This week the farmers’ question made National Headlines because two hundred thousand farmers ,demanding the withdrawal of a controversial ordinance on FRP (Fair and Remunerative Price) were able to bring New Delhi to a virtual halt by their sheer presence. They were able to stall the proceedings in the parliament and choked almost all the main arterial roads till the government agreed to convene an all party meeting to review their position. Many newspapers carried photographs of leaders of political parties ,others commented on how the Opposition had got an opportunity of coming together , and still others carried the Prime Minister’s statement reiterating the need to resolve the issues amicably. The questions that remain unanswered are the basic issues which any agrarian economy must resolve : how does the state decide a price that is ‘fair’ to the farmer, viable for the industry and acceptable to the consumer. Should it be left to the market ? Should not the farmer get some share in the final price which the consumer pays for the produce ? How do we ensure that the industry improves its efficiency ? What about the by- products, co-generation of power and ‘value add’ as the product moves up the retail chain ? And last but not the least, how does the political system react to the basic issue raised by the farmers that the price of agricultural commodities be linked to the MRP – a point which has often been stressed by this column.
Let us first examine a few facts which are accepted by almost everyone. The first of these is that the FRP provisions go against the farmer, for the onus of sharing the difference between the Statutory Minimum Price and the FRP is solely on the state governments. The existing FRP norms mean that the farmer loses between 20-25% in real terms. the industry, on the other hand has shown a remarkable recovery, and profits have soared over a hundred percent , while at the retail point, the consumer sees that his prices have touched the roof in the span of the last few months. Where then lies the problem, and what is the remedy ?
The problem lies in the fact that except for the factories in the co-operative sector, the industry has always viewed the farmer as an adversary. The political leadership has tried to balance the different interest groups, but has not addressed the issues which can make India’s sugar industry globally competitive by supporting integrated units in which sugar is only one of the many products. In the effort to keep the sugar prices at ‘reasonable levels’ and avoid the criticism of the middle class consumer, it has overruled the recommendations of its own CACP. However it should be mentioned that the consumption of sugar , across different sections of society is not uniform. The BPL consumes a lot less sugar than the APL and the middle classes . The food processing industry is also a bulk consumer of sugar – and most products – from aerated drinks to fruit loops, jams , jellies and juices – and they also cater to this segment of society. Therefore AgriMatters recommends that sugar prices should be allowed to find their own level in the market, and governemtn intervention should be focused on cereal crops which are consumed by the BPL. In fact the column would go a step further and suggest that even within cereals the focus should be on coarse cereals.
The response of the governemtn has been interesting,(to say the least). It has agreed to review the FRP regime, but has not commented on the demand that the prices of primary commodities be indexed to the final MRP. If this principle is accepted for sugar, the day is not far when the same logic will be used for paddy, or wheat flour. Surprisingly, those spearheading the agitation have also not pressed this beyond a point. Neither has any political party made a ‘political issue’ out of it – though it is a classic David versus Goliath case. perhaps the industry barons have been working overtime to ensure that such a demand does not become part of the political lexicon.
AgriMatters however feels that the farmers should make this the ‘main negotiating point’ because if this were to be accepted, the CACP projections could be extended to covering the retail prices, and a transparency in the price discovery at all points would get into the public domain. Just as the industry workers and governemtn servants are assured that their Dearness Allowance is linked to the Price Index, the farmers’ want their prices fixed with reference to the final consumer price. The industry cannot argue that it does not know which farmer has given what share – IT has made it ‘just a click away’. Therefore what is recommended that while the government /CACP may recommend an FRP/SMP as the first ‘interim’ payment, a second payment should be made to the farmer after the transaction is complete. Accounting standards can and should be developed, and incentives offered to the factories which upgrade technologies, establish higher recovery rates, and add value through enhanced forward integration. This is perhaps the only way in which the farmers, industry and consumers can understand and appreciate the point of view of all the stakeholders.