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Farm protests: Why the government’s promise to buy crops at minimum support prices is often hollow

Farm protests: Why the government’s promise to buy crops at minimum support prices is often hollow

More than one loan waiver, which groups of Protestant farmers in several states required is the establishment of a report drawn up in 2006 by a committee headed by scientific scientist MS Swaminathan. The main recommendation of the committee was to set the minimum support price for agricultural products at 50% of the benefits in the farmer’s cost of production.

A minimum support price is government intervention to protect farmers against sudden falls in market prices. This is the speed at which the government buys agricultural products when there are no other buyers in the market.

On the surface, the formula of the commission of a Swaminathan higher minimum guarantee prices based on the cost of production would strengthen the safety net for farmers.

But a closer look shows that it would have a limited impact because the support of the minimum price mechanism is broken. Here is why.

The central government said a minimum support price for 25 crops, including key grains, legumes, oilseeds and cotton, jute, coconuts and sugarcane. But the most visible offer in the minimum price support mechanism is for both cereals: wheat and rice. The Center purchases large quantities of farmers to fulfill their obligations under the National Food Safety Act. According to the law, the Center must assume the cost of providing 75 per cent of India’s rural population with five kilograms of grain per month at highly subsidized prices sold in the public distribution system.

In order to acquire wheat and rice, the Indian Food Corporation and the Indian National Federation of Marketing Federation, financed by the Center, accountants have been established in the main agricultural markets throughout the country. Estimates of June 22, the government bought 23% of wheat produced in the country and 35% of rice in 2016-17.

The supply of the other 23 cultures is more summary. For most, the Center does not regularly carry out these crops. For example, in October 2016, the Center has instructed its procurement agencies to purchase soybean producers for the first time in several years, according to the business standard. There are other designated organizations that could use the mechanism to obtain cash crops, such as the cotton Corporation of India, which carries out a variable amount each year.

In total, less than 5.8% of agricultural households in India are able to sell their products to the government, a high-level committee in January 2015 to report on the restructuring of the Indian Food Corporation has been found .

Although the Center supports the supply of wheat and rice, if States want to ensure that their farmers can have access to the minimum support prices for other crops, they must use their own funds. They can also declare a premium above the minimum central support price to encourage farmers to grow more than one crop. Maharashtra, for example, offers a bonus of 500 rupees per quintal for turdal, above the price declared in April 5050.

But states at risk of cash rarely are able to get crops, much less to advertise bonuses.

In Assam, for example, there is minimal support pricing mechanism almost entirely on paper. Few farmers are aware of its existence. According to a senior official of the Assam Agriculture Marketing Board, the agency charged by the state government for the purchase of farmers’ products at a minimum support price, the purchasing power of the board is severely limited by the lack of funds .


You don’t have to be moneyed to travel the world. There are several schemes to meet your expenses. So just pack your

bags and hit the road

By Shailesh Menon

Illustration by Champak Bhattacharjee

BLUE BEACHESTake a dip in the

of Pattaya, walk along ‘Water­front Prome­nade’ in Singapore, go spotting orangutans in the Malaysian Borneo and hit the cool spice trail in Sri Lanka — there’s a lot you could do this summer. But if an empty wallet is stop­ping you from hitting the fair winds, at hand are some really cool deals to fund your dream holiday.

Before we smack the road analysing various travel financing options, one needs to be amply clear, it is best to dig into
your savings to finance your holiday. ‘Beg, borrow or steal’ is only good if you don’t have enough money to buy tickets, food and accommodation. Options that involve borrowing money to fund holidays could increase your travel costs by about 30 per cent. The other option — to steal — could land you in jail.

“Borrowing money to travel is not the best way to have a holiday… Not many people would opt for credit to travel. But if you don’t want to borrow, you should have enough sav­ings to dig in. If you don’t,
your only option is to travel on credit,” says Ravi Menon, head, Foreign Ex­change & Risk Manage­ment, Cox & Kings.

The Macros

For Indians, cost of travel has been moving in two directions. While billings for domestic travel have gone up 10 to 15 per cent over the past two years, international travel has become cheaper due to weakening of most for­eign currencies. The drop in travel costs is more pro­nounced in the case of Eu­ropean destinations, with airfare to marquee cities
such as Zurich, Rome and Paris crashing 15-20 per cent since last year.

Much of this (drop in air fare) has been attributed to a weak Euro, which de­clined from Rs 83 a year ago to about Rs 70.9 cur­rently. Consequently, most travel operators are seeing 50-60 per cent more bookings to popular Euro­pean hotspots this sum­mer. According to tour op­erators, India logs 15-20 million tourist departure every year.

Despite higher costs, do­mestic travel has been wit­nessing an uptrend over the past few years. Domestic travel (to all states com­bined) has been growing at 14 per cent every year since 1991. As per data from the tourism department, year 2012 witnessed a 19-9 per cent growth in domestic tourist visits over the pre­vious year.

Encouraged by robust growth in the tourism sec­tor, tour operators and lenders (mostly banks) have begun offering fund­ing options to prospective travelers. Credit card pay­ment modes, personal loans, travel loans and dedicated travel (savings) accounts are pushed to customers in large num­
bers. And much to the de­light of lenders and tour planners, middle class In­dians are warming up to such novel ideas.

Personal Loans t Credit Card Payment

Consumers can avail per­sonal loans for meeting their holiday expenses, but that is not a very lu­crative option as such loans are given out at rates as high as 16-18 per cent per annum. There­fore, most tour operators / travel portals have tie-ups with banks to facilitate travel loans.

“These (personal loans)

are unsecured loans, mak­ing them very expensive for customers. Also, dis­bursals take a lot of time,” explains Sreeram Sirip- uram, founder of Fly- 4credit, a loan facilitator.

If you do not want to undergo the painful pro­cess of getting a personal loan approved, you can simply swipe your credit card and purchase a holi­day package. But this op­tion could turn out to be more expensive (than per­sonal loans) if you default on card repayments; you could be charged as high as 36 per cent penal inter­est on the defaulted sum.

That said, credit card purchases give you great flexibility to plan your holiday. The payment for your holiday happens in­stantly (without the ap­proval of the bank, as is the case with personal loans), if you have suffi­cient credit limit. The re­payment is done through equated monthly install­ments (EMIs) over 12 months.

The flip side is, credit cards cannot buy you ex­pensive holidays as most middle-class card holders have credit limits in the range of Rs 1-2 lakh.