Tag: Minimum Suport Price

Understanding the MSP Issue, India and WTO

By Jasdev Singh Rai

One of the farmer leaders called for India to exit the World Trade Organisation. India is engaged in tactical bargaining at WTO to retain minimum support price (MSP). The WTO is desperate to reach outstanding issues of the current Agreement on Agriculture while many ordinary supporters of farmers are accusing the Indian Government of siding with corporates. In this article we explore the facts and how each is stuck in a complex muddy field from which there are few ways out.

Let us start with MSP, or Minimum Support Price. A simple fact of agriculture is that farming is no longer a subsistence occupation. Subsistence farming used natural fertilisers such as manure and farmers practised crop rotation, keeping the soil healthy. Farmers mostly produced for themselves and sold some in the market.

However, as population and life spans grew in India, traditional farming could not meet the growing demand. India had to go to international markets to buy staple foods such as grain and rice to feed its population. Often, India didn’t have enough money and borrowed it or went with a begging bowl for cheaper grain. It was ridiculed and was open to pressure by donor countries. An empty stomach is at the mercy of the provider.

The Green Revolution was a kick-start to move towards food security and self-sufficiency. The prerogative was to produce enough basic foods to feed all of India and keep enough in store for difficult times and even export. India was willing to subsidise this juggernaut of self-sufficiency drive. It changed small farmers to become small commercial farmers.

Farmers now use nitrogen-based fertilisers, all year supply of water with ever deeper mechanised wells (tube wells), and seasonal labour. Now they farm to sell rather than just feed the family. They have mostly abandoned rotation farming, growing 2-3 crops a year on the same plot of land, almost sucking life out of the land.

The inputs such as water, diesel, electricity, labourers, seeds, fertilisers, pesticides, hiring tractors or owning one on hire purchase etc all amount to considerable expense. India’s farms are small, with about 86% of farms ranging from 1-3 acres. They are family owned.

There are about 125 million farmers in India. About 58% of the Indian population depends directly or indirectly on farming sector with jobs ranging from farmer, farm labourers, traders, labour for traders, truck drivers, assistants and so on.

The Government provides many support structures and incentives, such as a well-developed procurement system called the mandi system. The Government buys the grain from farmers and ensure a minimum price so farmers can make profit. This is called Minimum Support Price or MSP. Usually it is direct input costs, called A2 and others such as unpaid family time, labelled as F1 plus 50% to 85% top up, depending on the crop, to make farming viable for the family. There was meant to be another factor called C2 which is unpaid rental and interest on fixed capital of the land. This has not been instituted. Farmers still find it difficult to make a reasonable living.

ALSO READ: Understanding the Mandi System in India

In theory, MSP is given to 22 crops products listed as essential commodities. But in reality only a few products get it and not all states provide it. It is mainly Punjab, Haryana and some parts of Himachal Pradesh. Rice and wheat are among leading crops that the Government pays for.

The road to food security is expensive but the country has become self-sufficient. It no longer goes with the begging bowl for basic foods such as rice and grain. In fact it has the capacity to export them.

The alternative is to buy basic foods in the international market from countries like Canada, Australia, United States and some other countries. Farms in these countries are an average 400 acres and in Australia can be as large as 25,000 acres. By economies of scale, these farms can buy fertilisers cheaper, have few labourers per acre of land and much fewer machinery per acre. Only a few tractors are needed for a 400 acre farm, whereas in India every 3 acre farm has to hire a tractor, wait their turn to hire or buy a tractor for their small farm.

It is not difficult to understand why cash crops can be produced cheaper by these countries with larger farms. The farms are bigger partly because these are the new worlds where land was plenty. In India and Africa, farming has been in families for centuries if not thousands of years.

If India buys on the open market and stops subsidising its farming, it will be open to the uncertainties of international politics. Other countries could demand more than money in return for selling cheaper wheat. The recent Ukraine conflict has shown how African countries dependent on Ukrainian wheat nearly faced starvation until Russia stepped in.

The other alternative is for India to go the way of some western countries and drive small farmers out in favour of large corporate Agri Business as USA did. Subsidies can be smaller and production can be cheaper with overheads spread over large area. However, that also means over a 100 million of not more farmers thrown into the job market without any jobs available. And another 300 to 600 million people dependent on the farm sector being made jobless. Politically, it will be suicide for any party to go down this route and nationally there could be unrest with nearly 50% of the population unemployed. MSP supported farming can be considered to be a form of indirect social security for farmers in return for ensuring food sovereignty.

The WTO

However, India faces another pressure, the World Trade Organisation or WTO. It took over from GATT, the General Agreement on Trade and Tariffs, in January 1995. WTO is market orientated and concerned about ensuring international trade being conducted fairly and competitively. It does not like subsidies which it calls market distortion. And it also negotiates and sets limits on tariffs which are taxes on imports.

