Monday, December 2, 2013

Support price doesn't really support the needy!!

Every farmer says agriculture is synonymous with risk and uncertainty. Every Indian thinks that there is need for reforms and Green revolution similar to 1960's and 1990's. Every economist would say economic growth and agricultural growth are closely linked to each other in mixed economy.
The recent unfortunate death (suicide) of farmer in Karnataka and elsewhere in India who is caught in a debt trap are becoming common these days. The Government of India and respective state governments are still trying to find measures to stop these deaths from happening again.
Farmers face floods, drought, pests, disease, and a plethora of other natural disasters. The weather is their greatest adversary, something that can never be controlled by man. Weather can make or break a farmer’s fortune. It becomes the primary duty of Government to think of the welfare of farmers which would necessitate thinking of ways and means of reducing the risk in farming.
The state and central government gives heavy subsidies for sugar-cane production and allied activities. Most of the subsidy for irrigation, canal irrigation, drip irrigation and fertilizers has been cornered by sugar-cane farmers because they use more fertilizer per acre.
After acquiring a loan and investing all of their capital (borrowed and private) and labour into the sugar fields , a farmer of Karnataka must sit back and wait in front of the sugar factories to buy his/her produce. This shows that there is excess supply of produce or lack of crushing capacity from the factories.
Support price mechanism is another form of subsidy which should be curbed and the market needs a different mechanism to curtail the present crisis.

Some of the measures which government needs to take to curtail the trend of suicides are
1.         Promote crop insurance and ensure that claim to premium ratio is brought down.
Only 32 million of India’s 120 million farmers buy crop cover, 24 million of them under the just scrapped heavily subsidized government-backed scheme. The remaining seven million buy cover under schemes geared to be viable without government subsidy on claim settlement.
2.         Increase the number of factories which are under the co-operative management and to enforce measures for more transparency.
As per latest estimates, Karnataka state has 62 sugar factories out of which 24 run on co operative basis and 36 by private management. 2 sugar factories are under the public sector.
3.         The effect of the opening of insurance markets to private players in India is still to be seen in the Crop insurance sector. Encourage Private players to participate rather than making it stringent rules under IRDA
4.         Policy changes to focus on farmers rather than seed and fertilizer corporations.
A false perception of prosperity is being created in the minds of the cultivators that prompt them to take serious risks in terms of fertiliser-based cropping pattern.
5.         Karnataka Sugarcane (Regulation of Purchase and Supply) Act, 2013 is a good step. It should concentrate more on scientific pricing rather than playing the sentimental card. The board should ensure that competitive spirit is maintained and level playing field is provided to all entities in sugar market.

A heavily edited version of this post made it to the DNA newspaper letter section. 
Check out the same. 

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