Agriculture can be revived in India only if farmers get right prices for the produce

Hans India

29-06-2025

In a complete reversal of its earlier stand, the Bharti Kisan Union (Ekta-Ugrahan), which boasts of the largest support base in Punjab, now calls for a rethinking on making Minimum Support Price (MSP) a legal right for farmers. Saying that a legal mechanism for MSP will lead to 'higher inflation', the leader of the farm union, Joginder Singh Ugrahan, has stirred a hornet's nest.
While another farmer leader, owing alliance to BKU (Dakounda), Jogmohan Singh, termed any move that goes against the popular demand of the farm bodies for seeking a legal protection for MSP as 'back stabbing' the farmers, other farmer's voices expressed surprise at the turnaround. 'All factions should stick to the demand for hike in MSP as per MS Swaminathan's recommendation for 50 per cent profit over the input cost,' Jagmohan Singh had asserted.
Till only a few weeks back, prior to the time when the protest at the Punjab and Haryana border were not forcibly lifted, farmer leaders Jagjit Singh Dallewal and Sarwan Singh Pandher, were both calling for MSP to be converted into a legal right across the country. Even after the farmers protests at Shambhu and Khanauri borders ended, these leaders maintain that a legal MSP is the only way forward. So do others.
Nevertheless, the volte-face by the dominant farmers union in Punjab is baffling. While speculation is rife about why and how did the farm union go for a flip-flop, the split in economic thinking isnow wide open. As quoted in the media, Ugrahan says that beyond a point, the increase in MSP can't be sought as it will lead to increase in prices of foodgrains, making it out of reach of poor and marginalized classes. That is why the union is seeking a reduction in input costs, which will eventually bring in a fall in the cost of production. Any fall in the cost of production will indirectly mean a higher price for farm produce, he says.
Before I go any further, let's first look into a fallacious call for reducing the input costs such as that of chemical pesticides, fertilizer, diesel, seeds and other inputs that the farmers have to fend for. For several years now, I have seen academicians saying, and mainline economists have often echoed, saying while there is no need to increase farmgate prices, what is required
is to reduce the cost of production. They always knew that the input prices are not in the control of farmers and we often hear farmers rue that the MSP does not cover even the cost of cultivation. I don't blame the farmers, but at least the academicians should have known that the call for reducing the input costs is not workable and so it is meaningless. But I still see many academic papers that repeat the call for reducing the cost of cultivation. The reason is simple. Academicians and policy makers have never been in favour of enhancing farm incomes and therefore the best way is to divert attention to something that is undoable. Even if the Government decides to follow cost reductions it will only be possible with subsidy support, which means more budgetary support. And then at the same time, any increase budgetary support for agriculture is decried saying it will lead to fiscal imbalance.
Ugrahan says: 'Not only farmers, we have to think about all sections of the society, particularly the poor. In case, there is an increase in MSP, it will lead to inflation. So, to benefit the farmers, the cost of agriculture inputs should be kept under check.'
Therefore, I am a little surprised to know how come a senior farmer leader goes for a turnaround using the bogus argument of reducing the cost of production.
In reality, what the farmer leaders need to know is that a majority of country's poor are in fact farmers. It is well-known fact, they produce enough food for the country, but themselves sleep hungry. The latest report of the Situational Assessment Survey for Agricultural Households, which was based on 2019 data, clearly shows that the average monthly income of a farm household, at only Rs10,218 is at the bottom of the pyramid. I don't think any miracle has happened in the past five years that shows a remarkable jump in farm incomes thereby to change the perception about prevailing levels of farm distress. If Joginder Singh Ugrahan is satisfied and comfortable with such low-income levels knowing (or perhaps unknowing) that his suggestion would not in any way lead to enhanced income levels, there is no reason why the farmer leader himself should not be rethinking.
It is never too late to make a correction.
I find this switch over most intriguing knowing that an OECD (organization for Economic Cooperation and Development) had worked out that in the 16 years period, between 2000 and 2016, Indian farmers had lost Rs 45-lakh crore. Moreover, the latest 2024 OECD report on producer support had categorically shown that Indian farmers were the only community globally that continued to incur losses year after year since the year 2000. What more evidence is required to demonstrated a broken food system that has been pushing farmers into a cycle of indebtedness, distress and suicides?
Surprisingly, the policy makers who continue to call for reducing the cost of cultivation have never given any economic justification for not asking the industry to reduce the cost of production. Name one industry that continues to incur losses even for a year, and still stays in business. Tell me which section of the urban society has reduced the cost of living if it made any economic sense to them. I haven't heard of any section of employees wanting the pay commissions to be frozen. In fact, an imaginative 'fitment factor' continues to jack up employee salaries every ten years. Academicians and policy makers are fine with that (because it also raises their incomes) but then why is that such stupid arguments are floated only for farmers?
The answer is again simple -- because farmers will fall for such outlandish arguments.
Agriculture is in a dire crisis. Over the years, farm incomes have been deliberately squeezed. It is time to rebuild agriculture and that can only happen if farmers get an assured income (by way of a guaranteed price) along with a package of practices that actually usher in prosperity on the farm.
(The author is a noted food policy analyst and an expert on issues related to the agriculture sector. He writes on food, agriculture and hunger)