Doubling Farmers’ Incomes Becomes A Pipe Dream As Another Budget Fails To Take Much-Needed Steps

In 2016, after India had witnessed two back-to-back drought years, Prime Minister Narendra Modi set an ambitious target of doubling farmers’ incomes by 2022, the 75th year of the country’s Independence. Ambitious, because doubling incomes in seven years (2015-16 to 2022-23) meant the agriculture sector growing at 10.4 per cent per annum when the sector grew at only 4.3 per cent during 2009-14 and previously it had taken India 22 years (1993-1994 to 2015-16) to double farmers’ incomes in real terms.

Obviously, given the past record, there were apprehensions about how this goal will be fulfilled. Agriculture policy expert Ashok Gulati termed it unrealistic and impossible but still offered his advice on how the government can go about taking big steps in that direction. The Centre’s premier think-tank, Niti Aayog, came up with a policy paper wherein it elaborated how the goal of doubling incomes can be achieved through a slew of reforms.

But how has the Modi government fared on the agriculture front? The sector grew at a rate of 2.9 per cent in the last five years - the same rate at which it grew during Atal Bihari Vajpayee’s term - lower than 3.1 per cent growth rate of UPA-1 years and 4.3 per cent rate of UPA-2 years.

Agri exports, which hit an all-time high figure of $43.6 billion in 2013-14, registered negative growth and were struggling at $39.4 billion in 2018-19 with performance in between even worse. Volatility in pulse prices in 2007 enraged millions of consumers. Agrarian distress became the top buzzword for the Opposition forces in the past five years.

All-Round Farmer Anger

Farmer anger in western UP and Maharashtra made the government uneasy. The quota agitations launched by agrarian castes such as Maratha, Jat and Patel also had a lot to do with farming becoming less and less viable over the years.

Some hard steps needed to be taken to put the sector back on track after two consecutive drought years. It had 282 seats in the Lok Sabha and within no time it was ruling around 20 states in the country. Still, it couldn’t show any boldness. When Modi was Gujarat CM, he would advise PM Manmohan Singh on unbundling the procurement, storage and movement operations of the Food Corporation of India (FCI). He promised the same during his 2014 election campaign.

After coming to power, he set up a high level committee led by Shanta Kumar for the same in August 2014. It submitted the report in record time in January 2015 suggesting many reforms regarding restructuring of the operations of FCI, especially in procurement and plugging leakages.

FCI - An Existential Disaster

But the report has been collecting dust for the past four years. As a result, FCI remains as inefficient as ever and has outstanding dues amounting to Rs 1.85 lakh crore (31 March) because the government is not releasing on time the amount it has allocated to it as part of food subsidy in the budget. The situation is no different for states which had been allocated Rs 30,000 crore towards procurement operations.

The government is spending almost Rs 4 lakh crore on agriculture (Rs 55,000 crore on sector budget, Rs 75,000 crore on PM-Kisan, Rs 80,000 crore on fertilizer subsidy and Rs 1,85,000 crore on food subsidy).

And it is doing so in a manner which is hurting farmers, fertilizer companies (thousands of crores of their dues are pending), distorting markets by Minimum Support Price system which is skewed in favour of a few states and caters to only 20-30 per cent of farmers at the maximum. The answer to many ills of the sector is staring right us in the face: convert these subsidies into direct benefit transfer and send the money directly into bank accounts of farmers.

Importance of DBT

As many as 30 crore households can get Rs 13,000 per year if the whole agriculture expenditure is transferred via DBT. Since the transfer will be the same for all farmers rather than on per hectare or acre basis, small and marginal farmers will benefit more.

If the Modi government is serious about reforming the sector and doubling farm incomes, it should revisit its goal of achieving it in 2022, do a realistic analysis and postpone the target accordingly. In an interview to Swarajya last year, PM Modi had said his government was ‘following a four-pronged strategy to achieve the goal of doubling farmers’ income: decrease input costs, ensure proper prices for produce, ensure minimal harvest and post-harvest losses, and create more avenues for income generation.’ Clearly, the government is not doing enough on these four fronts, otherwise, it would’ve reflected in results.

