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LATEST NEWS UPDATES | Proposed scheme to address agrarian distress is impractical and does not touch on systemic issues -Roshan Kishore

Proposed scheme to address agrarian distress is impractical and does not touch on systemic issues -Roshan Kishore

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published Published on Dec 29, 2017   modified Modified on Dec 29, 2017
-Hindustan Times

The Indian farmer needs to sell his produce with as little intermediation as possible in order to make decent profits. One of the biggest roadblocks for this to happen is lack of mass demand for the majority of farm produce

Faced with the spectre of rural anti-incumbency after the Gujarat results, the Modi government is in firefighting mode. Reportedly, a scheme is being planned to provide partial support to state governments to procure crops (except rice and wheat) for which minimum support prices (MSPs) are announced. States who do such procurement would be responsible for disposing of the procured crops. Such measures will not take us very far in addressing India’s systemic farm-distress. Here’s why.

In addition to rice and wheat, MSPs are announced for 18 more crops. These include coarse cereals, pulses, oilseeds and cotton. Fruits and vegetables are not in the MSP basket. Horticultural production now has a bigger share than food grain production in India. The lack of commensurate growth in storage infrastructure for perishables has made horticultural prices extremely volatile. When prices rise, the middlemen make money, but when they fall, it is the farmer who is ruined. The proposed scheme will do nothing to correct this fundamental asymmetry in risk sharing for more than half of India’s farm produce.

An even bigger question is what state governments will do with the procured food grain? The public distribution system (PDS) entitlements are currently limited to rice, wheat and coarse grains. Trying to sell the procured grains even on a zero-profit basis would mean competing against sellers in the market. This is not practical. If states decide to offer pulses and oilseeds at subsidised prices through their PDS, it would entail an additional financial burden on already stressed state finances.

Such a policy could work if the PDS were to be made broad-based with provisions for distribution of pulses and edible oil. In that case, states would be eligible for funds required to distribute the procured food grains under the proposed scheme.

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Hindustan Times, 28 December, 2017, http://www.hindustantimes.com/analysis/the-proposed-scheme-to-address-agrarian-distress-is-impractical-and-does-not-touch-on-systemic-issues/story-lIFWN24UcRCBTFp60


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