Mar 9, 2016

It is the denial of a legitimate income that is killing farmers

Two days after Finance Minister Arun Jaitley, while presenting Budget 2016, promised to double farmers’ income in the next five years, three farmers in Punjab – the food bowl of the country -- committed suicide. The moment I read this news report the very first thought that came to my mind was: “Oh God! Couldn’t they have waited for another five years?”

For several decades now, Indian agriculture has been in the throes of a terrible crisis. With every passing year, the agrarian crisis has been worsening. In Punjab, as per official estimates, 449 farmers had taken their own lives in 2015. In Marathwada, the spiral death dance on the farm continues unabated. With 124 suicide already recorded between January and February 15 this year, there appears to be no respite from the continuing tragedy on the farm. The grim scenario is no different elsewhere in the country.

The year that passed by – 2015 –was perhaps the worst as far as I can remember. The rate of farm suicides per day, which was hovering around 42 in the past five years, has now jumped to 52. Knowing the existing grim realities I was therefore hoping for a paradigm shift in economic thinking that brings a smile on the face of 600 million farmers, including their families. I waited with abated breath.

Last year too, while presenting the 2015-16 budget, Arun Jaitley had listed ‘Raising Farm Incomes’ as his top most challenge. And yet farm incomes did not figure anywhere in his budget speech. In fact, the total outlay on agriculture was later reduced to 15,809-crore in the revised estimates. In reality, the budget provisions for the year that just passed by was even less than the Rs 18,000-crore that the country spent on importing pulses. No wonder, agriculture continues to be in dire straits.

Over the years, agriculture had been systematically starved of funds. The total public sector investments in agriculture for the 12th Plan period are a modest Rs 1.5-lakh crores. In the 11th Plan, the total outlay for agriculture was around Rs 1-lakh crore. This is peanuts considering that agriculture is the biggest employer, with nearly 52 per cent population engaged in farming or related activities. Compare this with the investments made for Delhi airport alone. CAG had pointed to Rs 1.63-lakh crore scam in Delhi airport deal. This is more than the total outlay for agriculture in the entire 12th Plan period. 

So this year, when the Finance Minister said: “We need to think beyond ‘food security’ and give farmers a sense of ‘income security’,” I was certainly elated. But when he announced his intention of doubling farmers’ income in the next five years, I was greatly disappointed. I am sure if Arun Jaitley had carefully gone through the Economic Survey that was presented two days before the budget, he would have known how severe the economic crisis in agriculture was. The average income of farmers from agricultural operations in 17 States was Rs 20,000 a year. In other words, with a paltry Rs 1,666 as monthly income in these 17 States, what should the farmers be doing? Wait for another five years? 

Perhaps going by the Economic Survey recommendations, which makes a very good diagnosis of the existing farm crisis, but comes out with a faulty prognosis terming the central challenge of Indian agriculture as low productivity, Arun Jaitley too emphasized on raising farm productivity to enhance incomes. This is a faulty prescription. Take the case of Punjab. Farmers produce 4,500 Kg/hectare of wheat and 6,000 Kg/hectare of paddy in a region which has 99 per cent assured irrigation. And yet, five farmers are committing suicide every two days. Let’s be therefore clear. It is not productivity or irrigation but it is the denial of a legitimate income that is killing farmers.

Nevertheless, a careful perusal of the budget proposals for agriculture shows that there is nominal increase in the allocations. The total budget provision of Rs 35,983-crore looks a quantum jump but when you look carefully you realize that it’s all a game of statistical jugglery. Rs 15,000-crore of interest subvention on the farm credit, which is part of the Financial Ministry allocations, has been shifted to agriculture thereby giving the impression as if a lot of public sector investment is being made in farming. Even the investment for irrigation under the Pradhan Mantri Krishi Sinchai Yojna has in reality come down.

Expanding irrigation is certainly a welcome move, but it needs more than a cosmetic infusion. According to the Economic Survey, only 33.9 per cent of the total cropped area is irrigated. Instead of investing on river linking, which is likely to be a wasteful expenditure considering the receding glaciers and multitude of hydroelectric dams is reducing the water flow, the emphasis should be on reviving ponds, wells and investing in watersheds. I see MNREGA being utilized for this purpose, which is a positive step. But more needs to be done. Similarly, there are some right kinds of initiatives like bringing 5-lakh acres under organic farming etc but these have hardly any possibility of doubling farm incomes.

Doubling incomes is certainly possible, and the farmers do not have to necessarily wait for five years, provided there is an economic rethinking. An increase in farm incomes will have a multiple impact on the country’s economic growth. More income in the hand of farmers’ means more domestic demand will be created. Increase in demand would push the wheels of industrial growth which have been stagnating for quite some time. This is the paradigm shift that the country needs for boosting economic growth. Agriculture alone has the potential to reboot the Indian economy. Give farmers the right income and they will do the rest.

Farmers have been systematically kept impoverished all these years. Let me illustrate. In 1970, the minimum support price for wheat was Rs 76 per quintal. In 2015, wheat MSP was fixed at Rs 1,450 per quintal, an increase by 19 times. In the same period, the basic salary (plus DA) of the government employees was raised by 120 to 150 times; of college/university lecturers by 150 to 170 times; of school teachers by 280 to 320 times; and of corporate employees by 300 to 1,000 times. If the farmers’ income (measured through MSP he gets) was also raised in the same proportion in the past 45 years, rural India would been a vibrant and progressive economy. In other words, farming has deliberately been rendered uneconomical.

A new dawn for rural India needs bold policy decisions. I have two suggestions: 

1) Provide farmers with Rs 3-lakh crore economic bailout package. And don’t be startled. If India Inc can be given Rs 3-lakh crore economic packages when faced with an economic meltdown in 2008-09, agriculture too needs a similar bailout package after two consecutive back to back droughts. Let’s not forget, in Punjab alone, rural indebtedness has grown 20 times in past 10 years. They can’t wait for five years. They need a bailout package now.

2) Since only 6 per cent farmers get the benefit of MSP, and 94 per cent are dependent on markets, which are largely exploitative, it is time to move from ‘price support’ to ‘income support’ for farmers. The need therefore is to provide a guaranteed income support to farmers, which is possible by setting up a National Farmers Income Commission. If the salaries of government employees can double every five years, I see no reason why a similar income structure cannot be established for farmers. 

Will Bharat Reap? The Asian age. Mar 6, 2016

1 comment:

Rajeev said...

I totally agree with the analysis.
The farmer is poorer than a peon.
Will high- tech agriculture be attractive to rural youth wit small land holdings.
Thinking in terms of Capital formation in agriculture may be incentivised by infusing more resources.If we have will, resources are not constraints.