Total Recall: How the match is fixed against Indian farmers

Pic: AFP

After the battering they received from an unexpectedly long spell of unseasonal rains, accompanied by strong winds and hailstorm, Uttar Pradesh farmers have been able to finally harvest their wheat crop. With the crop fields now empty, and with the sowing for the next crop some weeks away, it is time for them to assess the net income, if any.

That the agricultural income has been on a steady decline was never in question. But a detailed look at the net returns from wheat-rice crop rotation from a hectare of land in Uttar Pradesh, as computed by the Commission for Agricultural Costs and Prices (CACP), is not only shocking but unbelievable. As per the latest estimates, the net return from cultivating wheat in Uttar Pradesh has been worked out at Rs 10, 758. Since wheat is a 6-month crop, sown in October and harvested in April, the per month income for a farm family comes to Rs 1,793. 

With Rs 1,793 or let us say Rs 1,800 per month from wheat cultivation I wonder what kind of livelihood security we are talking about when it comes to farmers. The average monthly bill for a mobile phone for most college students anywhere in India would exceed Rs 1,800.

I looked for more details. If the other crop farmer is growing is rice, the average net return for it has been computed at Rs 4,311. Add for rice and wheat, the total that a small farmer from a hectare earns is Rs 15, 669 or Rs 1,306 per month. With such meager incomes I see no reason why a large number of farmers commit suicide at regular intervals. Those who are not so courageous either sell-off their body organs or prefer to abandon farming and migrate to the cities looking for a menial job as a dehari mazdoor (daily wager worker).

Well, many economists will dismiss the UP farmer as being an inefficient grower. I therefore looked at the costs and price calculations for Punjab farmers who are considered to be progressive, using the latest technologies and also bestowed with 99 per cent assured irrigation. The average net returns from a hectare of wheat have been worked out at Rs 18,701. Since Punjab predominantly follows wheat-rice crop rotation it becomes important to look at the annual computation of costs and prices. 

Now, don’t be surprised. The net returns from wheat-rice cropping pattern in Punjab stand at Rs 36,352 or Rs 3,029 per month. I wonder how a farmer in an economically developed state of Punjab manages to survive.

But still, Indian farmers have not failed the nation. Year after year, and despite being at the bottom of the pyramid, they continue to produce a bumper crop. This year too, they had done remarkably well. In the previois Kharif season coinciding with the monsoon months, they produced a bumper crop of basmati rice, cotton followed by potato. While basmati rice production had doubled in Punjab and Haryana, farmer’s expectation of a higher income were razed to the ground with a crash in the global prices of agricultural commodities. Disappointed farmers sold basmati at prices ranging between Rs 1600-2400 per quintal, against a price of Rs 3,261 to Rs 6,085 they got last year.

In cotton too, prices slumped from an average of Rs 4,400 to Rs 5,200 per quintal last year to around Rs 3,000 this year, prompting the government to direct the Cotton Corporation of India to step in to buy at the procurement price of Rs 3,750 per quintal. Let us not forget that the jump in basmati and cotton production happened as farmers had incurred an additional cost on diesel to run tube wells for irrigation. Punjab and Haryana had recorded a 50 per cent shortfall in monsoon.

Later, potato farmers faced a similar glut forcing them to sell at a throwaway price of Rs 2 per kg.

For years I have seen the farmers toil valiantly in the crop fields, often getting up at midnight to irrigate their fields when electricity connection flows to the tube wells, only to face an unforeseen disaster in the form of low prices. The Minimum Support Price (MSP) that farmers get for wheat and rice, which becomes an assured price for their produce, is being deliberately kept low so as to ensure that food inflation remains in check. Farmers are paid a low price also to enable the industry to get cheap raw material. Take for instance the case of cotton. According to a CACP report in the early 1990s, cotton farmers were deliberately paid 20 per cent low price for two decades so as to keep the textile industry economically viable.

This year, procurement prices for wheat and Rice have been raised by a paltry Rs 50 per quintal, which corresponds to an increase of 3.2 per cent. States like Chhattisgarh, Madhya Pradesh and Rajasthan which gave a bonus over and above the MSP have now been debarred from doing so. In fact, the government plans to withdraw MSP in the coming years leaving farmers to face the tyranny of markets.

