People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 9

March 08, 2009



AIKS For Stable And  Remunerative Crop Prices

The All India Kisan Sabha (AIKS) has deliberated on the agenda of fixing Minimum Support Prices (MSP) for the kharif crops and after consultation with farmers’ representatives came up with specific proposals. While the usual criteria for arriving at MSP was taken into consideration, the extraordinary situation of the global recession and the debilitating impact it has on the agricultural incomes and food security has also been considered while formulating these proposals.

These proposals were presented to the Commission for Agricultural Costs and Prices (CACP) at its meeting held on March 4, 2009 at Krishi Bhawan, New Delhi. AIKS all India office bearers Noorul Huda and N K Shukla represented the AIKS in this meeting that was attended by members of CACP, representatives of various kisan organisations and also the representatives of the agricultural departments of the various state governments. The chairman of the CACP has assured to forward these proposals to the government of India to take into consideration in fixing the MSP.

Below we give the full text of the AIKS note submitted on this occasion.

THE nearly two decades of implementation of the neo-liberal economic policies has led to untold miseries for the peasantry. The steady decline in prices of agricultural commodities for the last more than a decade, even as costs of cultivation kept rising, has led to the creation of a situation detrimental to agricultural production itself. Leave alone getting remunerative prices, the farmers are often not even able to realise the costs of cultivation. The Commission for Agricultural Costs and Prices has as one of its important terms of reference that while recommending the price policy and the relative price structure, “the commission may keep in view the need to provide incentive to the producer for adopting improved technology and for developing a production pattern broadly in the light of national requirements.” The stated objective of the government’s price policy for agricultural produce is also to ensure remunerative prices to the farmers for their produce and thereby to encourage higher investment and production.

The reality however is different and at the ground level farmers are finding cultivation to be no longer viable. When the question is one of subsistence and sustenance it is impossible to conceive of the producer adopting improved technology and being concerned of lofty ideals like ‘developing a production pattern broadly in the light of national requirements’. An alteration in the situation can be possible only if the government has an effective Procurement-Support-Distribution Mechanism in place.

Among the major agricultural crops, kharif crops account for the largest share and major food items like cereals, pulses, oilseeds and spices are cultivated in this season. Kharif crops constitute about 53 per cent of the total cereals production, 43 per cent of the total production of pulses and nearly 70 per cent of the oilseed crops cultivated in this season. Cotton, sugarcane and jute are also some of the major crops produced during the season. Coffee, pepper and cardamom are also harvested in this season. Hence, the fixation of MSP such that it provides adequate incentive to the peasantry to cultivate and make agriculture remunerative as well as an attractive proposition is eminently required.

The current deliberations of the CACP will be having immense consequence for the economy as it comes in the midst of a global economic crisis. In the emerging context, there will be three major impacts on the production systems of the rural economy. Two of these effects can be categorised as direct impact of the financial crisis, namely, plummeting product prices of agricultural commodities and declining availability of credit to small-scale agriculture. The third constraint is more indirect in nature arising due to the shrinkage of non-farm employment opportunities and increasing pressure of the work force on the farm sector.

Another major impact of the current crisis is an imminent depression in the world demand and prices of primary agricultural products which are cultivated on a commercial basis with the purpose of export. We can locate this phenomenon in the context of the already declining real returns from agricultural production, especially for commercial crops, in the post-liberalisation period. The onset of a global economic crisis will further the income deflation that the primary sector in the country has witnessed in the recent past. The other direct impact of the world financial crisis will occur in the arena of credit availability to the small-scale agriculture and other rural livelihoods in the near future.

The debilitating impact of these developments on food security of the affected population is only predictable. Those households that are most vulnerable to food insecurity need urgent assistance in enhancing their ability to access or produce food. Millions of people are driven into food insecurity and there has been a worsening of conditions for many who were already food-insecure. The crisis is threatening to lead to long-term threat to food security. The Food and Agriculture Organisation (FAO) of the United Nations in its report ‘The State of Food Insecurity in the World 2008’ has clearly highlighted these factors. Unless we have an effective procurement at remunerative prices accompanied by effective distribution at subsidised rates, the actual producers who feed the world will only reel under extreme hunger. There is hence a need to stress the importance of a Universal Public Distribution System to complement the procurement system. Increased public expenditure on rural development, food subsidy and employment generation has to be taken up.

The government initiative to waive off debts of farmers has, however, left out the loans taken from informal sources whereby the step itself would be seen as a half-hearted move as it does not provide relief for the large section of the peasantry indebted to private money lenders and finance companies. A Debt Relief Commission along the lines of the commission set up by the Kerala government is indispensable to bring the rural poor out of indebtedness. The recommendation of the M S Swaminathan Commission to reduce the interest rates from 7 per cent to 4 per cent which would benefit farmers in distress has also to be implemented. There is an urgent need to enhance the spread of the National Agriculture Insurance Scheme (NAIS) and for universalisation of the Crop Insurance Scheme. The scheme should cover more crops and also address the various crop losses arising out of the vagaries of nature.