Distortions occur if two countries, A and B manufacture the same product, for instance a ceramic plate. If production costs in country A is ₹10 a plate and in country B it is ₹8 a plate, then country B is likely to be able to sell more of it. However, country A may decide to subsidise every plate by ₹5 and thus enable the manufacturer to sell for ₹5 on the international market, undermining country B. This is distorting the market with a subsidy.

On the other hand, country A may decide that any plates imported from country B will be taxed ₹5. This pushes the price of country B plate ₹to 13. This will ensure that people in country A will buy the plates made by their own country at ₹10 rather than ₹13 a plate from country B. This is called protective measures and also distorting the market.

The Agreement on Agriculture (AOA) first came into force on 1st January 1995. It sought to put limits on subsidies. The AOA has three categories of subsidies. Green subsidies are permitted in fields such as training for farmers, which does not distort the market. Amber Box subsidies are market distorting subsidies. It was agreed that developed countries such as Canada, USA etc can give up to 5% subsidy. Developing countries such as India, China and most of the South can give up to 10% subsidy. The Blue box subsidy is where State subsidises to prevent over production and thus stop market distortion. This could be putting limits on production or giving money for uncultivated land set aside for environmental purposes.

The 5% subsidy for developed countries is a lot of money for a farmer with 400 acres. However 10% subsidy for a farmer with 3 acres of land does not make farming viable. India has been defying this by giving 50% to 85% subsidies. Clearly, WTO is not happy. Or rather some countries in WTO are not happy.

A group of 17 countries, known as the CAIRNS group, want WTO to impose these subsidy limits on countries like India. Leading them are Canada, Australia and USA. Australia brought a case against India on its 85% sugarcane subsidy. India lost that.

USA, Canada and Australia particularly want to bring a case on wheat subsidy in India. These countries know that the agriculture sector could collapse in India and India may be forced to buy wheat from them. They want to penetrate the big Indian market.

WTO and INDIA

Under Dr Manmohan Singh and now Narendra Modi, India has resisted this pressure. India wants WTO to allow it to continue with high subsidies. Its food sovereignty depends on that. The Modi government has been withholding consent on some other agreements until these concessions are agreed, particularly on tariffs for e-commerce. In the current 2024 round at Abu Dhabi, Piyush Goyal, the Industry and Commerce minister, scuppered any agreement on fishing stocks as India cannot afford not to give subsidies to fishermen and farmers.

WHAT NOW

There has to be 100% consent for a WTO agreement to become binding. India will no doubt continue to resist any pressure to reduce subsidies. One way forward is for the Agreement on Agriculture to come out of WTO and be handed to UNCTAD, the United Nations Conference on Trade and Development. WTO is not obliged to be cognisant of human rights, sustainable development goals, right to family life, right to education etc as it is not a UN body. But UNCTAD is a UN body and its policies and agreements have to align with those conventions.

WHAT SHOULD INDIA AND FARMERS DO.

Some farmers are arguing that there should be MSP for all crops. This is not feasible and is not really part of a food sovereignty approach. The Government is mindful of the impact on environment and water. Farmers and Indian government need to work together internally to achieve sensible policies and internationally to force changes at WTO or take Agreement on Agriculture out of WTO.

For more details visit us: https://lokmarg.com/

When The Farmer Fights Back

By Amit Sengupta

Iconic moments captured on camera often express a historical event which shakes the conscience of the civil society for all times to come. Captured in a fleeting flash, they remain etched in public memory: the Afghan girl, Sharbat Gula, then nameless, shot by Steve McCurry in June 1985 in a Pakistani refugee camp, celebrated on the cover of National Geographic; one thin man standing in defiance against a row of tanks at Tiananmen Square in Beijing, June 1989; earlier than that, naked children running from a napalm bomb during the Vietnam war; and Che Guevara’s dead body somewhere in a jungle in Bolivia, shot dead by CIA mercenaries.

In contemporary India, as thousands of farmers wait steadfastly at the Delhi-Haryana-UP borders, deciding their next move, some images have already captured the imagination: A dignified old Sikh farmer, totally non-violent, with flowing white beard, in a white kurta -pyjama and jacket, being threatened by a young, wiry cop, belligerent, aggressive and remorseless, his fingers clenched around a rod, his body tensed up with machismo and power.

There are other iconic images too of the struggle:  a young protester jumping from a trolley to a police water cannon vehicle, switching off the tap showering dirty water on a cold day on farmers, and jumping back. (He and his father have reportedly been charged now for murder)

Many endearing moments have arrived yet again: women and men cooking in community kitchens on the highway; women driving a convoy of tractors in protest; and farmers giving food and water to grateful cops.