Compare it with the government employees who have recently been given a second DA installment of 6 per cent at a time when wholesale price index has been officially computed at zero. This step-motherly treatment is the primary reason for the continuing agrarian distress in the country. In other words, farmers are being penalized for keeping food prices low for the indulgent consumers as well as for the industry. I don’t know why farmers alone should bear the burden of keeping the food prices low. After all, they too have to survive.

My colleagues have come out with some startling analysis. They looked at the rise in procurement prices with the rise in incomes of employees in various sectors over a period of 45 years – between 1970 and 2015. In 1970, the wheat procurement price was Rs 76 per quintal. In 2015, wheat procurement was is Rs 1450 per quintal, an increase of about 19 times. In the same period, the average basic salary plus DA of central government employees have risen by 110 to 120 times; of school teachers by 280 to 320 times; of college/university teachers by 150 to 170 times; and of mid to high class corporate sector employees by 350 to 1000 times. In the same period, school fees have increased by 200 to 300 times; medical treatment cost has gone up again by 200 to 300 per cent; and average house rent in cities has risen by 350 times.

This is a telling insight into the deliberate effort over the years to keep the farmers impoverished. But if you think, farmers have suffered unknowingly, you are simply mistaken. Actually, it is part of a global design. The World Bank had directed India way back in 1996 to move 400 million people out of the villages into the cities in the next 20 years, by 2015. Such a massive demographic translocation has also been suggested by academic institutes in the West. For a country to grow economically, the economic prescription is to reduce drastically the dependency on agriculture. Therefore the entire effort is to create such conditions that forces people to abandon farming and migrate to the cities.

To say that agriculture is an economically unviable profession is therefore untrue. If only farmers had received a wheat procurement price of Rs 7,650 per quintal – corresponding to the minimum increase in salaries of central government employees in the same period – agriculture would have been flourishing. India would have witnessed a reverse migration from the cities into the countryside, and farmer’s income would have compared favorably with the best in the industry. This would have provided gainful employment to millions of underemployed and unemployed. For the consumers, food prices could have been subsidized as is done in most of the developed economies.

In the Netherlands, the average farm household income is roughly 265 per cent higher than the average of the country. In US, the average farm household income is about 150 per cent higher than the national average. In India, the average farm family income is the lowest in all categories. It is not because the farmers in those countries are remarkably efficient. They get massive federal support in one form or the other. In India, successive governments have worked to push farmers out of agriculture. If only Prime Minister Narendra Modi was to reverse this trend, it would truly be Sabka Saath, Sabka Vikas. #

*Total Recall: How the match is fixed against Indian farmers. CatchNews. May 27, 2015

http://www.catchnews.com/pov/total-recall-how-the-match-is-fixed-against-indian-farmers-1432731942.html

How long will we continue to have a primitive form of crop insurance?

My daughter, studying in the US, recently shifted to a new flat in the suburbs of Los Angeles.  I went to Google maps on the internet, and after a few minutes of tracking, was able to locate her house on the map. The picture of the building where the flat was located was in front of me. Looking at the locality, the surroundings and the landscape around, I became confident that she’s living in a decent and safe locality.

Why I am narrating this is to explain how technology has made it possible for us to even spot a house thousands of miles away and also counts the number of trees. Forest cover is being determined by satellite images. Crop estimates are being prepared using remote sensing data. But when it comes to assessing crop losses that farmers suffer from weather anomalies, the insurance companies backtrack. If a farmer’s crop is completely destroyed, the crop damage that the insurance companies offer to compensate him is the average loss in 70 per cent of the block.

This primitive insurance system prevails at a time when unseasonal rains, hailstorm and strong winds have caused extensive damage to the standing crops. With crop damage extending to over 11 million hectares in 14 States, crop losses have already dealt a severe blow to farmers. With rains continuing to dampen farmer hopes, and with nearly 200 farmers committing suicide, many of them dying from shock, an effective crop insurance scheme could have minimized the blow.

