Farm Payments and the PDS conundrum

2020/11 03 21:11

The protests in opposition to the Farm Payments have largely been seen as a farmers’ difficulty, particularly within the States that fashioned the idea of the unique Inexperienced Revolution: Punjab, Haryana and western Uttar Pradesh. But when, as is extensively feared, this impacts the procurement system, it might nicely affect the supply of foodgrains within the public distribution system, at a time when India ranks 94 out of 107 international locations within the World Starvation Index. The implications of this harm would lengthen far past the agricultural sector and engulf our cities as nicely.

With a rising variety of city households shifting away from a dependence on the PDS, there’s a tendency to dismiss the centrality of the general public distribution of foodgrains in our cities. However for individuals who are susceptible, ration wheat and rice proceed to type an vital a part of the family finances. In occasions of disaster, notably the lack of jobs and revenue, the dependence of the poorer households on the PDS might be acute.

The PDS additionally continues to be a essential city coverage instrument. As just lately because the lockdown following the pandemic, the federal government offered 5 kg of rice and wheat freed from price to every holder of a ration card within the PDS. This was no burden on the federal government’s funds because it used grain that was already procured. In 1 / 4 when the financial system had contracted to simply round three-fourths its dimension, the federal government would have struggled to seek out the assets to purchase the grain within the open market. And, but, such an open market is exactly what the federal government has ensured with its three Farm Payments.

The three Payments are designed to dismantle the idea of agricultural coverage created throughout the Inexperienced Revolution. Following the near-famine circumstances within the mid-1960s, the Inexperienced Revolution technique was constructed round decreasing uncertainty when farmers adopted new applied sciences. Farmers got credit score to undertake new farming practices, and their returns have been assured by assured procurement.

The truth that the farmers might solely promote within the mandis went nicely with a system the place the Meals Company of India purchased all of the rice and wheat that was supplied on the mandis at a procurement worth. Farmers might then get the advantages of the Inexperienced Revolution know-how with out the danger of a crash in costs.

The federal government’s technique is to now break down the centrality of the mandis. One Invoice permits farmers to promote their produce anyplace they need and to whoever they need. The second Invoice creates the circumstances wanted for farmers to enter into contracts with patrons, together with the company sector, to promote their produce at a predetermined worth. And to make sure there are not any limits on these costs, the third Invoice takes foodgrains out of the Important Commodities Act.

Economists have rushed in to cheer the three Payments as much-needed reform. The Inexperienced Revolution based mostly procurement system labored nicely so long as all that was procured by the FCI may very well be offloaded within the PDS. However as soon as the demand within the PDS couldn’t take up all that was procured, the FCI was left with massive unsold shares that elevated the meals subsidy. Permitting farmers to promote elsewhere might scale back what the FCI has to purchase, and therefore the meals subsidy.

Will farmers profit?

The federal government insists that none of this can harm farmers adversely. Farmers would profit when costs are excessive and the State would purchase at its Minimal Help Value when costs fall beneath a threshold. However farmers who’ve lived by this actuality know, opposite to what economists consider, this hardly ever occurs. When the value of a crop is excessive, numerous farmers rush in to sow the identical crop the subsequent 12 months, resulting in a crash in costs. And a sometimes cash-starved authorities hardly ever, if ever, steps in in time to considerably scale back the extent of the crash. The federal government argues that long-term contracts would make sure the farmer will get the upper worth determined earlier than the crash. However the company government, who has made a deal for such the next worth at a time when market costs have crashed, would himself be on the lookout for one other job.

Within the subsequent stage of the cycle, farmers would transfer away from the crop whose worth has crashed. This might elevate costs. With the third Invoice eradicating foodgrain from the Important Commodities Act, the federal government wouldn’t have the ability to intervene. Farmers would additionally choose to now faucet the upper costs within the open market quite than promote on the procurement worth to the FCI. With out ample shares, the Public Distribution System in our cities would collapse. India would then be within the odd place of a rustic that sees itself as an rising world energy, even because it slips nearer to the underside of the World Starvation Index.

The author is a professor on the College of Social Science, Nationwide Institute of Superior Research, Bengaluru

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