There is an inherent irony in the loan waiver package for small farmers in the country. Most of the small farmers are essentially foodgrain producers who are systemically taxed by denying them open market prices for their produce. This policy of taxation, a legacy of a closed economy, continues unquestioned even today. The recent wheat imports are a case in point.

The government first banned wheat exports to keep the domestic prices well below the prevailing international prices, and then to augment its stock for the public distribution system (PDS), it has imported wheat at nearly double the price of what it offers to the wheat growers in the country. Farmers thus took a double hit: first through the export ban and then through state-sponsored dumping. Producers of no other commodity in the country have faced such ill treatment.

The problem is systemic and two aspects of the PDS are responsible for this. First, the necessity of large-scale procurement of grains by the state makes anti-farmer policies inevitable. The enormous inefficiencies in the operation of the Food Corporation of India (FCI) compel the government to suppress domestic prices so that FCI’s procurement cost is affordable. Government does it through a ban on exports or state-sponsored dumping.

Second, the nature of government involvement makes the PDS inevitably corrupt, leaving the majority of the poor deprived of any food security cover. What more expedient way is there to appear to be working in the interests of the poor than to lower the prices that farmers receive?

... contd.