If your car gets a hit, you can claim the damage. If your house is burnt down the insurance company will pay compensation irrespective of whether other houses in the colonies suffered or not. Why then an average in a block is taken as a measure for crop losses suffered by a farmer in a village is something I have never been able to understand. It is simply the failure of the government to make it obligatory for the insurance companies to provide per unit coverage to farmers that has left the farming community hapless. Insurance companies will obviously resist, but the government must ensure that they are made to deliver. Crop loss assessment must shift per unit basis, insuring each and every farmer.

But for nearly three decades, I have watched with dismay the reluctance on the part of successive governments to provide for any meaningful crop insurance plan for farmers. The comprehensive crop insurance scheme that the Ministry of Agriculture has now prepared – called, the National Crop Income Insurance Scheme (NCIIS) – and expected to be soon piloted in 50 districts across the country, is unlikely to provide any succor to the beleaguered farming community facing crop losses. What shocks me is that even after three decades, all that the government has managed to come up with is a shoddy proposal, a rehash of an earlier failed Farm Income Insurance Scheme introduced in 2003, and withdrawn in 2004.

As the name suggests, the scheme is designed to provide insurance against fall in prices as well as drop in crop yields. In case of yield losses from natural calamities, a disease attack or otherwise, it still follows the primitive methodology of basing the compensation on 70 per cent of the average loss in a district. This only shows that the planners haven’t learnt anything from the technological improvements.  The NCIIS draft does illustrate 4 probable scenarios and the compensation that a farmer will get in each of these. For instance, if a farmer’s yield is 4 tonnes/hect and indemnity being 70 per cent, the compensation would be worked out based on 2.8 tonnes only.

The guaranteed income that the farmers will get under the new insurance scheme would be to a maximum of 20 per cent of the price fall (against the Minimum Support Price) that a farmer suffers. It is based on a threshold yield, the average yield for past 7 years in a district. In other words, if the wheat MSP is Rs 1450 per quintal, and the farmer gets only Rs 900 by selling it openly in the market, the assured price that the farmer will get is Rs 900 plus 20 per cent of the gap between market price and MSP. Against Rs 1450, a farmer under the new insurance scheme can expect a maximum of Rs 1110 per quintal. This is distress price. If a distress price is all that the government assures it will provide to farmers, I think the message is clearly on the wall. Farmers must quit agriculture. 

The only good news on this front that I can share is Madhya Pradesh chief minister’s promise of setting up a State Crop Insurance scheme wherein farmers will be insured on per unit basis, and not on block averages. I hope more and more chief ministers understand the need for a crop insurance that is effective and meaningful. 

Govt lets down farmers yet again. Hindustan Times, Chandigarh.

April 20, 2015. 

Making some sense of crop insurance

Crop damage from unseasonal rains, hailstorm and strong winds has been quite widespread in India, Mar 2015. -- ANI photo

Unseasonal rains, hailstorm and strong winds that appeared in three phases beginning the end of February have already done an extensive damage to the standing crops. With crop damage extending to over 181 lakh hectares in 14 States, crop losses have already dealt a severe blow to farmers. But with more rains expected in the next few days just before the wheat harvesting normally begins, more trouble awaits farmers.

According to preliminary estimates of the Ministry of Agriculture, Uttar Pradesh and Rajasthan have taken the maximum brunt, followed by Haryana, Madhya Pradesh, Maharashtra, Jammu & Kashmir, Punjab and Himachal Pradesh. Crop losses have also been reported from West Bengal, Andhra Pradesh, Telengana and Uttarakhand.

Public memory is very short. While it is being said that the present spell of unseasonal rains is the worst in the last 25 years, the fact is that unseasonal rains accompanied by hailstorm had also done extensive damage to standing crops in 24 lakh hectares in Madhya Pradesh and 18 lakh hectares in Maharashtra a year earlier, in March 2014.

While 43 farmers had committed suicide in the Bundelkhand region of Madhya Pradesh (and adjoining Uttar Pradesh) and another 40 in Marathwada region of Maharashtra last year, the death toll this year from the unseasonal rains in March has exceed 67 in Uttar Pradesh alone. More deaths have been reported from Rajasthan, MP and Maharashtra. But the loss to human lives is no indicator of the severity and extent of the crop damage the country has witnessed. It is the extensive damage to standing wheat, oilseeds, and pulses and in addition the damage to fruits and vegetables from hailstorm that has aggravated the agrarian crisis.   

