The upshot has been that structure of relative prices in the domestic economy, including that of the price of labour, i.e. wages, has been grossly distorted. A logical extension of this principle too will be that it would be proper to export agricultural surpluses rather than use them for the satisfaction of the needs of the mass of people in the country who, for want of adequate purchasing power, are unable to provide a profitable market for further increase in agricultural production and productivity, unless demand for farm products from India becomes globally competitive which is not insight. Official policy has not yet become fully operational on this basis but it has come quite dangerously close to it with recent decisions on kharif and rabi prices, especially of paddy, wheat and sugarcane and cotton.

Agricultural Prices Commission (APC) was, to begin with, supposed to be an export advisory body. It recommended a particular set of prices for the farm produce based on independent studies of the cost of production, fair return to the farmer and fair prices for the consumer. But pressures have been brought to bear on official policy making during the past many years to change the terms of reference of the APC to introduce the so-called parity principle in price fixation.

The clamour for fixing support prices at level higher than what the APC determines should be dismissed if posed on the basis of cost of production plus norms purely political. The cost of production of agricultural production is computed from data compiled by qualified agencies under a scheme in operation for four decades.

Two separate sets of cost factors are taken into account. In case of one, paid out expenditure, including costs of inputs and hired labour, plus the value of family labour which go into production are computed. Such a computation alone is meaningful and relevant for the vast majority of Indian farmers. On this basis, all farmers easily get a very good margin of profit from sale of their produce to public agencies at fixed support prices. The position would be a significant improvement in a bumper year without any further increase in support prices. There is another set of costs which are worked out and are relevant for the surplus farmers, including those who do not themselves cultivate and only supervise their farms or what are called the gentlemen farmers. Going by the criteria of commercial agriculture, such cost factors are taken into account as the rental value of owned land and interest on owned fixed capital besides the labour and management input of the landlord. Even on this basis, the return from support prices is highly profitable for non-cultivating big farmers.

If the self-styled spokesmen of surplus farmers demand still higher prices and even secure them, this is bound to be at the cost of the consumer, including those who eke out existence at a bare subsistence level, and at the cost of resources needed for development and social welfare. It is necessary to ponder the question of prices for farm produce in its proper perspective and not be carried away by sentimental shibboleths about priorities for agriculture versus industry and poor farmer versus the urban rich.

The government having acted in a short-sighted manner on the question of fixing minimum support prices for the farm produce in a bumper corps year must itself bear the responsibility for the aroused expectations of the surplus farmers for higher and higher prices for their produce. Their demands, when accepted, will only make a shambles of the already stretched structure of relative prices within agriculture as well as between agriculture and non-agriculture sectors. While considering the so-called incentive prices for the farmer, it is necessary to note that among the vast numbers of our farmers, only a small fraction, not more than ten per cent of the total, produce for the market on any scale. Purchase by public agencies at incentive support prices are relevant essentially to their marketable surplus and are not very significant for the mass of the peasantry engaged in subsistence farming and none at all for the landless agriculture labourers and the rural poor generally. The fact is that a vast majority of the rural population is obliged to buy foodgrains for consumption during the lean season from the surplus farmers at high prices and often on credit on exhorbitent terms.

It is well known that only 10 per cent of agriculture households own over 55 per cent of agricultural land. About 50 per cent of irrigation facilities are held by only 20 per cent of households having more than four hectares each. As against this, 58 per cent of households, with less than one hectare have access to less than 10 per cent of these facilities. Much of the institutional credit that goes to the rural sector is also monopolised by the upper stratum of the peasantry which is mainly in a position to use modern inputs as well as machines for farming. These figures and facts underline for whom and to what extent the cry for remunerative prices for marketable surpluses in agriculture has relevance.

Also to be noted are the rising numbers of wage earners in the agricultural sector and rural economy. Available statistics show that the number of wage earners has been increasing fast. Since the mid-sixties by as much as 55 per cent between 1964-65 and 1974-75 and they have as many as 70 million men, women and children. They have nothing of the agricultural produce to sell and remunerative price for agricultural produce for them can actually become an extortion for them. If to these wage earners are combined rural households with holdings less than one acre, which form well over two-fifth of the total rural population, the stark fact stands out that the demands raised by upper stratum of the peasantry concern only a small segment of the total farmers in India.

The contribution of small holdings below 10 acres - which make up over 80 per cent of holdings account for only 75 per cent of the cultivating population (excluding wage labourers)

Roughly 18 per cent of cultivating households generate over half the gross output from agriculture and accounts for over two-thirds of the aggregate marketable surpluses from agricultural sector. This position has only further accentuated in the last four decades of the working of the new agricultural strategy which relies in the main on larger farmers, with better access to resources and modern technology to produce marketable surpluses. The fact is that the poor and middle peasants are generally compelled to sell at comparatively low prices at the time of the harvest and have to purchase foodgrains during the lean months, often at twice the harvest prices or even more. On the basis of these and other similar studies, Prof. V. K. R. V. Rao, the noted economist, observed, “It is clear, therefore, that a great majority of rural population is not benefited by a rise in foodgrain prices while substantial portion of the rural population is actually adversely affected by such a rise.”

Under the prevailing pattern of land holdings in India and promotion of commercial farming as “development of Indian agriculture”, the economic interests of the working class both in rural and urban areas in India, do not obviously lie in demanding increasing procurement prices for farm products, such prices can only instigate a price rise, of which the working people at lower middle class are the worst victims.” (IPA Service)