A Programme to Support Income Independent of Crop Production Could Boost Agriculture in a Long-Term Way
The market-distorting system of price and procurement support needs to be gradually replaced by a crop-neutral cash transfer scheme based on the size of land holdings, the number of crops grown, and any other relevant criteria to be decided by a government-appointed expert committee. This is because the latter cannot be extended to all crops, especially perishable horticultural products and protein foods, whose demand is growing faster than that for cereals.
Indian governments have increased minimum support prices (MSP) and increased government procurement in order to increase farmers' income. Farmers are unhappy, however, because their profit margins have been shrinking while government subsidies for bank credit, electricity, and chemical fertilizers have been steadily rising. On the other hand, steadily increasing farm produce floor prices contribute to food inflation and cause macroeconomic problems that restrain GDP growth.
In light of this, a crop-neutral income support program will encourage farmers to grow crops based on consumer demand and local climatic conditions, resulting in the best possible use of inputs, irrigation water, and chemical fertilizers and lowering the government's subsidy burden. As a result, it is worthwhile to embrace.
Farmers have been requesting a legal guarantee to minimum support prices for all 23 crops in order to deal with growing uncertainties brought on by unpredictable weather changes and increased marketing risks that reduce the return on investments. However, legal backing would be useless if it is not supported by a strong procurement infrastructure. Currently, procurement based on minimum support prices (MSP) is successful primarily for rice, wheat, and sugarcane.
Furthermore, a small minority of large farmers are more likely to profit from such arrangements. Only 6% of Indian farmers, mostly those with sizable landholdings, have benefited from MSP and guaranteed government procurement, according to the Shanta Kumar Committee's (2015) findings. The majority of the advantages of subsidized inputs, such as irrigation water, chemical fertilizers, or farm loans, are also appropriated by this sector.
Furthermore, it is important to consider the effects of the current MSP, assured procurement, and input subsidies, particularly those on electricity and chemical fertilizers, which have a significant impact on crop patterns. The share of this water-intensive crop in Punjab's total cultivated area has steadily increased from 5 percent in 1960 to 40 percent in 2020, while that of pulses has decreased from 19.1 percent to 0.5 percent during this time due to access to almost-free electricity and the absence of marketing or price risks associated with growing paddy.
Again, in Maharashtra, a state with a water shortage, even though sugarcane is grown on 4% of the state's total cultivated land, it uses up to 71% of the state's meager irrigation water supplies. Similar to Telangana, Tamil Nadu grows unsustainable sugarcane while Telangana produces more and more water-intensive crops like cotton and paddy.
A Superior Option
India must implement a comprehensive crop-neutral income support program that provides farmers with a fixed amount of money regardless of the crops they are growing in order to address the aforementioned distortions. Six Indian states, including Telangana and Odisha, have adopted an income support program as of right now. A national program called PM-Kisan Samman Nidhi is also available.
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