Agrarian distress and Challenges: an overview

Context:

• Similar to the last two Budgets, this year’s pro-agriculture intentions are palpable through increased outlays to the agricultural sector and initiation of various programmes.

Agrarian distress and challenges:

There are some real challenges confronting three laudable Budget announcements.

Challenges

• Raise the minimum support price (MSP)
• The first is to raise the minimum support price (MSP) by at least 50% above the cost of production.
• The MSP will also be extended to all crops for which estimates on cost of cultivation and a remunerative price are to be ascertained.
• In the last few years, the government has been giving MSP above 50% based on cost A2+FL, which is to be continued as per this Budget.
• little attention has been paid towards altering the ongoing ‘high input cost and low output price’ regime.

Issues involved here:

• One is to estimate the cost of production of commodities not covered under the scheme and their procurement procedures, if undertaken.
• The production cost, as calculated by the Commission for Agricultural Costs and Prices, is based on three different methods, termed as A2, A2+FL, and C2.
• A2 covers all paid-out expenses, including in cash and in kind, like, cost on account of seeds, chemicals, hired labour, irrigation, fertilizers and fuel.
• A2+FL cover actual paid cost and unpaid family labour.
• C2 includes all actual expenses in cash and kind incurred in production and rent paid for leased land, imputed value of family labour plus interest paid.

Other challenges and concerns:

• Indian agriculture is monsoon dependent.
• In India post-harvest losses in food and food grains are around 40-50%.
• Agricultural growth has been, on average, lower than that in non-agriculture, including industry.
• The rate of decline of the population dependent on agriculture has been discouragingly low since employment outside of agriculture has not been growing fast enough.
• The monopoly of traders over local agricultural markets bars farmers from selling directly to consumers.
• Fiscal conservatism has adversely affected public investment in irrigation, drainage and flood control.
• Liberalised imports of agricultural commodities including foodgrains and cotton have dampened domestic prices.

What’s missing in Current Budget?

• There are certain pressing issues not considered in this Budget that must be given closer attention.
• Close to 52% of net sown area (73.2 million hectares out of 141.4 million hectares) is still unirrigated and rainfed, in addition to the recurrence of floods and droughts due to climate change.
• Despite its presence in the Economic Survey 2017-18, the subject has not received due attention in this Budget.
• The plan is to take up 96 districts deprived of irrigation with an allocation of Rs. 2,600 crore under the Prime Minister Krishi Sinchayee Yojana — Har Khet ko Pani.
• The Centre will work with the State governments to enable farmers to install solar water pumps to irrigate fields.
• At the same time, the Minor Irrigation Census 2013-14, published in 2017, warns of a tremendous increase in deep tube wells to more than 2.6 million in 2013-14, from 1.45 million in 2006-07, and the resultant decline in the ground water table.
• A location-specific policy for irrigation with the identification of suitability of medium-major irrigation projects and/or minor or micro irrigation facilities is required to protect farmers from the adverse impacts of climate change.
• It must be supplemented with timely completion of pending canal irrigation projects, and strengthening of the National Agricultural Insurance Scheme by an increase in compensation and timely advice on weather.
• Technological interventions that update farmers about sowing and harvesting time and extension services can help prevent misfortunes.
• Budget is investment in agricultural research and development (Ag R&D): Another key component missing in the Budget is investment in agricultural research and development (Ag R&D).
• More drought and pest-resistant crops are needed, along with better irrigation technology.
• Farmers also require interventions in the seed sector to raise production and diversify to alternate crops to induce higher growth.
• The most disquieting aspect is that India spends almost Rs. 6,500 crore on Ag R&D, which is not even 0.4 % of GDP from agriculture and allied activities.
• Dividends from Ag R&D are much higher in the less developed eastern and rainfed States and hence receive adequate funds.
• Rather than enticing farmers with compensation and increased budgetary outlays, the government should assure doable action plans that quickly rescue them from price or crop failure.
• The long-term measures to increase their income and trigger agricultural growth, as reflected in the Budget, remain to accelerate investments in irrigation, infrastructure, improved extension services and institutions fully backed by a competitive marketing system.

Commissions:

Swaminathan Commission report  :

• National Commission on Farmers (NCF)’s Swaminathan Commission Report aimed at working out a system for food and nutrition security, sustainability in the farming system, enhancing quality and cost competitiveness of farm commodities .
• It recommended that the MSP should be set at a level that equals 150 percent of costs.
• The Commission observed that farmers needed to have an assured access to and control over rightful basic resources like land, water, bioresources, credit and insurance, technology and knowledge management, and markets.
• Agriculture must be implemented in the concurrent list from the state list — hence putting it as a matter of concern for both the Union and the states.

Way ahead:

• The government must extend immediate help to farmers from rampant price volatility.
• The States can implement the ‘price deficiency payment scheme’ (difference between MSP and price received) as has been started in Haryana for some vegetables, and the Bhavantar Bhugtan Yojana in Madhya Pradesh for select oilseeds.
• These schemes can also encourage small holders, including tenants, who constitute at least 86% of farmers, to sell in the regulated markets.

Gramin Agricultural Markets:

• The second measure is to develop and upgrade the existing 22,000 rural haats into Gramin Agricultural Markets.
• A corpus of Rs. 2,000 crore has been allocated in the name of the Agri-Market Infrastructure Fund for developing and upgrading marketing infrastructure.
• The real challenges are to ascertain the priority of the respective States towards it and ways to accelerate its pace.
• Under market reforms, it will also be important to link production centres with marketing through agri-value chains, which would require farmers to aggregate, form self-help groups, or farmer producer organisations.
• Small landholders in less developed States sell their produce mainly through village traders or government-run Primary Agricultural Credit Societies (for wheat and paddy at MSP) and often get exploited.
• A hike in MSP should be supplemented with irrigation, and reduction in fertilizer cost.
• Another interrelated initiative is the launching of ‘Operation Green’ with an outlay of Rs. 500 crore to address the challenge of price volatility of perishable commodities.
• This again makes it necessary for State governments to bring various programmes under one roof, perhaps within the Agricultural Produce and Livestock Market Committee 2017, to help farmers.

Increase institutional credit:

• The third important step is to increase institutional credit from Rs. 10 lakh crore in 2017-18 to Rs. 11 lakh crore in 2018-19.
• The share of agricultural credit in gross domestic product in agriculture and allied activities has increased from 10% in 1999-2000 to 41% in 2015-16.
• The actual flow has considerably exceeded the target.
• Therefore, targeting of the announced allocation to the poorer farmers and tenants in each State will go a long way in improving their purchasing power and augmenting investment, which is currently low.

Conclusion:

Rather than just increased budgetary outlays, farmers need plans that will rescue them from crop failure