield from their field have increased.

MP’s achievements are spectacular. 

During Chouhan’s regime the state recorded agricultural growth rate of 9.7 per cent compared to national average of 3.6 per cent. It won national awards for highest food production five times in a row. For the last four years, farm production grew at average rate of 18 per cent.

Writes respected financial journalist TN Ninan: “Among all the current statistics on the economy, the truly jaw-dropping one is MP’s agricultural growth.”

Problem of plenty

Ironically, it has led to a problem of plenty. The increased supply has resulted in plummeting prices in a market that is controlled by traders.

Farmers are suffering due to un-remunerative prices, as input costs have gone up. Every five hour a farmer commits suicide in MP. According to a survey of national sample survey office, half the farmers in MP are debt ridden.

Apparently, the sector needs help. But government’s support mechanism to help distressed farmers has proved a double whammy – for farmers as well as for consumers. 

Traders have cornered benefits of subsidies and walked away richer as the government lacks political will to control profiteering. Consumers have to pay more for their morsel of food. 

MP government’s much-touted Bhavantar Bhugtan Yojna, a complex mechanism of price deficiency payments, seems to have benefitted traders more than the farmers.

Traders manipulate market

Concludes a study by agriculture economist Ashok Gulati, a former chairman of commission for agricultural costs and prices: “MP experiment in BBY shows that market prices are prone to manipulation by traders, and end up helping traders more than farmers.” 

The study revealed that in October-December 2017, 68 per cent of urad was sold without any compensation under BBY, although average sale price was 42 per cent below minimum support price. In the case of soybean, whose average sale price was 12 per cent below MSP, 82 per cent produce was sold without BBY compensation!

Apparently, the government has failed to help farmers get proper price for their produce. Traders offer low prices, taking advantage of glut in the market. And consumers pay through their nose because the middlemen jack up prices.

Take the case of onions. In 2016 MP government purchased onions at the rate of Rs 8 per kg and then auctioned most of it to wholesale dealers at the average rate of Rs 2.50. It was selling in the open market at Rs 13 a kg. Middlemen raked in 500 per cent profit.

And who paid for that profit? Last week, the state cabinet wrote off a loss of nearly Rs 100 crore on onion purchase.

Farmers lost Rs 6,534 crore due to Bhavantar

Although the state government is not willing to admit it, there are clear indications of traders forming cartels and lowering prices. 

It happened in purchase of onion as well as in other farm produce last year. 

Soybean sold between Rs 2,580 and Rs 2,380 till December last under BBY. A month later, its prices shot up by about Rs 1,000 per quintal, fetching 40 per cent profit within a month.

Prices of other farm produce too shot up by Rs 150 to Rs 500 per quintal, just a week after government stopped its BBY intervention.

“Those not registered under BBY have to suffer bigger losses because traders are suppressing the market,” concludes Gulati’s study, pointing out that “actual prices in MP are even lower than the average sales price.”

The study estimates that MP farmers suffered losses to the tune of Rs 6,534 crore during October-December purchases for five crops covered under BBY. 

Telangana gives direct susidy

MP Government’s BBY is essentially a subsidy. But the formula is too complex.

Would not it be better to transfer money directly to farmers’ accounts? Telangana recently came out with an input support scheme, giving farmers Rs 4,000 per acre for kharif and rabi seasons.

Says Gulati: “The Telangana model does not require the farmer to register his cultivated area and crops. The farmer is free to grow a crop of his choice and sell it anytime in a mandi of his choice. This model is crop-neutral, more equitable, more transparent and gives farmers the freedom to choose.” The scheme, he says, does not distort markets and is worth following.

Even as government announced the Rs 10,000 crore largesse last week, farmers in Barwani were feeding their tomatoes to livestock. In many other parts of the state they were allowing the vegetable to rot in fields as traders were offering them only Rs 2 a kg.

Onion prices too crashed last week, not for the consumers, but for farmers. 

Will the government allow traders to make another killing at the cost of farmers and consumers?

Powers That Be, my column in DB Post of 19 February 2018.

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