Civil Service essay — 2018 Budget expectations for the farming sector
Budget 2018 — Can it bring any succor to the farmer
Distressed potato growers in U.P strewed their unsold produce in the vicinity of the Chief Minister’s quarters. Cotton and groundnut growers in Saurashtra region, reeling under the weight of a bountiful harvest and plummeting prices, stare down a tunnel of piling debts, no money for the next crop, and impoverishment at home. The question arises why in a country where per capita calorie intake is one of the lowest in the world, why and how a bumper crop causes such widespread distress. It has to be borne in mind that cotton, groundnut and even potato are not perishable commodities like fruits and vegetables. Obviously, the excess produce could not be bought from the farmers and moved quickly to large consumption centers in other parts of the country.
Prime minister Modi plans to take agricultural income to double its present level by 2022-23. It sounds so exciting to hear such grandiose thinking. With agriculture contributing 17% to GDP, such a quantum jump in farm income is bound to spur GDP growth rate close to 10%. But how can it be achieved in just about four years? NITI Ayog has come out with its set of policy revamps to achieve this objective. However, each of the steps NITI Ayog prescribes appear so daunting. Keeping aside all other problems, how will the glut resulting from high production be managed? Where is the buying power of the consumers to consume so much produce. Export is a possibility, but in most commodities, Indian farmers will find themselves utpriced by other countries. Will enhanced production lead to more acute farm sector distress and more farmer suicides?
Keeping aside the cynicism, let us examine the many issues that plague the agricultural sector today and how to address them.
What are the present government’s flagship schemes for the farming sector? .. These are
2. Pradhan Mantri Fasal Bhima Yojana, and the
3. Pradhan Mantri Krishi Sinchayi Yojana.
All these initiatives did bring some benefit, but appear to have lost much of their steam. Fresh vigour has to be injected into them so that they don’t falter.
Falling commodity prices —The trauma of 2017 ..
Although India received 95% of the projected rainfall last year, the agricultural output growth, projected to be in excess of 4% fell below 2%. Well, this is for the planners and the statisticians. What hurt the farmers hard was the falling prices of Kharif crops like maize, arhar, moong, urad, soyabeen and cotton. The farmer, driven to distress sale due to sliding prices at the mandis, just managed to recover the input costs. The fall in income has broken their will and confidence in farming.
Policy flip-flop by the government in 2016 was largely to blame for this sad situatin. The government initially aggressively pushed the farmers to grow more pulses through policy pronouncements and announcement of higher MSP for pulses. When to bumper harvest reached the market, prices began to fall. Instead of mopping up the surplus crop through brisk buying, the government pegged its procurement of pulses at 2 million tons, way below the 20 million tons of stocks on offer. The crisis reached the farmers’ doors as cunning traders shoe-horned the farmers to distress sale counters. An inept government mechanism exacerbated the plight of the farmers saddled with unsold commodities and overdue loans. Curiously, even when the country had so much of pulses, the government allowed imports of the item. Some six million tons of pulses entered the market through this route.
The government did curb imports as the Kharif crop of 2017 was ripening, but the move was too late. The hike in import duty on soyabean was direly needed to protect the domestic growers from cheaper soyabean prices in the international market. The first hike of import duty to 12.5% was in fact announced in August, nearly three months ahead of September when the first soyabean harvest reaches the market. But, the hike was not enough, and the growers found it hard to get a lucrative price for their harvest. Expecting no reprieve from the government, they sold off all their stock by October. Pricing pressure posed by unbridled imports broke their backbones. Surprisingly, the government again hiked the import duty taking it to 30% in the last week of November, but by then, the damage had been done.
The traders, the horders, and the middlemen enriched themselves at the cost of the toiling farmers.
The Rabi crop of 2018 will enter the market in a few weeks. The government has this time hiked the import duty on Chanaa and Masoor to 30%. Although announced in December, it does not seem to have made any dent on market prices.
What can be done to address this recurring crisis?
