The why and how of farm distress
Duty-free imports and a plentiful harvest caused a near-50% dip in food item prices in the wholesale market and by 14-20% in retail, data released by the government shows. This phenomenon gave rise to violent protests by farmers in Maharashtra, Madhya Pradesh and Rajasthan.
The death of six farmers in clashes with police in Madhya Pradesh’s Mandsaur district brought the farm crisis into national focus, uniting the Opposition against the NDA government. The Centre, for its part, reiterated its promise of doubling farmers’ income by 2020.
The indicators of how farm produce prices crashed this year became clear on Monday, when Consumer Price Index (CPI) was released. One can understand the reasons for farm distress in a bumper crop year by comparing CPI prices with the latest wholesale prices of pulses and vegetables in agricultural markets.
The index showed that vegetable prices fell by about 13.5% in May, as compared to the corresponding month last year. The dip in the price of pulses was even higher, at 19.5%. This led to an overall deflation of 1.05% in food prices for the first time since 2012.
The fall was higher in wholesale markets, where farmers offload their produce, with pulses and vegetables selling at nearly two-thirds (or 63%) of last year’s price. “It was a sad year for farmers despite a bumper crop after two tough years (of drought),” observed T Haque, former head of the Commission for Agriculture Costs and Prices (CACP). “In many states, farmers have not even been able to recover the input costs,” he said.
India’s farm sector production grew by 8% this year, the highest ever. According to agriculture ministry data, the production of pulses amounted to 22.14 million tonnes — 50% higher than 2014-15. Horticultural products witnessed a growth of over 40%.
However, the high production caused an unprecedented glut in farm markets already loaded with imported food items, including pulses. The government imposed 10% duty on these items in May, after prices crashed.
In 2015-16, the Centre allowed the import of pulses such as pigeon peas (tur dal) and lentils (mosur) to check rising prices, even as the Opposition accused it of failing to control food inflation. The resultant glut in the market caused prices to come crashing, and the dip was as low as 80% for commodities such as onions.
Many farmers like Rakesh started growing onions after prices skyrocketed in 2014, leading to an increase in its area under cultivation. Pigeon peas witnessed a similar trend in 2015. “It seems like farmers were not looking at anything else,” said a senior agriculture ministry official. “They thought onions and pigeon peas would fetch them a good price, but they lost money.”