Today Farmers are at the bottom of the economy because they accept paper currency, if they stop accepting paper currency and exchange Wheat/Rice only for “goods and services” then the whole equation will change. Farmers will become masters of Indian economy like they were in past 5000+ years upto 1970 when food levy system forced them to accept paper currency and pushed them to the present suicide situation.

LET ME TELL WHY?

1) You are wasting lot of federal tax money of these subsidies when they can be used to bring more productivity gains in rice and wheat.

To give Everyone some context and background, India is literally in FAMINE in 1960’s before Norman Borlaug from Rockefeller Foundation’s Wheat Research in mexico truckloaded 18k Tonnes hybrid-wheat-seeds to india to help india get through these famine conditions. MS Swaminadhan is the conduit for this. India’s wheat production (and Per Acre Harvest) TRIPLED by 1974 (10 yrs) directly as result of these hybrid seeds and has never faced a famine since.

The same story again in RICE can be traced back to IRRI in philippenes (again IRRI is sponsored by Rockefeller foundation) whose IR8 seed helped us get terrific yields that kicked off green revolution in india to make us self-reliant in rice for the last 3 decades.

We are at another juncture where rice/wheat acreage is dropping, productivity gains are flat and even coming down in some areas, water being drawn from 300-400ft under through submersibles at most places, severe flooding and arid conditions as a result of unpredictable weather conditons in the last 10 yrs and predictions that it will continue happening and gets intense in the coming decades….

what all these tell us? Federal Agencies should spend these DAMN RUPEES on attacking these problem domains through visionary approaches than wasting money on futile subsidies. IF IRRI in philppenes can do these things for us with thier paltry budget of 30 Million USD, why aren’t (india) we showing any results in terms of arid/flood-resistant strains of rice and wheat? It a SHAME on us (1 and every 1 billion of us). ..and we all should be indebted to rockefeller foundation for thier magnanimous vision. Rockefeller is a ruthless business-man whose oil monopoly in US (Standard Oil) has been split into 4-5 companies (Exxon, Chevron, Conoco..)…But his foundation contributed more than what govt’s of china and india (with 2 billion people) did to farming.

..had 9 more reasons why this whole procurement drama is just a public stunt by short-sighted political agenda that’s being nurtured on and on by all parties during all these decades. But, i would fill up almost 5-6 pages just on this subject. don’t want to swamp this blog.

Marketplace is smart and savvy enough to tackle the pricing isssues for the harvest..let the fderal govt. spend all the time, money and effort on providing a sustaibale farming life-cycle to farmers and stop bluffing all of us into an illusion that it’s providing price-protection for farming community.

May god bless all these political big-wigs with self-realization on the purpose of thier leadership and necessity of bigger vision!

Re your point about “the other party not honoring their contracts”

A futures and options market is normally set up with a central clearing-house which ensures that all obligations are honored.

http://en.wikipedia.org/wiki/CBOE

Re the “illiterate” populace

If the members of this iliterate populace can decide what to grow and harvest, what makes you think they can’t learn how to sell their products in the future? All they’re doing is locking in their selling price so they’re insulated on that front, and can focus on farming.

Well, I’m not sure of much of finance funda like you..I’m putting this point for my learning.. Assuming that the futures & derivatives markets exist.. All will go well if the farmer makes rational & logical decisions based on his estimates or the estimates guided to him…But how often would an illiterate populace make such decisions ? And in a nation like India, whats the guarantee that someone will honour the futures prices he has pledged to a farmer ? And that too in the rural areas where there is practically little governance ..Wouldn’t such circumstances give more space to middlemen who’ll end up duping the farmer?

Now, over the cut-throat competitions among middle-men…Often what happens in rural areas in the absence of govt is that there is a big clout of a local procurer..He kind of runs a monopoly over the entire system of purchasing / selling in the absence of agencies like FCI .. I’m not saying that FCI does a good job always..Often they too collude with local sellers to underquote the prices.. To be fair to the FCI and the similar govt agencies ( civil supplies corporation controlled ones) atleast in my home state – kerala, they do the minimum pricing systems decently enough so as to ensure a consistent return to farmers , which is actually very crucial for the farmers than having a speculative market of possibly higher returns..

The inherent assumption that everyone involved in futures/options market will honour the rates that they have pledged, is often a faulty one when it comes to interiors of India , where ppl with enough clout don’t honour even the price they have pledged 4 hours before or so… The current MSP system might be an economically incorrect way, but then it actually provides a bit of social security to the lower-strata of the society..

( PS:- This might seem to be a kind of communist – sided view, but actually its a view from someone who has seen a bit of troubles faced by a few vegetable farmers over the pricing of their products )

Ajith

which is any case is a piece of politically instigated flight of imagination. there are large unofficial derivatives markets in india with volumes far higher than the volumes on the official exchange have ever seen. the farmers use these markets happily ’cause it’s unwatched by the government who they believe are the biggest scamsters around.

can’t figure how the farmer gets stuck with this image of being a moron who gets taken for a ride on anything coming out of a market.

fair point you have raised. i’m not sure how the thing of MSP works now. but yeah, education of farmers is an extremely imoprtant thing. and hedging and futures isn’t as complicated as some people like to make it sound. you don’t need to teach the farmer Black-Scholes. just some basic fundase will do.