The Telegraph
Since 1st March, 1999
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On the face of it, the Centre’s proposed income insurance scheme for farmers seems a brilliant idea that may fetch additional votes for the Bharatiya Janata Party in the coming elections. But the scheme — which seeks to protect farmers’ income from falling yield and falling prices — may lead to corruption. It might also prove more profitable for traders than for farmers. In reality, the government, which wants to be rid of the responsibility of implementing the minimum support price for crops and their procurement in the states, seems to have ditched the farmers.

In fact, the government has been wanting to de-link the MSP from procurement for the last few years. First, it tried to shift the burden of procurement to the states, but abandoned the proposal in the face of opposition from Punjab and Haryana. It then came up with an income support scheme which met with the same fate. The income insurance scheme is a version of this earlier one.

The new proposal is being justified on the grounds that the existing MSP and procurement scheme applies to rice and wheat crop only, and that too in a few states like Andhra Pradesh, Punjab and Haryana. So why not extend this scheme to make it more just' Now a rice farmer in Uttar Pradesh is compelled to sell his produce at a rate much below the announced MSP, while his counterparts in Punjab and Haryana get a much higher price. This is because the government agencies and the Food Corporation of India do not buy rice and wheat from farmers in UP.

Real distortions

With the new scheme in place, the FCI will not need to procure foodgrains from the farmers at the official MSP. Officials also say the scheme is “WTO-compatible” since it does not involve “trade-distorting” payments to farmers, with the market left open to private players.

Once the scheme is implemented, close to 11 crore farmers will have to sell their produce to private traders at prices set by them, with the insurer bridging the gap between the lower market price and the MSP. But can the government make timely payments' Take the sugarcane growers in UP. The “beneficiaries” of a scheme far better than the one proposed by the Centre, they are never paid in time, leading them to fall into debt traps. Then there is corruption which victimizes the poor farmers and benefits the rich farmers, traders and millowners.

The Punjab government has criticized the new scheme since it applies to wheat and paddy alone. It will bring more areas in the state under paddy and wheat cultivation, while support measures are needed for crops such as cotton, sunflower, rape seeds, mustard and pulses whose yield as well as prices are relatively more volatile and prone to variations.

Premium trouble

The state government also faults the calculation of average crop yield on the basis of “last five years”, irrespective of drought or flood; it wants the calculation to be for “the last five normal crop years.” It also has problems with the premium rates for insurance cover. The proposed eight and four per cent for paddy and wheat respectively, are too high for farmers in Punjab because the fluctuations in yield for these two crops are insignificant here. Farmers in other states will also find it difficult to pay such high premiums.

At present, the MSP announced by the Centre is far higher than the recommendations of the commission for agricultural costs and prices. But the “guaranteed income” in the proposed scheme will be based on the CACP’s recommendations.

A much better idea is the NABARD amendment bill, which allows farmers credit at a low nine per cent interest rate. Sadly, it is hanging fire now because of a tiff between the ministries of agriculture and finance.

The FCI, say agriculture ministry officials, will continue to acquire foodgrains under the new scheme but only to meet the needs of the public distribution system and maintaining a buffer stock. Unfortunately, the Centre and state government ignore the need for food security at the household level. Everyone seems to be preoccupied with politics only.

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