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Why are farmers not getting a fair price? (Relevant for GS Prelims, GS mains Paper III; Economics)

Why the drop-in rates?
Garlic has been the latest casualty of the price crash in the vegetable market after poor returns of tomato and potato crops forced many farmers to abandon their produce owing to a bumper output in recent days. The miseries of financially distressed farmers seem far from over even as they continue to demand waiver of farm loans and remunerative prices for their produce through several platforms across the country.

The problem of plenty has hit the farmers badly. While garlic farmers in Madhya Pradesh and Rajasthan, which produce 45% of the country’s garlic, recently fetched as low as Rs.1 a kg in wholesale prices, the instances of tomato farmers dumping their harvest on the fields earlier this month — be it in Haryana, Tamil Nadu or Uttar Pradesh after prices nosedived — have only highlighted their woes. Tomato production during 2017-18, according to the first advance estimate, is likely to be 7.8% higher than that of the previous year. However, it is 20% higher than the average production of the past five years. Similarly, potato production is estimated to be 1.5% higher than that of the previous year. However, compared with the average production of the past five years, it is 8.7% higher. These figures indicate that farmers are producing more without good returns. Why are vegetable farmers not getting a fair price? Season after season, farmers face price uncertainties mainly owing to fluctuations in demand and supply caused by bumper or poor production, speculation and hoarding by traders.

Are traders manipulating prices?
In Madhya Pradesh, after garlic prices dropped sharply, the government decided to include it in the Bhavantar Bhugtan Yojana (Price Deficit Payment Scheme) that was introduced in the Kharif 2017 season. Farmers, however, rue that with the conditions associated with the scheme, most of them are unable to gain any benefit. The scheme is aimed at providing price deficit payments to farmers if the market prices are below the minimum support price. Farmer leaders believe the implementation of this scheme in the first season has resulted in little benefit to farmers, with very little to prevent manipulation of prices by traders. “The government claims to have disbursed ₹1,900 crore in compensation, but a large section of farmers has been excluded from the scheme,” says Jai Kisan Andolan national convener Avik Saha. Those left out bore the brunt of a larger price crash because of market manipulation.

What is the way forward?
The fluctuation in vegetable prices has become a perennial problem and is usually associated with the economics of demand and supply. Farmers, mainly marginal and small landholders, depend on intermediaries to sell their produce. Being perishable, vegetables are more prone to price fluctuation, hence they require better infrastructure for storage and marketing. Contract farming is an alternative for farmers to reduce financial risks by providing an assured market for their produce at a pre-agreed price. The Centre last week approved the State/UT Agricultural Produce and Livestock Contract Farming and Services (Promotion and Facilitation) Act, 2018. The Act lays stress on protecting the interests of farmers, considering them as weaker of the two parties entering into a contract. The Act is aimed at ensuring the purchase of the entire pre-agreed quantity of one or more of produce, livestock or its product. Although varied forms of contract farming exist in some pockets, a formal system is not widespread. By and large, cultivation of commercial crops such as cotton, sugarcane, tobacco, tea, coffee, rubber and dairy has had some elements of informal contract farming.

Experts believe that integration of vegetable and fruit growers with agro-processing units through contract farming could prove beneficial to producers as it takes care of price fluctuations and helps to mitigate production risk. Pratap Singh Birthal, professor at the National Institute of Agricultural Economics and Policy Research, says: “Under the contract farming law, the agreements would help farmers get an assured price for the produce, which will act as a buffer against price volatility and market fluctuations…”

(Adapted from The Hindu)



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