no mantras or miracles will work here

had started on this draft in march 2010:

here, at the Indian Farmers' website, you'll find this article (word document): 'Status Paper on Rice'. on page 13 and 14, you'll find a detailed breakdown of all the costs involved in producing rice. and the concluding part says:

YIELD, COST OF CULTIVATION PER QUINTAL AND INCOME

(a) Cost of cultivation per acre Rs. 25000/-

(b) Average yield of paddy per acre is 25 quintals (35 bags)

(c) Cost of cultivation per Quintal (Rs. 25000¬ /25) = Rs. 1000/-

(d) MSP fixed for paddy per quintal is Rs. 745 (for the year 2007-08)

(e) Total gross income (Rs.745 X 25 quintals) =Rs.18,625/-

(f) Estimated loss per acre to the farmer (Rs.25,000 – Rs.18,625/-) = Rs 6,375/-(g) MSP to be fixed as per Prof. M.S. Swaminathan Commission

recommendation should be Rs.1,500 per quintal (Cost of cultivation + add minimum 50% of cost of cultivation i.e. Rs.1000+500=Rs.1,500)

those are average costs for producing rice across andhra pradesh in the year 2008-09. also note that the m.s.swaminathan commission's recommendation for increasing the minimum support price upto rs.1500 (or, Cost of cultivation + add minimum 50% of cost of cultivation), made in 2007, has not been adopted until now.

illusory potential

1) the m.s.p. for rice in the current year is rs. 950 for common variety and rs.980 for higher grade plus an 'incentive bonus' of rs.50 (which is temporary and could be withdrawn next year). so how much could a farmer producing 25 quintals an acre, earn per acre now? nothing. the costs (rs.25,000 per acre) would equal the returns (rs.1,000 x 25 quintals). which means the majority (60% of all farmers) of farmers in the state of andhra pradesh, or the marginal farmers (average landholding size: around an acre), would earn nothing.

2) less than 20% of farmers in andhra pradesh own 3.5 acres or more each. and those are 1995-96 estimates when average landholding size was 1.36 hectares, or 3.35 acres. in 2005-06, it was 1.20 hectares or 2.96 acres. the average income of the average paddy farmer* now would be around zero, if the m.s.p., remains at around rs.1,000 (at an average productivity rate of 25 quintals an acre), because the costs (rs. 25,000 per acre x 2.96 or 3 acres) would equal the returns (rs. 1,000 per quintal x 25 quintals per acre x 3 acres).

3) what if the m.s.p were increased to rs. 1,500? the average paddy farmer with a landholding of 2.96 acres would make around (rs. 1,500 per quintal x 25 quintals per acre x 3 acres) rs. 1,12,500 which would yield him a net income of (rs. 1,12, 500 minus costs of rs.75,000) of rs. 37, 500. the per capita income of his family members (assuming a family size of 5) would be around rs. 7,500, or less than one-third the per capita income of rs. 23,729 (in 2004-05, at current prices) of the state.

4) who would benefit if support prices are increased to the level suggested by swaminathan? less than 6% of the state's paddy farmers, or those who own more than 10 acres each. each farmer who owns more than 10 acres, would earn an income of around rs. 1,25,000 (rs.37,500 per acre x 10 acres minus costs of rs.25,000 per acre x 10 acres). the per capita income in his family would be around rs.25,000 or slightly more than the state average.

5) how about the majority, or the marginal farmers? the marginal paddy farmer would make around rs.37,500 (rs.1,500 per quintal x 25 quintals) and earn an income rs. 12,500 (rs. 37,500 minus costs of rs. 25,000 an acre). that means per capita income of each member of his family will be rs. 2,500, or slightly more than one-tenth the per capita income in the state.

6) what if every paddy farmer in the state managed to double the yield: from 25 quintals an acre to 50 quintals an acre? let's assume he doesn't have to incur any new capital costs and input costs to increase the yield by such magnitude, and he's able to manage the feat by sheer good luck. how much will the marginal farmer be able to make in the new scenario? his income from each acre will be (rs.1,500 x 50 quintals = rs.75,000 minus costs of rs 25,000= 50,000). which means per capita incomes in his family would be less than half the state average. how much will the average paddy farmer (landholding: 2.96 or 3 acres) make? rs.1,50,000 (rs. 1,500 per quintal x 50 quintals per acre x 3 acres minus costs of rs. 25,000 per acre x 3 acres). which means per capita income of his family would rise above the state average by around 25%.

but that would depend on three miracles happening simultaneously:

i) m.s.p. going up by more than 50% in one year. average annual growth in m.s.p in the last two decades has been less than 10%.

ii) average yield per acre going up by more than 100% in one year. average annual growth rate in yield in the past four decades has been much lower than 2%. 

iii) there would be no need for fresh capital investment and also no increase in input costs.

even if all those three miracles do happen, simultaneously, over 60% of the farmers in the state (the marginal farmers) would still earn incomes of around rs.50,000 which would still mean per capita incomes in their families would still be less than half the state average. and the small farmers, another 20%, would be earning significantly more. the medium farmers, another 15%, would be doing even better. which means 60% of the paddy farmers in andhra pradesh wouldn't benefit much even from the miraculous scenario which offers i) a 50% increase in minimum support prices immediately and ii) doubling of yields iii) and a zero percent increase in input costs.

is there really a point in further speculating on what would the farmers earn if the minimum support prices were doubled to rs.2,000?
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as i mentioned earlier, i wrote that draft over an year ago. now, minimum support prices have gone up slightly: rs.1,030 for grade 'a' variety and rs.1,000 for other varieties. which means the conclusions i'd drawn on all the  6 scenarios presented still hold true. and only scenarios (1) and (2) reflect the current reality as you know. (3), (4), (5) and (6) represent hypothetical scenarios. pipe-dreams which rest on miracles.

there are a couple of things one needs to know to understand how these farmers survive if the returns are so low or non-existent: the total estimate of costs listed in the status paper also includes a 'land lease' component: rs.7,000 for an acre. this is what the owner-cultivator would save, but the tenant farmer would be deprived even of that. also, a certain percentage of the farmers also go in for a second crop. but that wouldn't make a great difference in their incomes, i think, because most of the costs would have to be incurred again.

the high priests of 'food security' aren't thinking about all that i guess. as i said in my previous post, there seems to be a strong belief among them that these are manageable problems. that a few wise interventions like increasing support prices, subsidies and agricultural extension etc would improve productivity, which is a primary concern for them, and also somehow give the farmer greater returns.. from sainath to jayathi ghosh, everyone's been reeling out those mantras. but the stupid shudras have a saying: mantraalaku chintakaayalu raalavu. which means, roughly: the tamarind tree wouldn't shed its fruits for mantras.

from swaminathan to sainath, they've been spouting these mantras for many years now. i don't doubt their sympathy for the farmers. but i'm convinced, seven years after the congress was re-elected promising succour for the farmers (one of its main election planks) and seven more years of unabated chanting of mantras, that they probably think of the farmer as some kind of a lifeless cog in a vast system of machinery that's not working as per their grand designs. the cog's problems matter only so far as they affect the working of the machinery.

lastly, according to some latest observations in the media, the costs of cultivating each acre have gone upto rs.30,000. even if all those estimates are wrong by even a significant percentage, say 20 or 30 or even 50, i don't see how it will change that overall inexorable reality.