 Hello and welcome to NewsClick. Today we have here with us Dr. Vikas Rabu from JNU to discuss with us the current agrarian crisis that is going on in India. Welcome to NewsClick. As you know there is a prevalent agrarian crisis right now and the dominant narrative seems to be that it is due to the price crash in the major agricultural commodities which is caused due to the glutton production that is this year after the drought of previous two years. What is your take on it? Firstly the agrarian crisis is something that has been building up for last three years. It is not something that's happened this year. It's been happening for a while and you know we've been hearing the reports of suicides and all the kinds of distress that's been going on. So it's something that's been going on for some time. We have to understand that this year is a normal year of production after two years of drought and in that sense it's not really a year in which there's been some excess production or anything. It's a year in which it's a normal year of production. It's a good year of production there was you know good monsoons in that sense but it's not as if farmers have produced such a large amount of food grain that the you know it's there's excess supply. The problem that has caused this crisis is the fact that there has been a demand deflation in this year primarily because of demonetization. Demonetization has kicked off a whole series of things in the economy which have resulted in depressing the demand. So the amount of food grain that would have been absorbed in a normal year this year is not being absorbed because people don't have purchasing power. Can you explain how this deflation of demand happened in rural areas? You see demonetization happened when farmers were going to start doing rubbish sowing. Now that is typically a time when for example there is a lot of labour is hired for land preparation for plowing and you know the tractors are hired and all of that that you know whole sort of a lot of activity on the fields happens at that time. So there is this whole economy that a substantial amount of money in terms of what goes into production for the rubbish crop is actually spent at that time. Now demonetization and the whole crisis of cash happened almost throughout the whole period of rubbish which meant that for all the tasks that were involved in production farmers were short of cash which meant that they were not able to pay to the workers to suppliers to providers of machinery and so on and so forth which meant that all these people then had less money to be able to buy things by food and so on. So you basically have a situation where a large part of your population that lives in the rural areas and either is farmers themselves or people who depend in somewhere in agriculture were hit and therefore there was I mean there is less purchasing power in the rural economy and that was not just the farmers it was everybody else as well. So there was a sort of huge effect on purchasing power of people working people in the rural areas which has created this problem. Now you have this problem that the farmers were not able to pay to the workers. Now this in some cases would have meant that there were outstanding payments in other cases it would have also simply meant depressing the wages depressing the rental charges depressing the salaries of tractor drivers reducing the depressing the wage the payments to mechanics and all of that. So there is general deflation and there was a general deflation and there is a problem of non-payment of dues. All of us know that government announces minimum support price for major agricultural commodities but the news is that the market price is much lower than the MSP right now. Now how can that happen government obviously farmers can go and sell to the government at the MSP why are they not doing that? There are two things one is that over the last three years or so particularly since the BJP has come to power the MSP has not been rising very much. So you know in real terms you know accounting for the general inflation in the economy the MSP has not been rising very much. The second thing is and this is a structural problem that has always been there that even when the government announces MSP it does not necessarily make itself available to do the procurement. So you know the procurement agencies FCI and state level procurement agencies actually do not necessarily do the procurement in all the states. There are some states where a lot of procurement happens there are some states where they have permanent infrastructure in the Mondays where government agencies are there and they do the procurement. In years such as this most of the grain that farmers in Punjab or Haryana would have gone to FCI or Mark Fed and so on. So bulk of the market surplus from Punjab and Haryana this year would have actually landed up in the FCI go downs but then there are other states where FCI is simply not there West Bengal or you know Bihar or Orissa and there is no procurement. Now in such cases farmers simply don't have a place to go to where they can sell. So there is this notional MSP but that's only notional because farmers doesn't have anywhere to go to where here she can sell the grain at that price. So one of the demands of farmers in Madhya Pradesh and Maharashtra Rajasthan who have been agitating is that the MSP should be fixed in such a way that it should be 50% over and above the cost of production. Now a lot of people 50% over and above the cost of production seems very high. So is there any precedence in other countries where you know the price is so high? Okay but before this you know when we talk of for example this MSP you also have to understand that while MSP is actually announced for a whole range of crops there are only some crops for which procurement actually happens and there are a whole range of crops for which MSP is notional everywhere. There is really no very little procurement