Interview: Prakash Kammardi

‘The predictability of incomes in agriculture has collapsed’

Print edition : September 04, 2015

Dr T.N. Prakash Kammardi Photo: Arun Kulkarni

Interview with Dr T.N. Prakash Kammardi, Chairman, Karnataka Agriculture Prices Commission.

KARNATAKA is the only State in the country to have a State-level agricultural prices commission, modelled on the national Commission for Agricultural Costs and Prices. The first Chairman of the Karnataka Agriculture Prices Commission, Dr T.N. Prakash Kammardi, who took charge in June 2014, believes that the mandate of the institution ought to be wider. It ought to be more holistic, studying incomes of farmers rather than focussing on merely input costs and the prices of agricultural produce, he says. Kammardi, who hails from the Malnad region, was born into an agricultural worker family. “Much later we acquired a small piece of land,” he recalled. In the past few weeks, Kammardi travelled across the State, meeting the families of suicide victims. He spoke to Frontline about the plight of farmers, the causes of the rising tide of suicides in Karnataka, and how the farmer is being forced to bear the increasing burden of uncertainty. Excerpts from the interview:

You have travelled across the State in the past couple of months—almost a dozen districts—where suicides have occurred. What have you learnt about the large number of farmer suicides this year?

I have been visiting the families of suicide victims to express my solidarity with them and to console them. I have visited more than 30 families. But I have not visited them as a representative of the government or even as the Chairman of the commission I head. Suicides by farmers are not a new phenomenon in either Karnataka or the country for that matter. The State has been among those with a high incidence of such suicides for quite some time. The incidence of farmer suicides has declined in the last few years but increased sharply in the last couple of months.

What explains the rising tide of suicides in the past couple of months?

According to the Agriculture Department, more than 200 suicides occurred in Karnataka between April 1 and July 30, but the number of cases that were accepted as “farmer” suicides was only 78 and the families of 65 victims were given compensation. Suicides have been reported in most districts, and farmers growing a range of crops have taken their own lives. We know that suicide is a very complex phenomenon; there are multiple causes at work. Social science assumes that human beings behave rationally, but in the case of a suicide there is a breakdown of rationality. But there is a common set of factors in these cases. What is undoubted in these cases is that the victims found themselves in a hopeless situation. As an economist I can figure out that one of the main problems in most of these cases is that the predictability of incomes in agriculture has collapsed. Farmers’ lives have become highly unpredictable. The failure of sugar mills to pay farmers their dues has been one of the prime reasons for the large number of suicides. We know that if the farmer has a good harvest, he suffers because prices tend to fall. If his crop fails too, he suffers. But the case of sugarcane this year is peculiar. The farmer had a decent harvest and the price of Rs.2,000 a tonne was in my opinion also decent, but he is still suffering because he has not been paid for his harvest.

There are a lot of problems in the sugar industry. There is a lack of competitiveness, and a lot of distortions have resulted in the glut and political interference. But in what way is the sugarcane grower responsible for all this? What is even more unbearable for the farmer is that he has not been paid for what he had already supplied last year. Sugarcane has enjoyed other benefits. For instance, there is a statutory minimum price and there is a State advisory body; yields and prices have also been good. Why we have not been able to deliver sugarcane growers a better deal despite all these measures puzzles me. It seems to boil down to the unpredictability of the farmer’s income. The small farmer in Mandya district [Hosuru village in Pandavapura taluk] who burnt himself along with his crop in June apparently did so because he could not even get a decent price from the jaggery units. The jaggery market is highly imperfect; there is no competition.

But with the statutory minimum price in place, the State government is not completely helpless in getting the sugar mills to pay their dues to farmers.

It is more complicated because there are Supreme Court orders that curtail the hands of the States. I am not getting into that because the sugar industry is very complicated. There may be a glut in sugar, but business establishments [sugar mills] cannot say they will only pay if they make profits. The entire sugar industry is highly imperfect in nature, in terms of ownership and many other factors. There has been an enormous increase in the area under sugarcane in the last 10 years. The area under sugarcane, Bt cotton, maize and arecanut has increased sharply in the last decade.