The last image would have been appreciated by the likes of Nelson Mandela, Martin Luther King and Mahatma Gandhi. This is because the cops, many of them children of hardworking farmers from humble rural backgrounds, had earlier gone all out against the peaceful protesters. They had drenched them with water, in this cold, teargassed them, threatened them with lathis, dug medieval war-like trenches, brought in iron barricades, sand and mud trucks, huge cement slabs, sand bag walls, ship containers, barbed wires, and an endless row of cops in full gear, ready to charge.

REFERENCE POINT: Making Sense Of Central Farm Laws

The farmers have been protesting in Punjab and Haryana since September. November 26 was a national protest day organized jointly by farmer organisations and trade unions against the labour laws being unilaterally enacted by the Centre despite the economic collapse and mass unemployment of millions in the organized and informal sector. These might include draconian provisions like hire and fire, 12 hours work, mass sackings, major changes in pro-worker acts like the Inter-state Migrant Workers Act, Contract Workers Act, the Factories Act, the Industrial Disputes Act, etc, and changes in wages, safety and compensation, while contractors will be calling the shots with no regulations. These trade unions are also opposing unbridled privatisation of the public sector, including banks, railways and airports, whereby certain favoured industrialists of the ruling regime in Delhi are being brazenly backed.

Significantly, there are more than 250 farmers’ organization in the All India Kisan Sangharsh Coordination Committee, and they actually joined hands with the workers on November 26 all over the country, including in West Bengal and South India. The farmers march to Delhi from Punjab and Haryana, and also other Hindi heartland states like Uttarakhand, UP and Rajasthan, however, became the epicenter of this mass uprising, and it is not going to die down so soon.

Police used water cannons on protesting farmers

The question is, why the government is so adamant after pushing the three farm bills in Parliament without consensus? Why is it refusing to make the MSP a law? And why is it so rigidly refusing to budge, to negotiate with flexibility, using strong-arm tactics? What is that unsurmountable, one-dimensional pressure on the Narendra Modi regime that it is ready to alienate farmers, while choosing to block, barricade and brutalise them?

“The BJP government is toeing the line of corporate cronies,” said Vijoo Krishnan, speaking to Lokmarg. He is a top leader of the Left-led All India Kisan Sabha, which led the massive long march of farmers to Mumbai. “The intention of this government is total corporatization of Indian agriculture. But the resistance is unprecedented. Except for the BJP and RSS unions, all other workers and farmers’ unions have joined this resistance. Even state governments like Punjab and Rajasthan are exercising their federal rights in support of the farmers. Kerala has declared MSP for 16 agricultural products, and has protected the farmers during and after the lockdown. Besides, it is providing food to 90 lakh people, including ‘guest workers’ (migrant workers).”

Farmer leader J Hooda from Shamli, Western UP, speaking to Lokmarg at the UP-Delhi barricades, said: “The farmers have always known their sinister motives – to sell our land and agriculture to corporates. Modi is doing precisely that to favour his favourite industrialists. Now the farmers are not going to relent. Drop the farm bills. Make a new law on MSP.”

Hooda says the farmer makes huge losses in the open market, because it is based on market whims, unscrupulous private players and demand and supply ratio. Often, distress sale becomes a norm. Without government support in states, or a central MSP, farmers will be doomed. “They want to abolish local mandis. So where will we go to sell our produce – can we compete in the international market with massive, mechanized farming and huge multinational farmer lobbies? Why are they pushing us into the hands of unethical corporates who are now trying to capture Indian agriculture through the backdoor backed by the BJP regime?”

Indeed, while Punjab and Haryana (with UP and MP) are the biggest producers of rice and wheat, there are 23 crops, including cereals, pulses, commercial crops, on the list. India is 80 per cent agriculture – the food chain begins at the land of the tiller and ends long distances in metros and small towns. In this complex and long chain, thousands of people are involved: farmers, entire families, landless farmers and sharecroppers, small and middle farmers, local services and ancillary networks, small markets, shopkeepers, loaders, truckers, workers, mandis, mills and factories, small scale and big industries, and others. It’s corporate and government propaganda that only 6 per cent of rich farmers are benefitting from MSP. What about the millions integrated to the entire process till the food reaches your table? ask farmers.

Argues Vijoo Krishnan: “MSP ensures at least that much for farmers if public procurement is there. In states where there is no effective public procurement, farmers get paid even below the MSP. For instance, while the MSP of paddy is around Rs 1860 per quintal in Bihar, Odisha etc, farmers are forced to sell at Rs 1000-1200 per quintal.”

ALSO READ: ‘MSP Must Be Fixed For All Crops’

Farmers are also arguing that even the MSP, based on state averages, is arbitrary. Kerala pays many times more per quintal for paddy, and the crop produce costs vary from state to state. But the government refuses to usher in serious policy changes for large scale benefits to the vast rural sector, even while pampering and subsidising big industrialists and waiving off their debts etc, while facilitating lucrative contracts for them, like the privatisation of airports and railways, or the Rafael deal.