Although Prime Minister Narendra Modi did assure farmers of immediate help and relief when he spoke to them in his radio programme Mann ki Baat on Mar 22, I am reminded of an insensitive remark made last year by the former Agriculture Minister Sharad Pawar when he said unusual rains and hailstorms are not uncommon and, therefore, appealed to farmers to show courage. But Pawar was quick to assess the damage accruing to sugar mills from a reduced sugarcane harvest even before the expert teams had visited the affected regions and assessed the crop losses.  

What has made the difference this year is that besides the media repeatedly highlighting the extensive damage to standing crops, the NDA is keen to ward off the anti-farmer tag it has earned especially after its failure to provide 50 per cent profit in the minimum support price (MSP) that it had promised before the elections. With the government already under flak for pushing in an anti-farmer land acquisition bill, it swung into action to salvage its popular image of being farmer unfriendly. Aerial surveys were conducted; top ministers travelled to the affected areas; chief ministers were quick to announce a series of measures including deferring interest payments on crop loans, waiver of electricity bills, immediate assessment of crop losses, and came up with promises of a higher compensation package. We will have to wait and watch to know how much of it actually translates for farmers once the weather returns to normal. 

In the past we have seen farmers receiving relief cheques of Rs 8, Rs 10, Rs 215, Rs 1305 and so on. Year after year we have read news reports of how farmers who have seen their crops affected by inclement weather had been poorly compensated by indifferent State governments. After months of waiting, when a farmer gets cheque that is not even worth presenting before a bank, it only shows the contempt and cruelty by which the farming class is treated. It is therefore heartening to see this year a lot more seriousness to help the affected farming families. Already, many States have announced a higher relief than what is spelled out under the provisions of the State Disaster Relief Fund.  

Earlier, I have watched with dismay the reluctance on the part of successive governments to provide for any meaningful crop insurance plan for farmers. While in urban areas, Insurance companies have appropriate plans to provide cover for every individual, house and automobile, for farmers the crop losses are assessed only at the block level. A farmer at best can get compensation for an average crop loss suffered in a block even if his own loss in his crop field is several times higher. Furthermore, not many farmers actually know that they have been insured, and not many Insurance companies know what the farmer is cultivating. They just pick up the premium from the banks, and disappear to return later at the time of collecting the next premier. This is primarily the reason why farmers have never been enthused to take to crop insurance.

Insurance companies say that it is practically impossible to ascertain the loss per farm. I don’t agree. This is just an apology to avoid adding on to the operational costs. In an age when it is easy to track the movement of every truck carrying foodgrains, I don’t see why the same technology cannot be used for mapping each and every farm in the country. At a time when remote sensing is being used to count the number of trees, it should not be difficult to measure the crop losses in each and every farm or a cluster of farms to begin with. Therefore I have two suggestions to make crop insurance meaningful:  

* IFFCO-Tokio General Insurance Company has launched a Barish Bima Yojna in collaboration with Karnataka government. It provides crop insurance coverage to a minimum group of 25 farmers having 100 acres of cultivable land. Although insurance amount was awarded on the basis of the amount of rainfall received, there is a need to improve it further to add yield losses suffered by farmers. A little more effort can succeed in turning this into a comprehensive crop risk insurance model for farmers. And subsequently, using the latest technology, it should be possible to come down to calculate the losses that each individual farmer suffers.

* Dhan Foundation in Tamil Nadu has come up with the concept of Micro-Insurance. Borrowed from the Netherlands where Micro-Insurance has worked very well. Let me illustrate. Mutual crop insurance was done for a major pest called red hairy caterpillar. Farmers were advised to take preventive measures, go in for crop rotation, and at the same time the yield loss was compensated. The premium was roughly 30 per cent of the sum assured. Similarly, ground nut was insured against weather fluctuation. A Mutual Insurance Committee is formed among the villagers, which decides on actual premium and also ascertains crop losses. The committee takes care to ensure proper claim settlement, which has often been completed in one month.

Two prerequisites are absolutely necessary. The first is the need to set up rainfall gauges in each and every village. The second is to enhance the budgetary provision for crop insurance from the existing Rs 3,000-crore. Not providing enough financial support for strengthening crop insurance only shows how low it stands in national priority. #