May 19, 2015

How farmers continue to subsidise consumers and the industry.



A poor woman in a village wants to buy a bakri. She desires to be economically independent, and that knowing that she can eke out living, approaches a micro-finance institution (MFI) for a small loan. She needs roughly Rs 7,000 or so which no bank would be willing to provide her.

The MFI operating through a self-help group lends her the money at an interest of 24 per cent to be paid back at weekly intervals. Effectively the interest rate comes to 36 per cent.

On the other hand, industrialist Laxmi Mittal decides to invest in Bathinda petro refinery that the Punjab government is setting up in a joint venture. The cash-starved State government gave him a loan of Rs 1,250-crore at 0.1 per cent rate of interest spread over five years and on top of it gave him a tax holiday of 15 years. Similarly, for Tata’s Nano factor in Gujarat, the State government had given him a loan of several hundred crores to be paid back in 20 years at an interest of 0.1 per cent. Of course there is nothing wrong in extending a helping hand to the industry.

I bet if the poor women in the village had also got a loan for buying a bakri at 0.1 per cent interest, she would have been driving a Nano car at the end of the year !

Some years back, in the early 1990s I read a report of the Commission for Agricultural Costs and Prices (CACP), the body that determines the minimum support price for agricultural commodities. This report for the kharif season clearly stated that cotton farmers were deliberately paid 20 per cent less price for over 20 years so as to keep the textile industry economically viable. In other words, what we are never told is that actually it is the cotton farmers who had all been subsidizing the textile industry all these years.

A few months back, the cotton prices crashed from Rs 4,500 to Rs 5,200 per quintal to about Rs 3, 200 per quintal. Since the cotton farmers had subsidized the textile industry all these years, I had expected the rich and powerful textile industry to come to the rescues of cotton growers in this hour of need. But it didn’t happen. Farmers were left to count their losses.

These two examples clearly illustrate why and how the rural population, mainly comprising farmers, has been kept impoverished all these years. Not only in case of cotton, farmers across the board have been deliberately paid a low price for their produce either to ensure that the industry gets the raw material at a cheaper price or have been penalized to keep the food prices low for the consumers.

The 2014 report of the National Sample Survey Organisation (NSSO) tells us that the average monthly income that a farm family derives from farming activities is a paltry Rs 3,078. To make the ends meet, a farm family has to work in some other non-agricultural activities, including MNREGA. That makes for an average of Rs 6,000 per family per month. No wonder, 58 per cent farmers go to bed hungry, and 76 per cent want to quit agriculture if given a choice.

This year, soon after the NDA government took over in May 2014, the minimum support price for wheat and rice has been increased by just Rs 50 per quintal. Last year, the wheat farmers received a price of Rs 1400 per quintal, this year they are being paid Rs 1450 per quintal, an increase of 3.2 per cent. On the other hand, government employees have been paid two DA installments in the same period which add up to 13 per cent of their salaries.  This low price for farmers is simply to ensure that food inflation is kept in control. But the same principal is not followed when it comes to government employees. They continue to get DA regardless. In other words, it is the farmer who is subsidising the consumers.

It is primarily for this reason that agriculture appears to be a losing proposition. Planners and policy makers therefore advocate farmers to be moved out of agriculture. Forcible land acquisition is being justified in the name of a better economic future for the farmers. I have heard Finance Minister say time and again that he is supporting industry simply because the revenue he gets from the industry is what can be invested in rural areas. Industry has been given tax concessions to the tune of Rs 42-lakh crore in the past ten years, beginning 204-05, so as to prop up industrial growth, manufacturing output and boost job creation. Nothing of the sort has happened.

This skewed economic thinking is leading to policies that push farmers out of agriculture to swarm in to the cities. It is expected that in another 15 years, by 2030, nearly 50 per cent of India’s population would be living in the urban centres. These cities and towns would occupy approximately 2 per cent of the country’s geographical area. To me this is not only economic madness but also speaks volumes about the lack of political and scientific vision. With such a massive translocation of population, living in the cities will be like living in ghettos. Already, 60 per cent of Mumbai’s population comprises slums, and these slums are in 8 per cent of Mumbai. 

Economic approach therefore has to change. It should aim at making the rural areas economically viable. Instead of pushing rural population out of agriculture the thrust should be to provide gainful employment in the countryside. It has to begin with providing the right kind of economic incentives to farmers and other living in the villages. Farmers too are entrepreneurs, and the younger generation in villages too can become start-ups. All they need is policy support. This has to be accompanied by public sector investments in the villages. So far, the effort has been to keep the countryside starved of resources. In the 12th Five-Year plan, only Rs 1.5 lakh crore has been invested in agriculture. This is a pittance considering 60 crore people directly or indirectly survive on farming. How long can India afford to keep farmers impoverished? 

सोच बदलने का समय  Dainik Jagran, May 16, 2015
http://www.jagran.com/editorial/apnibaat-time-to-rethink-12371140.html

गांवों की ओर भी देखें हमारे हुक्मरान Nai Dunia, May 16, 2015
http://naidunia.jagran.com/editorial/expert-comment-our-rulars-should-also-look-towards-villages-368697

2 comments:

Mahesh Srivastava said...

Disparity and advamtages u mentioned very well, now If u were Finance minister or autonomous solution provider, what do u solution suggest/provide to country since u manage all farmers, industry and country's economy.

Deepak Garg said...

it is the farmer who is subsidising the consumers. it's a reality which our urban population fails to understand. Pity on Farmers. Although a very good effort by you to make the understanding of farming crisis more clear to the urban population.