Streamlining of subsidies and their DBT can help take care of the input costs problem. Moreover, there is an urgent need to launch a nationwide initiative to make electricity reach all the farms (solar is not the panacea) as soon as possible so that it can trim down fuel costs. Apart from unit costs, expanding of supply of quality seed, fertilizer, area under fruits, vegetables and high-yielding variety crops is the need of hour.

Infrastructure Needed

Building infrastructure for irrigation is critical to compensating for the vagaries of monsoons and ensure even production over the years without dips in productivity.

The Modi government’s track record on irrigation has been very poor, despite launching various schemes with thousands of crores of budget allocation. Out of 99 big irrigation projects which were on the verge of completion and identified by the government, farmers have received water in their fields in only six projects by the end of 2018.

Now, as another drought stares in our face, we are no better off than we were during last two consecutive drought years. Moreover, there is absolutely no move by the government to shift people away from water guzzling crops such as paddy and sugarcane (even in a state like Maharashtra where 100 per cent sugarcane area is irrigated even though overall only 19 per cent of total gross cropped area is irrigated).

‘Zero Farming’ Talk, But Subsidy Promise?

At a time, when the whole country is worried about water scarcity and the government launching Jal Shakti Abhiyan, shouldn’t this be the national priority? Similarly, Finance Minister talks about adopting organic farming (with the fancy new name of ‘Zero budget’ farming) but gives a big increment in fertilizer subsidy to the tune of Rs 10,000 crore. It seems the government isn’t paying heed to its own sermons.

Modi’s second strategy of ensuring proper prices for farmers produce is also not in sync with the actions of the governments. A study conducted last year by the Organisation for Economic Co-operation and Development (OECD) jointly with the Indian Council for Research on International Economic Relations (ICRIER) found that between 2001-16, the producer support estimate for India was negative 14 per cent of gross farm receipts while consumer support estimate was 25 per cent meaning that thanks to interventions by the governments, consumers pay 25 per cent less while producers get 14 per cent less amount for their produce.

Now, we are also in an inflation targeting regime for the past four years, so the situation is unlikely to have changed post-2016 too. This pro-consumer, anti-producer policy tilt needs to be corrected and a balance has to be found. Here, the United States seems to be doing a good job (check the study).

As far as ensuring minimal harvest and post-harvest losses are concerned, it’s crucial to invest in storage infrastructure and building supply chains. This has also not happened. Finally, the best alternative avenue for farmers to earn additional income is through livestock.

Technology And Livestock

But we seem to have hit a productivity roadblock in this area. Merely increasing population isn’t the right way. There is a need to invest in breed improvement via technology. In fact, investing in technology not just for livestock but also for seeds, their varieties, practices et cetera can also go a long way in improving productivity and helping earn that extra money (provided exports are liberalised, otherwise, we will have excess supply and prices will crash as it happens all too often).

However, we only spend 0.7 per cent of agriculture GDP on research and development in this sector. Is there any wonder then that innovations are few and far between? Currently, farmers in some states are openly defying the government and planting GM crops (Bt Brinjal and herbicide intolerant Bt cotton).

The Modi government needs to show some boldness and let farmers experiment just as Vajpayee did in 2002 with Bt Cotton. (Agriculture economist Ashok Gulati estimates that India earned extra $67 billion in the next 15 years due to that one step - benefiting Gujarat farmers the most which in turn helped Modi politically as well).

Importance of Private Investment

Another way of bringing technology and money to farms is via private involvement. PM Modi had told Swarajya that only 1.75 per cent of investment in the agriculture sector is by the private sector. This is where contract farming comes into the picture. A model law is already prepared and shared with the states but it seems hardly any one is enthused about it. The least Modi can do is convince BJP-ruled states to get on board and pass the law. In addition to this, another low-hanging fruit that needs immediate picking is passing and implementation of model APMC Act by the states. Archaic laws from the licence raj era such as Essential Commodities Act needs to be junked in toto.

Ultimately, the goal should be to make sure that farmers get 70 to 80 per cent of what the consumers are spending to buy their produce (exactly what AMUL was able to achieve). The middleman needs to be cut out whether by directly allowing farmers to sell to consumers, private firms or via cooperatives. All the government’s actions, as far as marketing reforms are concerned, should be aimed at that.