A recurring theme among affected farmers is the issue of remunerative prices for agricultural produce, especially the imbalance between input and output prices and the question of state procurement.

Remunerative prices in a liberalised and globalised economy are determined mainly by supply and demand and the degree of market competitiveness. However, in reality, this is not happening at the farmers’ level. Even if supplies are low, farmers are not getting a good price. And, when the prices are high [at the retail level], the farmer is not benefiting. Take the case of tur dal: prices are high but the farmer is not getting a good price. Onion prices are high, but because of market imperfections, the farmer is not getting what he ought to. The role of the state is limited in a liberalised economy. But the government has to ensure that even in a situation of a glut—as is the case currently with sugar, maize, cotton and some other crops—prices do not fall below the cost of production. This is the purpose of the minimum support price [MSP]. The Government of India has a major role to play in this in the case of more than 20 major crops. In the last two years, the Union government’s MSP has increased at a very meagre rate. During the UPA [United Progressive Alliance] period [2007-08 and 2013-14], the MSP of crops relevant to Karnataka increased at an average rate of a little less than 15 per cent per annum. In the last two years the average increase has been just 3 per cent per annum.

What explains this shift?

It appears that the Union government’s overriding emphasis is on structural adjustment aimed at addressing the question of inflation. The one-point agenda of the government is to curtail inflation at all costs. That focus may be fine, but what about insulating farmers from inflation? Agricultural price policy cannot merely become an instrument of curtailing inflation, but that is what it is now. Agricultural price policy, as we have understood it for years, is fundamentally a means of stabilising and enhancing farm incomes. We know that consumers are not getting a better deal, but nor are farmers benefiting. So, this excessive focus on controlling inflation, at the cost of all other objectives of policy, is having an adverse impact on farm incomes.

Who is benefiting from this? Which classes are gaining from this skewed policy, what are the political affiliations of these classes? Which are the elements that are nurturing the so-called middlemen dealing in agricultural inputs and output? The onion trade and the sugar industry are both cases of being highly imperfect markets; political patronage is heavy in both cases. These are subject matters for a serious inquiry from a political economy perspective. The political economy of agricultural commodity markets has not received adequate attention from economists. The persistence of high prices of agricultural produce at the retail level even as farm gate prices remain depressed leads to the question: who is appropriating the surplus? In my opinion, this is one of most important theoretical issues for researchers today.

The pricing policy of the Government of India should take the major responsibility in addressing the issue of stable and remunerative prices and incomes of farmers. The current dispensation failed to accommodate these concerns while focussing excessively on inflation. For instance, we can export onions because we are producing more than our requirement. But the export of onion is unthinkable for our political class.

Farmers say the high—and rising—cost of inputs such as seeds, fertilizers and pesticides has also contributed to their woes.

Now, according to the latest studies, marketed inputs do not form a major chunk of the costs. Instead, labour costs have increased significantly, accounting for up to 40 per cent of the total costs incurred by farmers in Karnataka and in the rest of the country. Input costs have remained relatively low because of the subsidies for seeds, electricity, water, fertilizers, etc. From high-cost agriculture the economy has turned into high labour-cost agriculture.

What could be the role of cooperatives in ensuring stability in the livelihoods of farmers?

The farmer is a price taker for his produce. This is a serious issue. To overcome this, farmers ought to enhance their collective bargaining capacity. Call it what you want—cooperatives, farmers’ clubs or a group approach—this would make them stronger. This would make their income streams more predictable and ensure stability. It is necessary to ensure that no farmer is required to depend on a single source of income; nor should any field depend on a single crop. This would result in multiple sources of income. But to ensure that this succeeds we need to develop backward and forward linkages so that the farmer has the capacity to not only grow multiple crops but market them. In fact, managing the multiple sources of income is itself a challenge. Linking this to cooperatives or other such institutions could provide solutions to this challenge.

But that is not the way we are going, especially with liberalisation.

That is the way to go. That is the alternative if we have to provide stable livelihoods to farmers. Otherwise, youth will turn away from agriculture.