The quick-fix solution to the quagmire is often assumed to be recourse to MSP. But, MSP is a deeply flawed tool to address farm sector woes. At best, it can work like a palliative for the farmer who has the debt-collector at the door, and a sick wife needing costly medical care. Implementing MSP for all crops across the country is a logistical challenge, and poses an awesome burden on the exchequer. Food has to be bought at high prices, held for some months, before it is sold at very low prices. The shortfall has to be made good by tax-payers’ money. The problem returns for the next season. The cycle continues. Buy at high prices, sell at low prices, collect the shortfall through taxes. It is time, we think of doing away with this expedient solution.
eNAM(Electronic National Agricultural Market) is a smart IT solution that can link the producer in any corner of the country to the seller at another corner through the internet. On the face of it, it looks like a modern day solution to an age-old malaise. However, the progress so far towards a pan-India roll out of this scheme has been very patchy. Apart from this, we all know that all agri products come in various sizes, grades, and looks. For a buyer to bid, he must inspect the item he intends to buy. In other words, a buyer in Nagaland has to come and see the mangoes being grown and offered in Tamil Nadu. Even if we get around this problem through electronically generated photos and quality certificates, how do we quickly move the stock from state to state? India’s road network is too primitive to take this additional burden.
But, all is not gloomy in this front. Already 14 states and some 470 mandis have come under the eNAM umbrella. What the government needs to do now is to bolster the e-NAM network through legislation and more funding.
2. Crop failures – another danger the farmer has to grapple with ..
Pest invasion, drought, inability to buy fertilizers, and climatic aberrations– all collectively hamper good harvest. Drought is a phenomenon on which man has no control, but covering all arable land under irrigation is not. If the canals run dry, the farmer can switch to drip irrigation, dig his own well, or cultivate crops that need much less water. All these are doable tasks, but it needs massive government intervention through loans, incentives, education, and lots and lots of field work by trained agricultural science graduates. Irrigation projects have stalled over the years due to lack of funds. Even the projects where only the last-mile linkage is to be done have stood incomplete.
Since independence, we have tried, but have managed to bring just 41% of our total of 160 million hectare of agricultural land under irrigation. Farmers in the rest of the areas are at the mercy of the rain god.
Another disturbing trend is the under utilization of the irrigation capacity created at such enormous cost. Due to some skewed planning, farmers fail to utilize the water flowing in the canals. This trend is worsening gradually. As regards micro irrigation, where the farmer creates his own water management scheme, the share of such facilities stands at a low of 12% of the total irrigation capacity created.
How grave is this issue of water shortage?…
By government’s own admission, nearly one third of India’s farm land routinely receive less rainfall. Coupled with is, droughts have begun to visit Indian farmers more often. We had droughts in 2001, 2002, 2014, and 2015. Back to back droughts are particularly destructive.
One way to insulate the farmers from the vagaries of monsoon is Insurance. The much tom-tommed Pradhanmantri Fasal Bhima Yojana has brought some succor, but it is far too little. Government statistics reveal that only 30% of the total crops were covered under the Inurance scheme last year. No doubt, it s an improvement over the figures for the previous years, yet there is nothing much to cheer with 70% farmers still left without cover. Settlement of crop failure claims are processed with no great alacrity, the survey process is opaque, and disbursement paraphernalia is too cumbersome for the illiterate farmers to contend with. But, giving insurance cover to the whole farming community at affordable cost is a good idea. What is needed is a more robust, and efficient insurance coverage campaign, and an IT-enabled loss survey and claim settlement process. Private sector management expertise will deliver the goods better than the government bureaucracy.
The panacea for the water woes ..
The obvious solution is to expedite completion of irrigation projects in different stages of construction. Particularly, those projects where the last-minute linkage is pending must be fast-tracked. When presenting the 2016-17 budget, the Finance Minister had declared that 23 out of the 89 irrigation projects under execution will be given high priority (under the Accelerated Irrigation Benefits Programme, AIBP), so as o make them fully functional. Almost till date, these top-priority projects are far from being completed.
So, the attention needs to be on complete the on-going projects by infusion of more funds and vigorous monitoring.
There are so many other solutions that need much less government intervention, such as drip irrigation, ensuring reliable power supply to lift irrigation projects, discouraging water-intensive crops like sugarcane and certain varieties of paddy, encouraging cultivation of crops that need less water, encouraging farmers to dig collective ponds etc. etc. These efforts lack the necessary urgency at all levels f implementation.
Prime Minister Modi has built up an excellent rapport with his Israeli counterpart Netenyahu. Israel has the world’s best water management knowhow. Just as India has made impressive strides in developing solar and wind power through government initiatives, it would be a good idea to invite Israeli companies and water experts to invest their money and time in setting up model facilities in areas where water is so scarce.
Another idea, already discussed, but shelved, is to link the rivers. We can start in a modest scale by linking just two or three rivers, assess the impact and then proceed to link more rivers. This single step will banish floods and droughts, boost hydropower generation, give a fillip to inland water transport, and increase fishing activities. We need the Prime Minister’s bold leadership all these to come to fruition.
(Materials for this essay are drawn from Hindu and QuintBloomberg)