Making the Small Farmer Smile

IN THE WELTER of decisions made by the Union Cabinet on September 18, two items had a nondescript air about them. The only thing worth noticing about the Nutrient Based Subsidy (NBS) and the Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA) were their financial outlays aggregating to a total of ₹59,475 crore. These are no longer eye-popping numbers in an era when the money spent on free foodgrains comes to a neat pile of ₹11.80 lakh crore for five years. But it will be a mistake to judge their importance only by their money value. Their importance lies in their political potential in dealing with the politics of unruly farmers of North India.

PM-AASHA is an umbrella scheme to protect the income of farmers (annadata) that has four parts: Integrated Price Support and Stabilization Scheme (IPS&SS), the Price Deficit Payment Scheme (PDPS), the Market Intervention Scheme (MIS) and the Price Stabilization Fund (PSF). As these names suggest, these are schemes to contain volatility in the prices that farmers get for their crops. These crops include pulses, oilseeds, copra, tomato, onion, and potato. The ambit of these individual schemes varies crop by crop, but the overall goal is clear: ensuring that farmers (as well as consumers) do not suffer from volatility in the prices of these crops.

The interesting part of these schemes is that they involve non-wheat and non-paddy crops and, as such, largely bypass farmers in the politically volatile parts of North India, in particular, Punjab, parts of Haryana and western Uttar Pradesh where farmers have been mobilised for political ends.

It is interesting to compare the outlay on PM-AASHA—whose likely beneficiaries are poor and marginal farmers—with the amount of money spent on pampered farm­ers from Punjab, which is now a zone of political disaffection. PM-AASHA will incur a cost of ₹35,000 crore until the end of 2025-26. In contrast, in the 2023-24 wheat and rice marketing season—the full marketing year for which data on purchases from Pun­jab is available—the Centre footed the bill for the entire volume of foodgrain stock brought to the markets there. 121.12 lakh metric tonnes of wheat were bought from Punjab’s farmers at a minimum support price (MSP) and bonus of ₹2,125 per quintal. 124.14 lakh metric tonnes of rice were purchased at MSP and a bonus of ₹2,300 per quintal. One quintal equals 100kg. A rough calculation shows that ₹54,290 crore was spent on these purchases in 2023-24 marketing year, or 1.55 times the entire outlay for PM-AASHA until 2025-26. The comparison is between one single state, Punjab, and a clutch of programmes for the entire country. (Punjab produces a negligible quantity of oilseeds and pulses compared with the rest of India). If anything, the final cost of what the Centre has to bear in the case of Punjab is understated: the economic cost of wheat and rice is significantly higher than the MSP.

In terms of inter se equality of support for farmers, this is a deeply iniquitous system. Pulse and oilseed farmers are scattered across the country while wheat and rice farmers are geographically more concentrated, probably less so in the case of rice farming. But the ultimate political effect is visible: wheat and rice farmers can—and always do—unite quickly and make demands from the Centre while pulse and oilseed farmers, who are scattered across India, are unable to surmount the collective action barriers to act with political cohesion.

The schemes that are now part of PM-AASHA have emerged at different times in the past one decade. Schemes such as Price Support Scheme (PSS) and others were merged even as new ones were rolled out. The entire set is now more cohesive even as the approach is increasingly coherent. The idea is suggested by the name: helping farmers protect their income. As such, one can read a very different set of tea leaves in PM-AASHA.

If the scheme and allocations for it are substantially increased over time—say, they are doubled over time—two very different objectives can be met. The economic objective being that of providing fair remuneration to farmers who grow crops like pulses and oilseeds. MSPs for these crops are announced with unfailing regularity but unlike wheat and rice where purchases in mandis by the government are undertaken to the last grain, oilseed and pulses farmers are largely left to their own fate. With PM-AASHA over the years, this is changing. A greater financial muscle to the programme can change the fate of millions of these small and marginal farmers for the better.

Politically, some effects are already visible. Whenever rich and pampered farmers of Punjab, parts of Haryana and western UP march to New Delhi, it is hard to find even a handful of oil­seed and pulses-growing farmers. Their economic situations— and consequently, political incentives—are vastly different.

The danger now is different. In case the government wants to streamline and rationalise expenditures on purchasing wheat and rice, the possibility of “farmers’ unity” backed by political parties of the Opposition, turning into something more sinister, always remains. A degree of political irrationality in farmers’ politics, however different and antithetical their individual interests may be, always remains a possibility. This is all the more true given the nature of Opposition politics in India. Higher expenditures on small and marginal farmers who grow crops like pulses and oilseeds can come handy in isolating the farmers in the North who routinely harass the government with economically ruinous demands.

If PM-AASHA is enlarged even further, it can serve the economic interests of the country very well. Poor farmers can get the fruits of their labour, consumers can get pulses and oils for consumption (groundnut and sunflower oils, to give two examples) and reasonable prices even as the government can rationalise its spending priorities and move the country away from the ruinous wheat and rice cropping pattern in Punjab. Who knows that even Punjab, which is staring at an ecological disaster from disappearing groundwater supplies, too, can be saved.

The bigger change, of course, will be the ending of the abuse of farmers for political purposes and a decisive no to the danger of legalising MSPs for all crops, a step that if it is ever imple­mented, will spell India’s economic death knell.

At the moment, all this seems more wishful thinking than anything concrete. For one, the effects of programmes like PM-AASHA are not sudden but manifest over time. For another, much higher financial commitment to PM-AASHA is necessary before the political effects can be taken for granted. But what is interesting to note is that after years of tinkering with various price stabilisation schemes for crops, an umbrella programme is being re-designed and re-purposed in a cohesive manner. This needs to continue even as financial backing for the programme should be enhanced.

It is a well-known fact that as incomes increase, relative spending on cereals goes down even as that for protein-based foods (milk, eggs, meat, pulses, etc) goes up. Many years ago, the possibility of ‘protein inflation’ was considered very real. While prices of cereals and foodgrains are more or less stable—unless climate-induced factors hit production—India still needs to do some heavy lifting in the case of protein-based foods. PM-AASHA can go some distance in meeting that objective.

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