Mar 4, 2009

Farmers Manifesto - 3 and last

In this 3rd and the concluding part of the document on farmers manifesto, we explain why and how the direct income support to farmers need to be ensured. Very often people ask me whether direct income support to farmers is at all possible, and if yes how do we work it out. Well, I present below the way we can do it, and I believe if the State is serious, we first need to set up a Farmers Income Commission, which will fine tune the mechanism to provide income support.

Let us say for the sake of our farmers, the people who work day and night to feed us: Jai ho !

Direct Income Support for Farmers – Why and How

In order to ensure a consistent and sustainable income to farmers in the face of steeply rising input costs and unreliable markets, the government needs to seriously develop a direct income support mechanism. This should be used in conjunction with other mechanisms such as support prices and input subsidies to ensure a secure livelihood to farmers.

The rationale for direct income support

§ It is important to remember that government policies have kept agricultural prices artificially low. This has particularly enabled the government to keep the cost of living of urban industrial workers and government employees low, so that their wages don’t place too much burden on the industry and government. The price intervention by the government in the form of Minimum Support Price has also worked within this ambit. The CACP determines the MSP every year in a non-transparent manner based on a host of considerations including “effect on industrial costs, effects on cost of living and effect on general price level.”

§ Farmers and agricultural laborers work hard every year to produce food and other essential produce to sustain the nation’s population and economy. It is the responsibility of the nation to ensure that they make a decent living out of performing this critical function. The income support can be seen as remuneration for ensuring food security and self-sufficiency, and safeguarding and harnessing our land and other natural resources for vital primary production.

§ The right to life of the farmer community which constitutes 65% of our population is under serious threat in the existing agricultural situation. The farmers’ suicides represent only the tip of the iceberg, indicative of the broad and deep distress in the agricultural community. Ensuring minimum income level which keeps them above the poverty level should be seen as the right of the cultivators, not as a dole.

§ It is clear that the farmer as producer is sacrificing a portion of the fair price in order to enable food and essential items to be available to the nation’s consumers at affordable prices. The direct income support should be seen as a redressal that compensates for this differential.

§ The government is spending enormous amount of funds towards fertilizer subsidies, but most of it goes to the fertilizer industry not to the farmer. The fertilizer subsidy bill for 2008-09 is Rs.1,19,000 crores, which is more than 15% of the nation’s entire budget! The projected subsidy for 2009-10 is Rs.2,50,000 crores. Even such a huge expenditure is not getting transferred into real income to farmers.

§ The employment opportunities in other sectors are growing at a meager rate to absorb a significant portion of those currently in agriculture. If agriculture is allowed to become increasingly a loss-making proposition, millions of farmers will move out but will have no way to go.

§ Employment in urban enterprises across the country from the 3rd Economic Census (1998) to 4th Economic Census (2005) has grown only by 9.6% in 7 years, from 28.77 lakhs to 31.52 lakhs. Whereas the overall employment growth between 1983 and 1993-94 was 1.74%, it fell to 1.08% between 1993-93 and 2004-05!

§ Direct income support is already being provided to farmers in Europe and US to keep agriculture a viable occupation. In UK, each farmer gets 230 pounds of direct payment for every hectare of land cultivated. Direct payments to farmers by the European Union (EU) in 2006 came to 49.8 billion Euros, which was 46.7% of the EU budget. In the US, the direct payments are determined for each crop separately. Each cotton farmer in the US on an average gets $30,000 every year. Wheat farmers get 52 cents for every bushel sold, in addition to a guaranteed minimum price of $3.92 per bushel. The support that we are proposing is very small compared to this.The stated reasons for the European Union to provide direct payment support to farmers include ensuring food self-sufficiency, preserving a rural way of life, the fact that without this support, farmers will not be able to continue farming, and that pastoral agriculture is considered as part of Europe’s heritage. In the Indian case, in addition to these considerations, there is also the basic issue of survival of a large percentage of our population.

Implementation issues for direct income support

§ Conditions for the support

o The support should be given to those who cultivate the land, including agricultural workers. In case of absentee land-owners, the support should not go to the owners but to the tenants working on the land. In each year, the support should be given only if a crop is being grown, not if the land is left fallow. In other words, it should be based on the principle of “honest work, just reward.”

o The payment should not be crop-specific but made available for all crops.

o The amount should not be based on the extent of land.

o The payment should simply be given on a per-family basis, as the main aim is to provide a minimum income to each agricultural family.

o The income support can also be linked to the performance-the production being maintained at not less the average of the last ten years (moving averages can be calculated).

§ Financial aspects

o There are about 1.2 crore agricultural families in AP. If we assume that 1 crore families would receive direct income support of Rs.25,000 per annum, it would cost the state Rs.25,000 crores every year, which is about 25% of AP’s annual budget.

o If 100 days of labor to the farmer can be accounted into NREGA or similar central budget, then the direct support could be reduced by a corresponding amount.

o To put the cost in perspective, we should recognize that this can potentially bring lakhs of families out of poverty, thus reducing the financial burden on the various welfare programs of the state for the poor.

o The extra money going into the rural economy through this program will have positive economic consequences by increasing the purchasing capacity, and by enabling investments by farmers.

§ Delivery Mechanism

o The delivery of support should ideally happen through village-level institutions, and reach the individual farmers with as little intervention by the bureaucracy as possible.

o Women’s savings groups can be used as vehicles for transferring the payments to the farmers.

(concluded)

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