Cash crops are the alternative to PSM
Farmers and government both want farmers’ incomes to double in no time. Farmers believe that maintaining the Minimum Support Price (MSP) is the way to go. They would get high assured prices; they would increase production and obtain high incomes. However, the government believes that PSM leads to excess production which becomes a burden on the economy as a whole and which in turn also leads to reduced incomes of all people including farmers.
It should be noted that while the farmers ‘approach ensures them high incomes, the government approach does not help improve the farmers’ incomes. Therefore, farmers are justified in demanding legislative protection for PSM.
Let us understand the government’s point of view. The MSP distorts the production model. Farmers produce more wheat and paddy because they are assured of high prices. Increased production would lead to increased supply in the market if there were no PSM. This would lead to lower prices and farmers would reduce production of these crops the following year. In this way, the demand and supply of wheat and paddy would balance out. Prices would rise and farmers would increase their production if there was less production. Conversely, prices would fall and farmers would reduce their production if there was more production.
This self-correction mechanism does not work once the MSP is in place. Farmers continue to increase production even when we already have excess stocks as they are attracted by the high PSM. Increased production does not lead to lower prices because the MSP is fixed. The result is that this excess production must be exported at a very low price. Ultimately, the government buys these crops at a higher price and exports them at a lower price, resulting in a financial burden and this burden dissolves on everyone, including the farmers. The government is justified in removing the MSP because of this problem. However, the government has no solution as to how farmers’ incomes will be increased at that time. But solutions do exist.
The first solution is for the government to try to move farmers from low value MSP supported crops like wheat and paddy to high value added crops. Our farmers produce pepper in Kerala, silk and areca in Karnataka, mango in Maharashtra and Uttar Pradesh, palm in Andhra and pan leaves in Bihar. Farmers producing these high-value crops are generally not fussing over PSM. They are already making good income from these crops. The situation at the global level is even more dramatic. Tunisia produces olives, France produces grapes, the Netherlands produces tulip flowers, the United States produces nuts, Saudi Arabia produces dates. These countries sell these crops at a high price on the world market. The Dutch farm worker earns around 10,000 rupees a day from the production of tulip flowers.
We should be able to pay our farm workers a salary of 10,000 rupees per day if we can also produce tulip flowers. Our particular advantage is that the country has a variety of climates from Kashmir to Kanyakumari. We could produce tulip flowers in winter in the south and in summer in the north. We can supply specialized agricultural products all over the world at a very high price all year round, which France and the Netherlands cannot. Farmers would not be inclined to spend their time demanding MSP if they can make money from tulip flowers like Kerala pepper growers.
The second solution is to increase the level of money transfer already made. There are approximately three crore farming families in the country. The government could transfer Rs 1,000,000 per family per year and provide them with a minimum basic income. After doing this, the government can dismantle the MSP and also remove all subsidies given on fertilizers, electricity, water, food grains and exports. The price of wheat and paddy in the market would then decrease and farmers would produce more mango and pan leaves. Farmers would have no reason to complain as their minimum income is provided by cash transfers.
In my opinion, the central government and state governments would save around Rs 6,000,000 crore if they removed the MSP and all subsidies. Half of this amount, or 3,000,000 crore rupees, can be returned to farmers as a direct cash transfer of 1 lakh rupee per family per year. Farmers would then have no argument to make because their basic income would be assured.
The difficulty in implementing these solutions is that the research bureaucracy in the laboratories of the Indian Agricultural Research Council and our universities is simply not interested in undertaking research. Their salaries are guaranteed. They continue to receive salaries whether or not they do research. They’re making good bio data by posting cut-and-paste academic articles in fake journals. Therefore, the government should dismantle all this research bureaucracy and award research contracts to government laboratories as well as private institutions to undertake mission-based research and produce specialized crops that can generate high income in all regions. from the country.
The second difficulty in implementing this solution is that the Food Corporation and Public Distribution System bureaucracies thrive on buying, storing, transporting and selling food grains. They will not get any income if the government dismantles the MSP. Therefore, they do not allow politicians to implement these solutions.
One problem with this solution is that the production of specific crops can oscillate. There may be excess production of wheat and paddy in some years and shortages in other years. The solution is for the government to convert the Food Corporation of India into a “Food Trading Corporation”. This company is expected to enter into future contracts for the supply of various crops so that price stability is maintained within a reasonable range. This company can also import and export according to the situation. In this way, we can get a secure supply of food grains without having to pay huge unnecessary subsidies on fertilizers, electricity, water, food grains and exports.
(The author is a former professor of economics at IIM, Bangalore)
(The opinions expressed in this column are those of the author. The facts and opinions expressed here do not reflect the views of The Hans India)