Though the government has hiked the minimum support price for crops, prices of most crops are below the MSP, leading to anger among farmers

Demands for farm loan waiver continue

Farm distress could hurt the BJP in some parts of the country in 2019

Will underwhelming agriculture growth become a liability for BJP in 2019?

Pandarinath Ausarman, a wiry 45-year-old with slicked-back hair, has just harvested maize in two of his 17 acres at Eklahera village, just outside Aurangabad city in the drought-prone Marathwada region of Maharashtra. He says he had read somewhere that the Central government had announced a minimum support price (MSP) of ₹1,700 for a quintal of maize. But all he was offered by traders was ₹1,100-1,200. “MSP is just on paper. It doesn’t reach the farmers,” he says, dejected, sitting outside a temple with a few other fellow farmers.

This is not the story of just Ausarman. Rural disquiet is spilling from the hinterland to highways, it is winding its way from paddy fields to Parliament Street. In late September, thousands of farmers marched from Haridwar to Delhi, demanding a loan waiver and a higher MSP. In March, 25,000 farmers walked from Nashik to Mumbai. Farmers’ fury can impact elections. The BJP faced that wrath in the Saurashtra region in last year’s Gujarat assembly elections. It again felt the blow in the by-poll to the Kairana parliamentary seat in western Uttar Pradesh. What bearing will it have on Madhya Pradesh and Rajasthan — two states that have been roiled by massive farmers’ agitations and which go to polls a few weeks from now, along with Chhattisgarh, Telangana and Mizoram? What will be the message from the angry kisan to the BJP in the 2019 general elections?

In 2016, midway into his term, Prime Minister Narendra Modi said at a kisan rally in Bareilly that it was his dream to see the farmers’ income double by 2022. In an interview with ET Magazine, Union Agriculture Minister Radha Mohan Singh reiterates it: “We have increased import duty on several commodities, raised minimum support price (MSP), widened insurance cover and invested big time in farm mechanisation, irrigation and modernisation. These… will definitely give results in the coming years. By 2022, farmers’ income will double at the least.” (See interview) Is this claim realistic?


According to a report by NITI Aayog, a government think tank, between 1993-94 and 2015-16, the income per cultivator grew at an annual rate of just 3.4%. To achieve Modi’s and Singh’s objective, the report adds, farmers’ real income will have to grow at 10.4% annually between 2015-16 and 2022-23 — more than three times the past growth rate.

Making the government’s task even harder is the fact that agriculture has grown at just 2.5% annually in the four years of Modi rule, compared with 3.6% in the previous 10 years, when the Congress-led United Progressive Alliance (UPA) was in power. Could this, combined with farmers’ anger over inadequate prices for their produce and demand for loans to be waived, pose problems for the BJP and its allies in 2019?

Minimum Support

Every year, the government announces MSP for 23 crops, but it does not mean much except in crops like paddy and wheat, which the Centre procures from some states at MSP. For other crops, market factors determine the prices. The government also has a fair and remunerative price for sugarcane, a crop with big political ramifications in parts of Uttar Pradesh and Maharashtra.

The farmer Pandarinath Ausarman pinned his hopes on maize only when cotton, the main crop in the region, began to fail him. He grows cotton in 10 acres. Rainfall in the administrative block, within which his village falls, was less than 40% of the average this year. That, in combination with pink bollworms, has resulted in cotton plants sporting a withered look, with very few cotton bolls to be seen. His yields dropped to a fifth of last year’s — so he was betting on maize. That, too, has failed him.

In October, the average wholesale price of maize across the country is around ₹1,480, still lower than MSP, according to government data. Most of the 14 kharif crops, for which MSP was announced earlier this year, have prices lower than MSP: prices of pulses like urad, tur and moong are 15-25% below MSP.

Around 1,380 km north of Aurangabad, in Pathanpur village in Meerut Cantonment in Uttar Pradesh, 70-year-old Ram Singh is having a hard time growing sugarcane, owing to outstanding dues from sugar mills. “We have yet to get payments for our 2016 crop delivered at a local mill. We expect a payment of ₹2 lakh. We have again taken a loan for this year’s crop. It’s a vicious cycle.” He adds that payments are not remunerative. “Last year we got ₹315 per quintal; our costs worked out to ₹280.” In its supplementary budget passed in September, the UP government proposed to advance ₹4,000 crore as a soft loan to private mills to pay farmers and set November 30 as the deadline for mills to settle arrears. The total dues owed by the country’s sugar mills to farmers are reportedly over ₹13,500 crore.

The Union government in June announced a relief package of ₹4,050 crore for sugarcane farmers, after the BJP’s defeat in Kairana in the sugar belt of western UP. It was followed by another ₹5,500 crore package in September. Sugarcane farmers are believed to play a crucial role in 35-40 Lok Sabha seats in UP (out of the total 80) and 10-15 seats (out of 48) in Maharashtra, the country’s biggest states. The BJP is in power in 18 out of the total 29 states, including UP and Maharashtra, either on its own or as an ally in the ruling coalition.

The Union government claimed that with the recent MSP announcement, it had fulfilled its promise of prices 50% higher than the cost of production. But the difference between the MSP and the cost of production is under 20% for most kharif crops, when costs like rentals for leased land and imputed rent for owned land are factored in. “There is a conceptual problem with our MSP. Prices cannot be determined just by costs. You need to look at demand also,” says Ashok Gulati, agricultural economist.

The body that fixes the MSP has suggested that the government pay the difference between the MSP and market prices, similar to a scheme called Bhavantar Bhugtan Yojana in Madhya Pradesh. This may result in a huge financial burden on the government — if market prices are 10% lower than MSP, it could be ₹56,500 crore, and if they are 30% lower, it could be ₹1.7 lakh crore, according to one estimate.