The increase in input prices to exorbitant levels and the cuts in input subsidies have only further accentuated the miseries of the peasantry. In such a context there is all the more relevance to the exercise and for seeking remunerative prices for the agricultural crops.



Ensure Stable and Remunerative Crop Prices

The world commodity markets are witnessing drastic price falls and our farmers are exposed to the vagaries of the volatile world market prices. The Indian peasantry can be protected from such effects only if the government puts in place an effective procurement policy complemented by remunerative support prices. In this regard the suggestion of the National Commission on Farmers to institute a Price Stabilisation Fund has to be implemented. It also entails a complete ban on Futures Trading which introduces speculative trading into agriculture. Currently there is an urgent need for price and income support to farmers in general and the growers of export crops in particular in the wake of shrinking world demand and declining prices. There are already indications of a crash in prices for many of the commercially cultivated export crops. This is due to the inadequate demand in the world markets for products like cotton, pepper, rubber, etc. A look at the price trend for an year or a couple of years reveal that the high price periods for such crops have been short and in most cases, the current crisis is pushing the prices to levels that are much below than that at the start of the growing seasons. This implies that farmers who were induced to shift to these crops due to the high export prices stand to be completely ruined and would accumulate sizeable losses due to the investments that they have already undertaken for growing these crops. These price trends imply that the growers of these crops stand to lose heavily from the current slump in output prices. In order to mitigate such losses and prevent any withering of livelihoods in the rural areas, it was ardently required that certain measures like revamping the marketing boards or making certain allocations for building a Price Stabilization Fund. The latter could have been used to provide a ‘minimum living price’ to the farmers in the face of the crisis. This is all the more necessary as a large part of the agrarian crisis that has precipitated over the last decade has been in the dry-land areas mainly cultivating export-oriented commercial crops for which prices are relatively more volatile. Many cash crop cultivators, who had begun their sowing operations on the basis of crop prices determined by the relative prices of just a few months ago, now find that their cultivation is simply financially unviable at prevailing input and output prices. With particular regions of the country, including some of the fragile dry-land areas, increasingly dominated by such cash crop cultivation (such as cotton, groundnut and soya bean), it is not difficult to imagine what will happen to livelihoods in these cases.  This is a major economic catastrophe that is not just waiting to happen – it is already unfolding. So a series of monetary and fiscal packages that do not even mention, let alone address, the inevitable problems of cash crop cultivation, is bizarre, to say the least.

In the case of cotton too the Amaravati divisional commissioner had suggested way back in 2006 that the MSP for Short Staple Cotton should be Rs 3500 per quintal while the MSP suggested by the CACP in 2008-09 was far below it. In the wake of the falling prices there is a need for providing effective price support to our farmers. The approach to the plight of the sugarcane farmers is also one of total insensitivity. The MSP fixed by the government is far below expectations. In the case of coconut, there is need for having higher import duty on coconut oil and remunerative prices for the produce are required to protect our farmers from total collapse. The estimated costs of production which is taken into account are often far below the actual expenses incurred and the MSP fixed on that basis does not adequately compensate the cultivators. Against a backdrop of sky-rocketing global commodity and crop input prices, the Swaminathan committee had suggested MSP be computed as C2 plus 50 per cent level. In times of recession it is not adequate enough to have such a computation alone as it does not provide proper stimulus to production, let alone increase productivity. Currently, in three crops – paddy, wheat and rapeseed-mustard – they are only above the 50 per cent cost-plus level. In cotton, maize, groundnut, lentil, bajra, arhar and urad, the MSPs now are 20-30 per cent above C2 and in others between 10 and 20 per cent.

Our specific proposals for the MSP of various kharif crops are attached herewith (see accompanying table). The eventuality of the CACP proposals being disregarded as in the case of paddy and other crops during the last year taking refuge in flimsy grounds will make any exercise like the present one futile and the CACP will itself be relegated to a position of redundancy.

Strengthen Procurement And Distribution Mechanism

An effective procurement mechanism complemented by a Universal Public Distribution System is indispensable if the farmers have to be led out of the present crisis. Procurement by the government bodies has to be enhanced. The fixing of remunerative prices as suggested above will also encourage farmers to sell their produce to the procurement agencies itself.

We hope that the CACP will take up the suggestions of the AIKS in due seriousness and help in improving the livelihood conditions of the cultivating peasantry and the rural poor.


S Ramachandran Pillai

(AIKS president)