The year-long turmoil by farmers ended last month after the Union government repealed the three Farm Bills and agreed to set up a Minimum Support Price (MSP) guarantee panel of various cultures. Farmers hope the government will agree to make the MSP legally binding. Experts debate the possible impact of legalizing MSP in terms of cost to government and inflation in the context of the economy, but broader aspects such as optimal use of land, water , fertilizers, labor and other inputs are not part of most discussions. Major agricultural nations such as Australia and the United States plan their production with these considerations in mind while securing guaranteed prices for their farmers. During my protected farming investigation in 2017, a farmer from Rohtak, while complaining about falling prices, told me that his friend had a farm of about 1,200 hectares in Australia and that his produce was sold at a guaranteed price on his farm. The business plan (area under different crops) had to be approved. This is normal practice for Australian farmers. This is called land use planning.
Area planning can result in production closer to the required figure for individual crops. It can synchronize MSP and market prices due to production according to demand. This can reduce government supply demand to the MSP. When the relevance of PSM declines, marketing reforms can stimulate private purchases, which does not happen now. Land use planning can also optimize the use of scarce resources such as water and fertilizers by preventing a glut in the production of individual commodities.
Apart from cereals such as wheat and rice, India lacks oilseeds, pulses, fresh and dried fruits and spices. MSP supply has been instrumental in increasing the production of wheat, rice and pulses in recent years. But our pricing policy, initiated in the wake of the grain shortage, has favored wheat and rice over oilseeds, pulses and other crops. This resulted in unbalanced production. Moreover, the unlimited purchase of wheat and rice by FCI has benefited farmers in a few irrigated states who even claim taxes and commissions for their arhtiyas from the Union government. In the case of less irrigated states producing pulses and oilseeds, the National Agricultural Cooperative Marketing Federation of India (NAFED) makes limited purchases only under the Price Support Scheme (PSS) and pays no tax to States nor commission to the arhtiyas.
Therefore, the panel set up by the Center to decide the MSP issue should first consider dismantling the discriminatory pricing policy given the current demand in the country. Secondly, the area planning approach must be integrated with the guaranteed MSP, which will not only reduce the huge public expenditure, but also lead to optimal use of our scarce land, water, fertilizer and other inputs by controlling overproduction. Overproduction of any commodity can cause prices to drop sharply and losses to farmers; if it is bought by the government, it will be very expensive for the national treasury when international prices are lower. Area planning can solve both of these problems and also save on input and post-harvest management costs.
Land use planning is the alternative mechanism adopted by countries such as the United States, Australia and the United Kingdom. In Australia, the Departments of Agriculture and Food provide information and advice to the Australian Planning Commission and local governments to provide strategic planning at the farmer level for the growth of agriculture according to demand. Demand can be made up of human and domestic animal needs, industrial use and exports. In the United States and Australia, the zoning process regulates the types of activities that can be accommodated on a given piece of land, as well as the amount of space dedicated to those activities. Subsidies are also linked to the area allocated to a crop. In the UK, all farms larger than 5 hectares must obtain land use permission not only for the cultivation of crops, but also for the construction of buildings, excavations and engineering operations necessary for related activities. . Contrary to this elaborate exercise, our agriculture and horticulture departments have generally set higher production targets than the previous year with the thumb rule of around 10%.
Our basic needs for grains, pulses, oils, milk, meat, fruits and vegetables, clothing, fuel and shelter must be met from the land, which is in short supply in our country. Traditionally, farmers have decided on the acreage of different crops mainly based on their own needs, but nowadays more of them are growing for marketing, considering the price they will get. Previously, market prices were a result of demand and supply, but now market prices are replaced by MSP for some crops where Union Government supply has been a critical factor. The implementation of the MSP scheme is limited to a few states, and that too for wheat and rice out of the 23 crops for which the MSP is announced.
At the national level, an accurate estimate must be made of the total demand for each agricultural product well in advance of the planting seasons. This may include requirements for domestic consumption for both humans and animals as well as for exports. Then, this demand can be distributed among the states in proportion to their area devoted to the crop concerned during the last five years or so. The state may subdivide demand at the regional/district level based on past acreage. State agriculture and horticulture department officials can register an individual farmer’s acreage under individual crops well in advance of the planting season to secure MSP purchases. When the total area registered for a particular crop reaches the limit assigned to the district/state, its registration can be stopped and the remaining farmers can register for the next highest paying crop where the limit has not been reached or sow n any culture on their own. To benefit the greatest number of farmers, an area ceiling can be set for each farmer, for example 3 acres for potato, 5 acres for paddy/wheat and groundnut/mustard seeds, depending on the area. concerned and the total needs.
Area planning can result in production closer to the required figure for individual crops. It can synchronize MSP and market prices due to production according to demand. This may reduce the demand for public procurement from the MSP. When the relevance of PSM declines, marketing reforms can stimulate private purchases, which is not currently the case. Land use planning can also optimize the use of scarce resources such as water and fertilizers by preventing a glut in the production of individual commodities.
The author is a former Professor, Chairman of SBI, CRRID, Chandigarh
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