“It is foolish to expect traders to buy at MSP and then threaten to jail them for a year if they don’t,” says Prithviraj Chavan, a senior Congress leader and former Maharashtra chief minister, referring to an aborted state government plan to penalise traders who don’t buy at MSP.

The agriculture minister says the government’s efforts are aimed at ensuring prices that are above MSP. “MSP should be seen as a fall-back mechanism.” But how the government can do that is unclear.

Some believe that exports is the solution to price fluctuations. “There is, however, no major effort to find export markets,” says Vasant P Gandhi of the Centre for Management in Agriculture at the Indian Institute of Management in Ahmedabad. Exports of principal agri commodities declined in 2014-15 and 2015-16, but have picked up since. In 2017-18, they amounted to ₹2.5 lakh crore.

Agriculture Minister Singh says the muted growth in the sector in the past four years could be attributed to drought in 2014 and 2015. “The results of our effort will take time to fructify. They have begun to show in terms of numbers,” he adds, referring to agriculture growth in recent quarters — 4.5% in December 2017-March 2018 and 5.3% in April-May 2018. “This shows how the trend will be in the coming years.” The southwest monsoon this year, which accounts for 70% of India’s annual rains, has ended up being below normal, contrary to the Indian Meteorological Department forecast. It is the lowest since 2015.

Waiver in the Air

Farm loan waivers are often used by governments as a political tool to win over voters and as a temporary fix for farm distress. Since 2016, Tamil Nadu, Uttar Pradesh, Maharashtra, Punjab, Karnataka and Rajasthan have announced waivers for loans amounting to at least ₹1.3 lakh crore. Gulati believes these waivers will spoil the culture of credit in the country. But Chavan defends waivers: “If there are twothree consecutive years of drought, what will the farmer do? We do not have a robust crop insurance system.”

The UPA announced a loan waiver of ₹60,000 crore in 2008. Nilanjan Mukhopadhyay, political analyst, believes that and the Mahatma Gandhi National Rural Employment Guarantee Act were instrumental in the UPA’s victory in 2009. “But I’m not sure farm-loan waiver is enough to overcome caste-based politics.”

Jagannath Navale, a cotton and maize farmer like Ausarman in a nearby village, says he will vote for Modi again in 2019 if he announces a farm loan waiver. “Those who haven’t repaid their loans for years benefit from waivers, while people like us who repay regularly don’t, so why should we repay loans?”

What the Maharashtra government, or any BJPruled state government, does or does not for farmers may have an impact on the general election if voters see the state government as an extension of the Centre, since both are helmed by the same party.

One of the Modi government’s key initiatives is the PM Fasal Bima Yojana, a crop insurance scheme that cornered 28% of the Department of Agriculture’s budget in 2018-19. The government is targeting coverage for 50% of the gross cropped area in 2018-19, but might miss the target, given that last year, the coverage was reportedly only 24%, down from 30% in 2016-17. The number of farmers covered also declined from 57.25 million in 2016-17 to 48.75 million in 2017-18.

One of the reasons the government gave for the fall in numbers was the debt waiver schemes announced by UP and Maharashtra. Farmers have to pay a maximum of 2% of the sum insured for kharif crops, 1.5% for rabi crops and 5% for commercial and horticulture crops and the balance premium is shared equally by the Central and state governments.

Minister Radha Mohan Singh says the scheme will benefit farmers. “Compared with the last two years of UPA rule in which only 6.66 crore farmers were covered, we gave cover to 10.61 crore farmers in 2016-17 and 2017-18. Scale of finance is ascertained and premium is fixed according to estimated production. The insured money per hectare has gone up from UPA’s ₹17,500 to ₹38,035. Earlier the premium was high and risk coverage was limited. Plus, there was a cap on actual benefits. Our PM increased cover, removed capping and cut premium as well.”

Prem Shankar Pathak, a paddy farmer in Birsinghpur village in Sewapuri, Varanasi, says the premium for the scheme should come down further. “Getting payment is a challenge sometimes. I know of many farmers in nearby villages whose standing crop of paddy was ravaged by unseasonal rains but they have yet to recover any losses. When they approach banks, they are turned away for want of papers.” Varanasi is represented in the Lok Sabha by the prime minister.

Pramod Aggarwal, a scientist with the Consultative Group on International Agricultural Research, points to the logistical difficulty in assessing fields for the crop insurance scheme. “All the kharif crops mature around the same time. Samples need to be collected from millions of hectares within a span of 15 days. It’s humanly impossible.”

The minister says there is greater focus on agriculture sector during the Modi rule than under UPA. “Farm budget under the UPA in 2009-14 was ₹1,21,082 crore; our budget in 2014-19 has been to the tune of ₹2,11,694 crore,” he says. “Crop insurance cover has more than doubled in terms of insured amount. Budget for mechanisation of farming has been increased more than 10 times. ₹40,000 crore corpus has been created for 99 irrigation schemes; all of them will be completed in a year.”

However, if the upcoming assembly elections signal that farmers are unhappy with the BJP, then the Union government may quickly offer some sops before the general election. While that may be politically expedient for the party in the short run, agriculture needs a more reasoned approach if it is to be sustainable in the future.

[email protected]

With inputs from Prerna Katiyar in Meerut


“There is a conceptual problem with our MSP. Prices cannot be determined just by costs. You need to look at demand also”

Ashok Gulati,

agricultural economist

“Premium fixed under Fasal Bima Yojana is high and we hardly got any benefit after unseasonal rains ravaged our standing kharif crop”

Prem Shankar Pathak, farmer, Birsinghpur village, Varanasi