Farmer are angry that the government is shy on implementing the comprehensive Swaminathan Commission recommendations, including the guarantee of 50 per cent more than the stated MSP, among other reforms, like compensating for land, labour, seed, pesticides, fertilisers, diesel, electricity, water, tractors, machines, and other things needed for agriculture. They are asking why the government has not returned the GST to them on all the additional things they have used for agriculture.

Indian economy is in crisis because crony capitalism by profit sharks have ravaged it with no signs of recovery during the pandemic. Now they are greedily eyeing the post-independence public sector and agriculture. If the farmers are driven to the edge, for the benefit of favoured industrialists and powerful MNCs, then there is no option left for them but to fight back. That is why, as of now, it is a do or die struggle for the thousands of defiant and non-violent farmers, now steadfast at the borders of the capital of India.

The Newly Enacted Agriculture Bills

Explained – Farm Bills And Farmers Protests

By LokMarg

Farmers across the country are protesting against the newly enacted Agriculture Bills. The Centre calls these laws key to reforms in the agriculture sector to benefit farmers, the protests continue to spread. There is fear among farmers that these laws will make them dependent on corporate houses mercy.

To understand the contentious provisions under the new law and the previous farm produce procurement system, LokMarg speaks to Dr Darshanpal Singh, a noted agriculturist and farmer leader from Punjab.

Dr Singh explains how farmers will be affected by the new laws and their grievances, as well the measures needed to support the farmer. Watch this interview here:

A Farmer and Social Activist from Patiala

‘New Agri Laws Will Turn Farmers Into Beggars’

By LokMarg

Angrez Singh, 56, a farmer and social activist from Patiala, Punjab, explains why he is protesting against the recently-passed Agricultural Bills

Ye Sarkar anndata ko bhikhari bana degi (This (Narendra Modi) government is bent on turning the farmer into a beggar). We can see it coming. First, this government made changes in the labour laws to suit large industrial houses; next it began to bypass environmental concerns for the benefits of mining magnates; and now come the Agriculture Bills. Can’t you see who the real beneficiaries are going to be?

Large corporate players coming in to invest in farming sector means only big farmers with resources and capacity to bargain with these business houses will benefit. Surely, albeit slowly, this will lead to one company having monopoly in due course of time. The same way as it happened in the telecom sector. And it will only be a matter of time when small farmers will be transported to the days of bandhua majdoori (bonded labour).

I feel the mandis were doing good work and acted as a safety net for small farmers across the country. There was a guarantee of minimum support price (MSP) as well as grievance redressal system in place. If all this goes, the farmers will completely be at the mercy of corporates. I am not saying the systems by the previous governments were perfect, but this change in the name of reforms is sure not going to work. You can’t put a whole system down right to the expectation of goodwill and fair play on part of corporates. We need to have checks and balances in place to safeguard the interest of small farmers.

WATCH: ‘Guarantee That No Farm Produce Will Sell Below MSP’

The new provisions were put in place as abruptly as the demonetisation decision was imposed on innocent people. There was no debate, no effort to build consensus and no pilot projects to see whether a plan, law, reform is actually efficient or not. I wonder if we are regressing to pre-Independence times of bulldozer laws because Agriculture Bills seem like a step in that direction.

I am happy that farmers’ groups and organisations across the country are united on the issue. Many a migrant labourers used to work in the farms of Punjab and because of the pandemic most of them had returned to their homes in other states. Today, we are short of farm hands. Producing food is no child’s play; it takes a lot of blood and sweat. While the farming sector can sure do with being better organized, I don’t think turning agriculture into business is a good idea. Ultimately it is the poorest of the poor who will suffer while the rich will get richer.

Agrez Singh with a family member at his native farm in Patiala, Punjab

Akali Dal leader Harsimrat Kaur Badal’s resignation from the Union Cabinet and the party’s withdrawal of support from the NDA are too little, too late. Akali leaders should have taken strict measures in June when these bills had been brought in as ordinances. This is only a last-minute effort to save face.

India used to face foodgrain crisis for many years after Independence, until the Green Revolution happened. Haryana and Punjab literally proved themselves as the food bowl of the country; other parts of the country picked up afterwards. Many farmers in Punjab and Haryana had come after Partition and had built their lives from scratch.

India is primarily an agricultural country and we consider the earth as our mother. People are emotionally attached to the land and its produce. We believe in sharing food and are efforts are not solely focussed on profits. The government should consider the emotional cost of these Farm Bills as well.

In the short run, only the farmer community might suffer, but slowly the stress will spread to larger sections of society as prices of foodgrains, vegetables and other farm produce shoot up. We hope social media as well as mainstream media understands the importance of these issues and encourages people to think deeply and convey their concerns to the government and I hope the government listens.