that happens. The government does not even have infrastructure to procure and distribute. So you know pulses for example historically there was always an MSP but government simply does not have infrastructure to store pulses pulses are susceptible to storage base they're eaten up by brook heads and so on. So now MSP is supposed to be a price that is a minimum support price which the government is notionally government is supposed to determine on the basis of an assessment of what the cost of production is. Now it is typically pegged at some level over and above average cost of production. Now one is to understand that not every farmer produces at the average cost in particular with very highly skewed distribution of land and resources. You know some rich farmers may be producing at low cost but a vast bulk of poor peasants actually end up producing at cost which is much higher. You know think of farmers who need to rent the land to produce or farmers who buy inputs in small quantities and therefore buy them at a higher price or farmers who can't go to a wholesaler buy them in retail buy them through various agents and brokers and therefore end up buying the inputs at a price that is higher than what large farmer would buy. So in other words you have a vast number of farmers who was proportion of farmers who actually have costs that are higher than the average cost. So when you say 50 percent of cost 50 percent over and above cost it's not 50 percent over and above for everybody it is 50 percent over and above an average in a skewed distribution. So bulk of the farmers are not going to get 50 percent. The other thing you have to keep in mind is the fact that the scale of production in India for any agricultural household is actually quite small. Bulk of your farmers are marginal or small farmers which means that you're talking about median farmer with something like half a hectare of land. Now although 50 percent in terms of percent sounds very large it means in absolute terms an income that's tiny you see. So once talking of unless one has a return of something like 50 percent you are going to end up in a situation where the farmers will not even be able to get income that would be sufficient for subsistence. Now in some of the you know it's this whole problem of you know there's this whole neo-liberal neo-classical argument that is often made that you know producers need to be competitive across the world. So Indian farmers have to be competitive vis-a-vis their Canadian or Australian counterpart. Now this is completely flawed. You know I mean think of compare say an Indian farmer with a Canadian or an Australian farmer. Now at the same level of cost if both the farmers get say 10 percent return it would mean a fancy absolute income for a Canadian farmer who has 600 hectares of land and it will be a disaster for an Indian farmer with 0.5 hectares of land. So the absolute income is something that one needs to look at particular in agriculture in particular because the land sizes are fixed. Land is a fixed is the constrained input. I can't expand my enterprise unlike you know an industrial enterprise. I can't expand my production simply because the amount of land I have is fixed. Now given that a typical Indian farmer is working on a very small land holding means that the absolute amount of income for an Indian farmer could be anything like 5000 rupees a year 10,000 rupees a year and in fact the other thing is that if one accounts for their own labour if one accounts for the cost of their own capital if one accounts for the cost of the all the time that they put in labouring on the field vast majority of Indian farmers would actually be incurring losses. So talking of international comparison one of the arguments that government is giving for the price crash is also that there is an over production all over the world and there is a crash in the agricultural commodity prices internationally. So is that a reason? Look India largely the major crops India produces for its own markets. I mean India needs to produce wheat and rice and pulses for its own market India in fact imports pulses as you know large amounts of pulses are imported. There is some export of rice and wheat but it's not because the Indian demand is adequately met it's and people are starving in the country. So you know ideally if you were able to have reasonable controls and trade I mean your own domestic production should meet the domestic demand and if their prices fall outside for commodities that you import it should be good for you. So you should actually be happy that your pulse imports this year are going to cost less but the problem is that you are not able to resist the potential threat of global exports being dumped into India. So what about this issue of debt waiver? A demand of these farmers organizations who have been agitating in multiple states have been that they loan should be weighed but there is also an argument mainly coming from RBI that it will set a bad precedent if farmers loans are being being waived. What do you think about it? Well I think the whole problem of precedent is something that we have to we don't need to worry about too much. I mean what about precedents that are given when we when we give huge amounts of we write of debts of big big corporates you know what what what precedents to be set you know what precedents are set when when Vijay Malaya happily walks off with a lot of money from the banks. So you know I don't think precedent is what worries me so much. I in fact think that in the present situation immediate national debt waiver is the first thing that must be done and it must be done immediately because not so much that not just that it would it would help the farmers. It would make the farmers be eligible to take loans from the banks and be able to pay up you know make all the outstanding payments. Thank you Vikram. Thank you. Thank you for watching NewsClick. Keep watching us on newsclick.in.