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LATEST NEWS UPDATES | We should not forget that prices which consumers pay are not what farmers get

We should not forget that prices which consumers pay are not what farmers get

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published Published on Aug 22, 2012   modified Modified on Aug 22, 2012
-The Times of India

Union steel minister Beni Prasad Verma's claim, that he was happy with inflation as higher food prices have helped farmers, borders on the ludicrous. A few weeks back P Chidambaram also attracted flak when he said that consumers have to pay more for sugar, rice and wheat as procurement prices are raised to benefit farmers. Linkages between high food prices and farmers' welfare is dubious because there is a substantially large and growing gap between the prices that farmers get for their produce (or farm gate prices) and the final retail food prices paid by consumers. In fact, in the case of perishable products like vegetable and fruits, farmers are lucky to get even one-fourth of the final retail prices.

And even in the case of procurement prices paid by the government the gains go mainly to the medium and large farmers in a few states from where most of the foodgrain stocks are procured. Small and marginal farmers, who have less than two hectares of land but account for four-fifth of the farm holdings, are net purchasers of food and hardly make any gains from rising procurement prices. The brunt of the burden of high food prices falls on the poor, who spend the major part of their incomes on buying food. So the truth is high food prices deliver few gains to most farmers and hurt the poorest income groups the most.

In fact ministers like Verma, who have a poor understanding of farmers' welfare, are the reason why the agricultural economy remains fettered by regulations which, while depriving farmers of just reward for their hard work, also raises food prices for consumers. The reality is that antiquated agriculture and antiquated retail practices are producing a growing gap between demand and supply for food items. While that results in food inflation for the consumer, it can hardly be seen as beneficial for farmers.

This sort of zero-sum game, where pain for the consumer is seen as translating into gain for the farmer, is dull and unimaginative. Verma's remark is characteristic of the tone-deafness of the UPA administration, which accounts for its dipping popularity despite pretensions of batting for the aam admi. An alternative approach would mean doing what it takes to improve agricultural productivity, requiring among other things opening up to FDI in retail. 

The Times of India, 22 August, 2012, http://timesofindia.indiatimes.com/home/opinion/edit-page/We-should-not-forget-that-prices-which-consumers-pay-are-not-what-farmers-get/articleshow/15589487.cms


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