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LATEST NEWS UPDATES | From Plate to Plough: It's not about loan waivers -Ashok Gulati & Ranjana Roy

From Plate to Plough: It's not about loan waivers -Ashok Gulati & Ranjana Roy

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published Published on Feb 27, 2017   modified Modified on Feb 27, 2017
-The Indian Express

Indian farmers are facing multiple crises. Punjab’s case highlights their problems.

THE ANSWER TO who will form the next government in Punjab is currently sealed in the ballot boxes. Meanwhile, there are reports that the Election Commission has written to the home minister, reinforcing its demand to make electoral bribery a cognisable offence. But what about the assurances made in election manifestos which promise voters the moon before the polls? The reference here is to Punjab’s elections where all major political parties have promised to waive farmers’ loans — that means any incoming party will be under tremendous pressure to fulfill its promise. And if this is done in Punjab, very soon, it will spread like an infectious disease across other states, taking the same shape as the 2008-09 mega loan waiver of the UPA government, which finally cost the exchequer Rs 52,517 crore.

If a loan waiver was the solution to the problems of the peasantry, there should not have been any farm distress after 2008-09. But those problems still persist, simply because their answers lie somewhere else.

Take the case of Punjab. The state has been a forerunner in agriculture since the Green Revolution. Its agri-GDP registered an average annual growth of about 10 per cent during the first four years of the Green Revolution (1966-67 to 1969-70). But during the period of the current government, agri-GDP growth dropped to 1.5 per cent per annum (2007-08, 2014-15, latest available data), which is even lower than the national average of 3.2 per cent, and way below the best performer, Madhya Pradesh, whose agri-growth stood at 10.9 per cent per annum during the same period (see graph).

Notwithstanding the fact that Punjab’s per ha productivity is pretty high, the moot question is — where did Punjab go wrong, and what sort of policies can get it back to a high growth trajectory on a sustainable basis?

First, Punjab seems to have become a victim of its own success. Grain, primarily wheat and rice, occupies 80 per cent of its gross cropped area (GCA), with almost the highest productivity in India. This was great when India was suffering from food shortages; however, the situation today is completely different. After 2007-08, India emerged as a net exporter of cereals. Stocks of cereals crossed 80 million tonnes (mt) on July 1, 2012, more than double the buffer stock norms. As a result of this “abundance”, the increases given in minimum support prices (MSP) of wheat and paddy were very meagre. That brought down the profitability of these crops, and thus, the income of Punjabi farmers.

Just to give a flavour of the MSPs in India vis-a-vis some neighbouring countries, the MSP of wheat in China was $ 385/MT in 2014-15, in Pakistan $325/MT versus India’s $ 225/MT. Similarly, for Indica rice, China gave a support price of $ 440/MT against $ 320/MT for India’s common rice.

Punjab’s peasantry suffered due to bans on exports of wheat and rice (during 2007-11), stocking limits on private trade and heavy taxes and commissions imposed on purchases of wheat and rice from the state, which are as high as 14.5 per cent. In a country where one per cent tax on the purchase of jewellery creates an uproar, it is ridiculous to have a 14.5 per cent tax on basic staples like wheat and rice. The net result of this misguided policy is that the food processing industry, which can add value, feels extremely reluctant to enter Punjab — most roller-flour mills in Punjab buy their wheat from Uttar Pradesh.

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The Indian Express, 27 February, 2017, http://indianexpress.com/article/opinion/columns/election-commisssion-upa-government-agriculture-from-plate-to-plough-its-not-about-loan-waivers-4545171/


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