Not So Simple

Context: Increasing farmer’s income is possible only by ensuring higher productivity and higher prices of agricultural produce.

Ways to increase Farmers’ income: can be achieved through

• Through Higher Productivity

• Through Higher Prices: the only way to get higher prices without hitting the consumers is by increasing the farmers’ share in retail prices; There are three ways of doing that:
• The government offers a minimum price guarantee (as with foodgrain) along with a price subsidy,
• It mandates a minimum price (for sugarcane) that bulk customers (sugar mills) have to pay.
• The third option is for farmers to organise themselves as cooperatives, cut out middlemen, and/or capture greater value by processing the raw output. 
• The best example is milk cooperatives.
• The global success stories in cooperative action are California’s Blue Diamond almonds and Norwegian salmon. 

Issues in Agricultural Subsidy/Marketing

• Invariable access to food grain subsidy for different food items due to the intervention of middlemen.
•  Farmers get up to 75% food grain subsidy in sugarcane and milk whereas in TOPs (Tomatoes, Onions, and Potatoes) they get 30% of the retail price.
• There are also crops where growers get as little as 10% of the retail price, as experienced with coffee and bananas (both in Latin America, where O Henry coined the term “banana republic” to describe what he saw). 
• Bias towards certain crops: Varying percentage of food grain subsidy creates a price bias towards the crops where the farmer´s share of the subsidy is greater.
• Poor management practices result in the exploitation of small farmers due to control by vested interests, price manipulation, excessive fees and taxes.

Way Forward

• Increasing the farmer´s share of the retail price to get higher prices of agricultural produce without hitting the consumer 
• Offers a minimum price guarantee along with a price subsidy 
• Mandates a minimum price that bulk customers have to pay. 
• Farmers must organise themselves as cooperatives and capture greater value by processing the raw output.
• Direct marketing efforts can offer big potential benefits by eliminating the role of middlemen.
• Farmer should enjoy the freedom to sell to whoever he chooses, wherever he chooses, whenever he chooses.
• Ensure efficient management of regulated agricultural markets as they offer standard weights, the grading of produce and transparent pricing.

Conclusion: Farmer producer organisations must get off the ground in the right way and acquire scale.