Farms are seen in this aerial photograph taken above the outskirts of Gwalior, Madhya Pradesh, India. (Photographer: Udit Kulshrestha/Bloomberg)

Madhya Pradesh Elections: From Decade Of Record Farm Growth To Crisis 

BloombergQuintOpinion

Madhya Pradesh presents a classic case of success itself becoming a reason for failure. In the ten years from 2005-06 to 2014-15, the country’s average annual growth rate in agriculture was only 3.2 percent while MP achieved growth of 9.6 percent per annum. In fact, the rate of growth from 2009-10 to 2014-15 was an unbelievable 14.2 percent. With 70 percent of its workforce employed in agriculture, agrarian issues are expected to dominate the discourse in the run-up to the assembly elections being held on Nov. 28.

MP achieved this phenomenal growth by completing several irrigation projects, setting up a robust infrastructure for procurement of wheat and diversifying into horticulture.

High Growth, But Prices Fail To Keep Up

  • In the ten years from 2005-06 to 2014-15, the state expanded gross cropped area under irrigation from 30 percent to 42.8 percent, as a result of which the production of wheat doubled from 6 million tonnes to 12.9 million tonnes.
  • This was coupled with a bonus of Rs 100 per quintal of wheat from 2007-08 to 2012-13 which was increased to Rs 150 per quintal in 2013-14 and 2014-15. As a result, MP was successful in increasing wheat procurement from 0.48 million metric tonnes to 2005-06 to 7.1 million metric tonnes in 2014-15.
  • Production of vegetables increased from 2.79 million metric tonnes in 2005-06 to 14.31 million metric tonnes 2014-15. In the same period, the production of fruits increased five-fold from 1.22 million MT to 6.09 million MT.

In 2017-18, the state government experimented with the Bhavantar Bhugtan Yojana for eight kharif crops. The difference between the minimum support price and the monthly average sale price in mandis (markets) in MP and two adjoining states was calculated to arrive at an average sale price.

The difference between MSP and ASP was paid to farmers as a price deficiency payment.

However, not all farmers benefitted from the Bhavantar Bhugtan Yojana. For example, the production of soybean in MP last year was about 7 million MT—out of which 3.9 million MT was registered by farmers—but they brought only 1.9 million MT to the mandis. The average sale price of soybean was Rs 2,594 per quintal against the MSP of Rs 3,050. The state spent Rs 1,570 crore under BBY. In the rabi season of 2017-18, the state government initially announced that it will cover onion, garlic, gram, lentil and mustard under BBY but the scheme was not operationalised.

Thus, farmers did not get MSP for most rabi crops which arrived in mandis from April to June.
Day laborers cut soybean plants with sickles during a crop harvest at a farm in the district of Burhanpur, Madhya Pradesh, India. (Photograph: Sanjit Das/Bloomberg)
Day laborers cut soybean plants with sickles during a crop harvest at a farm in the district of Burhanpur, Madhya Pradesh, India. (Photograph: Sanjit Das/Bloomberg)

PM-AASHA: Limited Benefit

In September, the centre announced the Pradhan Mantri Annadata Aay Sanrakshan Abhiyan with three sub-schemes:

  • Price Support Scheme (PSS)
  • Price Deficiency Payment Scheme (PDPS)
  • Pilot of Private Procurement and Stockist Scheme (PPPS)

MP has adopted the Price Deficiency Payment Scheme for soybean and maize under which payment up to Rs 500 per quintal is to be made to farmers. Maize is not covered under PDPS, so the state government will have to bear the entire expenditure. Since oilseeds are covered under PDPS of PM-AASHA, it is expected that the centre will share 50 percent of any losses in PDPS operations on soybean. However, the state government has issued an order on Oct. 5, 2018 which says that Rs 500 per quintal will be paid to farmers as ‘flat bhavantar’ even if mandi prices are above MSP.

In reality, MP is not operating PDPS and it is just going to pay a bonus on soybean and maize. Farmers of other crops are not as lucky. It also means that MP has given up on PDPS as a model to deliver MSP to farmers.

It is a moot question if other states will run PDPS when the first state to take it up has abandoned it.

Since other crops like urad, moong, sesame, groundnut, and ramtil are not covered under ‘flat bhavantar’, they may be physically procured under the Price Support Scheme of PM-AASHA but large-scale procurement is unlikely due to storage and working capital problems of procuring agencies. Physical procurement and disposal of procured stock is a complex operation and many-a-times, when the procured stocks are sold in the open market, they tend to further depress prices. The National Agricultural Cooperative Marketing Federation is already sitting on about 5 million MT of pulses and oilseeds procured in previous years. The fear of a CBI enquiry also prevents timely decision making in selling the procured stocks.

Farmers wait to sell their soybeans at a grain market in Burhanpur, Madhya Pradesh, India. (Photographer: Sanjit Das/Bloomberg)
Farmers wait to sell their soybeans at a grain market in Burhanpur, Madhya Pradesh, India. (Photographer: Sanjit Das/Bloomberg)

Also read: PM-AASHA Unlikely To Ensure MSP To All Farmers

Hit By Global Downturn, Note Ban

One more area in which MP did well is the warehousing sector. It increased the storage capacity from about 11.87 LMT in 2005-06 to 71.76 LMT in 2014-15. This was achieved largely through joint ventures with the private sector.

In the last four years, the global downturn of commodity prices like wheat and soy meal, coupled with demonetisation, has had an adverse impact on domestic prices of most commodities, thus negating the gains due to higher production by farmers.

MP’s achievement in increasing production and creating infrastructure, therefore, could not prevent a downturn in farmers income. That is the reason we saw a farmers’ agitation in MP last year.

In the case of perishable crops, however, the state did not make a serious effort to create infrastructure.

  • As of March 2017, MP had a cold storage capacity of about 12.63 LMT which was just about 9 percent of the cold storage capacity of 141.76 LMT in Uttar Pradesh.
  • Out of 238 cold chain projects sanctioned by Ministry of Food Processing Industries up to April 30, for which grant up to Rs 10 crore is available, MP bagged only six projects while Maharashtra was sanctioned 55 projects.
  • The total budget of MP for the grant to food processing units is a mere Rs 30 crore in 2018-19, while the state spent about Rs 785 crore in meeting the losses in the procurement of onion last year.

The mood of farmers in MP is somber due to a continued depression of market prices, coupled with a shortage of rainfall in several districts in the eastern parts of the state. Political parties continue to promise to waive farm loans, irrespective of the cost on the banking system and the wider economy. A lack of investment in infrastructure and frequent restrictions on stocking, trade, and exports do not seem to attract their attention. The solution to challenges of agriculture needs a horizon longer than five years.

Siraj Hussain is a former Agriculture Secretary, and a Visiting Senior Fellow at ICRIER.

The views expressed here are those of the author and do not necessarily represent the views of BloombergQuint or its editorial team.