When Prime Minister Manmohan Singh met farmers in Andhra Pradesh today, his ‘‘New Deal’’ was compensation, a job, schemes for drinking water, drainage and education. And, of course, better access to credit.
Glaringly missing in Singh’s ‘‘New Deal’’ roadmap, as outlined in his address to the nation, is a promise to remove the heavy bias in agricultural policy in favour of foodgrains—a policy that has worked in favour of the prosperous farmers.
The bias isn’t new—the Green Revolution focussed on foodgrain production with high yield varieties of rice and wheat. Shortages of foodgrain are now a thing of the past but the policies of government are still stuck in a time warp.
As per the current policy, the government first promotes cultivation of cereals through a plethora of subsidies on fertilisers, power, water, seeds etc. It then buys vast quantities of cereals at above-market prices, through “minimum support prices”. The procurement is done through the Food Corporation of India, which gets subsidised ‘‘food credit’’ from banks.
Part of the grain is lost due to storage—this loss is borne by the government. Some is sold at low prices through PDS—this loss is also borne by the government. Some of it is exported at ridiculously low prices like Rs 2 per kg, to help produce beef outside India, and this loss is also borne by the government.
The poor do not benefit from this charade. The bulk of the wheat sold to PDS is from rich farmers who have big land holdings and a marketable surplus. The poor often buy wheat, and they suffer when the government’s policies elevate the price of wheat. Various middlemen make enormous profits out of PDS, and these middlemen are emphatically not poor.
This logic shows that the existing cereal policy is not pro poor. It is a warped and expensive way of trying to provide "a subsidy to the poor", and mostly lining the pockets of the rich. The money spent on this should instead be directly distributed to the poor. This would be a far more effective scheme in targeting poverty. This would also avoid distorting India’s agriculture.
What about the problem of dropping cereal production? Some politicians argue that India should continue producing additional foodgrains until the problems of hunger and poverty are solved in the country. The per capita consumption of rice in rural India fell from 86.5 kg per year in 1977 to 81 kg in 1999. This is said to be shameful and seen as a sign of increasing hunger and poverty. It is, therefore, argued that we need to push further and put more resources into the policy plank which gave the green revolution.
But the world has changed. When people get less poor, their diet shifts away from cereals. While the consumption of wheat has fallen from 65 kg per every urban Indian in 1977 to 55 kg in 1999, it has been accompanied by an increase in vegetable consumpion from 40 kg to 70 kg, of milk from 40 kg to 72 kg, of fruit from 6 kg to 19 kg.
In rural India too, the fall in the consumption of rice has been accompanied by an sharp increase in the consumption of milk from 25 kg to 50 kg, vegetables from 25 kg to 66 kg, and fruit from 3 kg to 17 kg.
Farmers across India have responded to the increase in demand by raising production of these items. We should rejoice at the dropping production of cereals!
The world of agriculture beyond cereals offers alluring higher incomes for small farmers. These crops generate greater income, for more people, than the production of cereals. Vegetable cultivation is estimated to be 5 times more profitable than cereals.
Fruit cultivation is found to be 8 times more profitable than cereals. Indian farmers can earn enormous revenues by selling high value agricultural products across the globe.
The production of high value crops like milk, eggs, fish and vegetables generates far more employment than do cereals. A recent EPW article by P. Joshi, Ashok Gulati, and colleagues shows that a 1 hectare shift in area from wheat to potatoes would generate 145 additional mandays of employment. While wheat requires 55 mandays per hectare on average, onions require 124 mandays, cabbage 110 mandays, tomatoes 195 mandays and so on.
A fascinating fact highlighted by Joshi and his coauthors is about the greater extent to which small farmers have shifted away from cereals. Cereal production is mechanised, and works very well for large land holdings and uses equipment like tractors.
In contrast, the production of fruits, flowers and vegetables is highly labour intensive. Small holders tend to diversify more as it provides them with the opportunity of incomes that are both higher and more regular.
Manmohan Singh’s New Deal should be squarely focused on this defining issue about Indian agriculture: to get away from the pro-rich cereal bias, and shift India into becoming a world power in the production of fruits, vegetables, milk, eggs, meat and flowers.
This shift in public policy will hurt the interests of mechanised rich farmers with large land holdings, who are profiting from the existing cereal-oriented policy. It will benefit hundreds of millions of small farmers and landless workers.
What is holding back this revolution, apart from government resources going into propping up the cereal economy? Road networks, cold storages and access to markets have been seen to have a very significant impact on the shift towards production of high value agricultural products.
Milk, fish, meat, fruit and vegetables are more perishable and require more infrastructural facilities like cold storage chains and good roads than do cereals. The NHDP project may do more for agriculture than the tens of thousands of crore being spent on agriculture.
Income and employment in rural India cannot increase by growing more cereals. Today the bias in favour of cereals has little to do with the objective of raising employment and income of the poor. It has more to do with the political power of the rich farmer, the main beneficiary of subsidies for cereal production. No ‘‘deal’’ for rural India is a ‘‘New Deal’’ unless it squarely removes the bias in favour of cereals.