S Sivakumar

Govt can use waivers where warranted, but must also initiate reforms and push investments, with the pvt sector playing an anchor

The Dream Scenes contain many reforms and structural changes in agriculture, all of which have been advocated for nearly two decades. A bountiful crop meant access to real-time and hyper-local weather forecasts, available on the farmer’s mobile phone, as well as to personalised knowledge relevant to his soil and resilient to unpredictable crop-growing conditions. Selling directly meant sound market linkages riding on the reform in the APMC Act, allowing multiple buyers competing for his produce without him going to the mandi. They contain a simple insurance scheme that gave money when the crop failed, or the ability to manage price risk by selling futures/buying options on the commodity exchange via the FPO (farmer producer organisation), of which he is a member. They contain incentives through interest rate subvention for timely repayment of loan.

Despite this two-decade-old advocacy, such scenes still remain dreams for a majority of our farmers. Why does it have to be so, when everyone is concerned and those who matter know the solution? “It’s politics, stupid,” says my friend, mimicking the 1992 Clinton presidential campaign slogan: “The economy, stupid.”

Since 2008, loan waivers have almost never failed the promising political party in winning an election. Why will then a winning formula be given up by the political class? This is not to say that there’s no place for loan waivers. There are regions in the country that suffered from poor weather in 2014 and 2015, and crashing prices of crops in 2016 and 2017. These are fit cases for waiver, while the derivative markets evolve and the insurance scheme gets refined.

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I believe there’s a tyranny in the “or” paradigm. That is, the argument between waiver “or” reforms/ investments. Instead, harness the power of “and”. That is, go for waiver where warranted, “and” reforms/ investments. After de-stressing the distressed farmer through a waiver, just publish a five-year blueprint of reforms and investments, and implement them steadfastly. A to-do list without timelines is a recipe for disaster in execution, especially when all of them can’t be done overnight. Once the reforms agenda is set, knees shouldn’t jerk for every time prices rise or fall due to seasonal variations. I am talking about APMC Act, Essential Commodities Act, and Forward Contracts Regulation Act (now the Securities Contract Regulation Act).

Some of these are inevitable pains resulting out of the government continuing to play the same role as it did when we were a production-driven supply chain system, while we are transitioning to a demand-driven value chain system. The government has to co-opt the private sector to anchor the value chains to realise the national aspiration of doubling our farmers’ incomes. Actually, the potential is to treble, if not multiply even more.

Dream Scene 1 The farmer harvests a bountiful crop. Sells directly to a food processor or a retailer at a good price that factored in a special premium above the market rate towards the superior quality of the produce. He has a meaningful surplus after repaying a loan, takes another fresh one to buy inputs for the next crop. Timely repayment means near-zero interest cost, adjusting for the interest rate subvention from the government

Dream Scene 2 The farmer harvests a bountiful crop. So has every other farmer in the vicinity. Market prices crash, but he exercises the ‘Put Option’ he bought before planting the crop. He has a meaningful surplus after repaying the loan… (rest of the sequence – same as Scene 1)

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Dream Scene 3 The farmer loses more than half his standing crop to unseasonal rains that happened days before it is ready for harvest. He claims the insurance money, has a meaningful surplus after repaying the loan… (rest of the sequence – same as Scene 1)

Cut To Reality The farmer deeply regrets his decision to repay the loan, because those around him who chose not to repay are rewarded with a loan waiver!

Disclaimer: The writer is group head (agri & IT businesses), ITC. Views expressed above are the author’s own.



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