Farmers Protest 2.0: Are Farmers Demands Unjustified?

Context: 

This editorial is based on the news “Farmers Demands are Unjustified” which was published in the Business Standard. The Farmers are marching again towards Delhi with multiple demands, two years after their initial protests.

The Rationale of the Farmers Demands As Per the Referred Article 

• No Economic Logic: 

• • Providing a legally guaranteed price for all 23 commodities is simply impossible: The government declares MSP for 23 crops and purchases some, mainly wheat and rice, for distribution under the National Food Security Act and maintaining a buffer stock. 
  • It also intervenes in other commodities to support prices. 

• Cost to the Exchequer: 

  • The government does not have adequate resources to do this. It is hard to arrive at a cost required for providing a legal backing to the MSP. 

• Exclusion of Private Traders From the Market: 

  • A legal guarantee would mean every time prices go below the MSP, the government will have to procure because private traders will move out of the market. 
  • Logically, once private trade gets discouraged, prices will automatically fall.
  • In this scenario, the government may find itself compelled to procure all available goods to stabilise the market.

• Liquidation of the Procured Stock: 

  • The manner in which the government will liquidate the procured stock is also a matter of concern.
  • There are chances of  market disruption and potential shortages in the market.

• Crops Coverage Under MSP: 

  • Only a small proportion of agriculture and related output is covered under MSP. 
  • Even for the crops that are covered under MSP, only a small minority of farm households benefit. 
  • Some of the faster-growing commodities, such as milk and poultry, do not get support.

• Timing of the Protest is Questionable: 

• • The Lok Sabha elections can be called anytime and laws can be passed only after the next Lok Sabha is constituted. The idea clearly is to put pressure on political parties to take these demands forward.

• Price Guarantee is Not a One Stop Solution: 

  • According to the article in Business Standard, as per the data analysed for the agriculture year 2018-19, only 8.8 per cent of agricultural households sold any crop at MSP to government agencies. 
  • Further, the value of that produce was just 8 per cent of total output : crops and livestock. Thus, a price guarantee will not address the real concerns of the farm sector.

Way forward 

• Address fundamental challenges of the Farm Sector: The farmers do face vagaries of weather and markets. Unfortunately, the challenges on the weather front will only increase with changes in the climate. It is therefore necessary to address fundamental challenges. 
• Cash transfers to the farmers: The government is doing cash transfers to farmers to support the farm sector. The scheme can be suitably adjusted to improve its effectiveness.
• Price stabilisation mechanism: The government can also work on a mechanism for price stabilisation, which can be used to intervene if prices go below a certain level. This will help to curb the distress selling of the farmers.
• Avoiding curbs on exports and stock holdings: This will ensure that the farmers have the flexibility to sell their produce internationally and manage their stocks effectively. 
  • This can create a more open and competitive market, allowing farmers to access a broader consumer base and potentially receive better prices for their products. 
  • It empowers farmers to make strategic decisions in times of market fluctuations or uncertainties. 
• Crop diversification: It is in the interests of farmers, particularly in Punjab and Haryana, to move away from water-intensive crops like paddy, which is depleting groundwater at an alarming pace and will soon become a crisis.

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