Farmers’ livelihoods: Need for guaranteed prices against market volatility

Dipak Kurmi

(The writer can be reached at dipakkurmiglpltd@gmail.com.)

Prime Minister Narendra Modi recently introduced the Unified Pension Scheme (UPS), a move touted as a significant reform aimed at providing dignity and financial security to government employees. The UPS assures a pension equivalent to 50% of the last drawn salary, a far cry from the market-linked National Pension System (NPS) that had previously left many government employees anxious about their financial futures post-retirement. The Prime Minister’s acknowledgement of the contribution of government employees to national progress is commendable, but it also underscores a glaring disparity in how different segments of the workforce are treated, particularly when comparing the financial security provided to government employees versus the economic precarity faced by farmers.

While the UPS is a step towards ensuring a ‘defined benefit’ for government employees, effectively shielding them from the uncertainties of the market, farmers in India continue to grapple with market forces that have consistently failed them. Despite Prime Minister Modi’s numerous accolades for the resilience of the farming community, the long-standing demand for guaranteed prices for their produce remains unaddressed. The contradiction is stark: while the government has moved swiftly to protect its employees from the volatility of the markets, it has been reluctant to extend similar protections to farmers, who are equally vital to the nation’s progress.

The Market’s Failure for Farmers: The UPS is a tacit admission that the market-linked pension scheme was inadequate for government employees, raising the question: if markets have failed to provide security for retired employees, how can they be expected to deliver for farmers? The reality is that markets, left to their own devices, have historically failed to secure higher incomes for farmers, not just in India but globally. In major economies, either substantial subsidies fill the income gap (as seen in China, which leads the world in agricultural subsidies), or agriculture is left to fend for itself in a volatile market, as is the case in India.

For nearly 25 years, Indian farmers have been caught in a cycle of poverty, with studies showing that many have been incurring losses year after year. The situation is dire, and the only plausible solution to lift farmers out of perpetual poverty is through the establishment of a legally binding framework that guarantees farm prices. Yet, when it comes to farmers, the government’s response has been to caution against such guarantees, citing potential market distortions. This stance is particularly perplexing given the government’s willingness to provide assured pensions for its employees without similar concerns about market distortion.

The Double Standard: Employees vs. Farmers: The bias in favour of market forces becomes evident when comparing the government’s approach to providing economic security for its employees versus its farmers. The Union Cabinet’s recent decision to tweak the pension scheme for government employees, ensuring they do not have to face the ‘tyranny of the markets,’ stands in stark contrast to the government’s refusal to guarantee prices for farmers. Policymakers argue that a legal Minimum Support Price (MSP) would distort the market, leading to higher consumer prices. However, this argument seems disingenuous when considering that the real fear is not about consumer prices but about squeezing corporate profits. The same economists who warn against the distortion of markets through assured prices for farmers are often silent when corporations engage in price gouging—jacking up prices to exploit consumers.

Price gouging, a common practice in capitalist markets, especially in times of crisis, is the real market distortion. In the United States, for instance, 38 states, including economic powerhouses like California, Florida, and New York, have enacted laws to prevent price gouging. During the COVID-19 pandemic, New York took action against companies that had hiked the prices of essential goods like hand sanitizers by 400%. Despite this, free-market economists have often criticized such measures as a return to Soviet-style price controls, displaying a clear double standard.

The Case for Guaranteed Prices for Farmers: The reluctance to provide farmers with an assured income is not based on economic logic but on an ideological commitment to market orthodoxy. As Vice President Kamala Harris has pointed out, price gouging is responsible for a significant increase in the prices of food and grocery items in the U.S. since the pandemic, with some economists even suggesting that banning price gouging is both good economics and good politics. If a ban on price gouging is acceptable in a free-market economy like the U.S., why is there such resistance to providing Indian farmers with a guaranteed price for their produce?

The answer lies in the government’s prioritization of corporate profits over the welfare of farmers. The Department of Expenditure’s justification for the UPS, which it terms ‘fiscally prudent’ and a measure to prevent fiscal hardship for future generations, rings hollow when considering the plight of India’s farmers. If the government can provide social security for its employees, why can’t it ensure economic security for its farmers, who contribute just as significantly, if not more, to national progress? After all, it is because of the hard work of farmers that India enjoys food security.

The Consequences of Market Neglect: The recent crash in soybean prices serves as a stark reminder of the volatility and unpredictability that farmers face in the market. When Kamlesh Patidar, a farmer from Madhya Pradesh’s Mandsaur district, decided to re-plough his standing soybean crop, he likely did not anticipate the chain reaction it would set off. The video of his actions went viral, and soon, reports of other farmers uprooting their crops began to surface. The collapse in soybean prices, even before the harvest season, negated the economic advice often given to farmers: to hold on to their harvest until they can secure a better price. Patidar, like many others, had saved his previous year’s harvest in the hope of higher prices, only to find that even this strategy was futile.

The reality is that the current market prices for soybean, which are significantly lower than the MSP, do not even cover production costs. This is not an isolated incident. Similar stories have emerged from across the country, with tomato prices crashing by 60% and basmati prices falling by 28%. These price crashes are not unique to this year; they have become an annual occurrence, one that the nation seems to accept with a disturbing level of complacency.

The Urgent Need for Agricultural Reform: The time has come for a significant reform in India’s agricultural sector. Providing a legally guaranteed MSP to farmers who have a marketable surplus and direct income support to marginal farmers is not just an economic necessity but a moral imperative. The continued neglect of farmers’ economic security is a stain on the nation’s conscience, one that cannot be justified by appeals to market forces.

If the government can protect its employees from market volatility, it must extend the same protection to farmers. The introduction of the UPS is a step in the right direction for government employees, but it also highlights the glaring inequality in how the government treats its farmers. By ensuring a guaranteed price for farmers, the government can prevent the fiscal hardship that future generations of farmers will undoubtedly face if the current system remains unchanged.

The dual standards in market economics—protecting government employees from market risks while leaving farmers to the mercy of volatile markets—must be addressed. The economic security of farmers is not just about ensuring fair prices; it is about recognizing their invaluable contribution to the nation’s food security and overall progress. As India moves forward, it must do so with a commitment to equity and justice, ensuring that the benefits of economic reforms are shared by all, especially those who feed the nation.