Agriculture

Illusions of bounty

Print edition : February 02, 2018

A farmer with his produce waits to negotiate with traders at a wholesale vegetable market in Hyderabad on February 1. Photo: NOAH SEELAM/AFP

Unveiled in the context of a spectacular collapse of agricultural commodity prices last year, the Budget adds insult to injury.

Expectations of farmers ran high on the eve of Finance Minister Arun Jaitley’s last Budget before the 2019 general elections, not because the section believed that the Narendra Modi government had suddenly turned “farmer-friendly” but because of the strong protests across the country since last year against the dramatic collapse of agricultural product prices.

It was on the basis of united struggles and a massive outpouring of agrarian protests that farmers and farmer organisations hoped against hope that the ruling dispensation, threatened by electoral losses, would come up with something tangible for farmers.

The Finance Minister played to the gallery, claiming that the Bharatiya Janata Party (BJP) government had been “very much sensitive” and “declared minimum support price [MSP] for the majority of rabi crops at least at one and a half times the cost involved”, in keeping with the party’s manifesto.

He also claimed that the government had decided to keep the MSP for all unannounced kharif crops at a minimum of one and a half times of their production cost and expressed confidence that “this historic decision will prove an important step towards doubling the income of our farmers”.

It soon became clear that Jaitley’s grandstanding was utterly bereft of any substance. By the end of the day the “pro-farmer” tag appeared ragged as a volley of questions revealed the “historic” announcement to be nothing but hyperbole.

Illusion and reality

The BJP had stated in its manifesto that it would “take steps to enhance the profitability in agriculture, by ensuring a minimum of 50 per cent net profit, cheaper agriculture inputs and credit; introducing latest technologies for farming and high yielding seeds and linking MGNREGA [the Mahatma Gandhi National Rural Employment Gurantee Act] to agriculture.”

In hundreds of election rallies, Modi assured farmers that they would be given the promised MSP of one and a half times the cost of production.. However, not long after the BJP-led National Democratic Alliance (NDA) government was formed, it went back on this promise. On February 20, 2015, it filed an affidavit in the Supreme Court that it was not possible to increase the MSP for foodgrains and other farm produce to input cost plus 50 per cent as it would “distort the market”.

The affidavit was filed in response to the court notice on a public interest litigation petition that had sought implementation of the BJP’s manifesto for the 2014 Lok Sabha election. Three years down the line, despite the affidavit, the government seems to have suddenly arrived at the eureka moment and realised that it had been paying the promised MSP for the majority of rabi crops.

First and foremost, the BJP government has betrayed farmers on their demand for assured remunerative prices by moving the goalposts in a last-ditch effort to pacify and woo them. A similar attempt was made earlier.

In a reply to Unstarred Question No: 1,317, answered on December 12, 2017, the Minister of State for Agriculture and Farmers’ Welfare Gajendra Singh Shekhawat claimed that the MSP recommended by the Commission for Agricultural Costs and Prices (CACP) was based on objective criteria, considering a host of relevant factors, and that prescribing an increase of 50 per cent of the cost may “distort the market”.

Earlier, he had dumped the C2+50 per cent formula proposed by the National Commission of Farmers (NCF), and promised by the Prime Minister, when he claimed that the MSPs fixed by the government usually provided adequate returns over the weighted average cost of production using A2+FL as the yardstick. Suddenly, people in the government stopped talking about C2+50 per cent.

Given that it was portrayed as a historic decision and was accompanied by a high-voltage campaign, it is only natural that it would be put to even greater scrutiny. Soon after the Budget speech, Prof. M.S. Swaminathan, who chaired the NCF, was one of the first to seek a clarification on whether the proposed hike was the same as the formula recommended by the NCF in 2006. He said that since the Finance Minister had announced the proposed hike only for unannounced crops, most important crops such as paddy and millets were not due for any MSP hike.

It is worth taking a closer look at the “historic decision”.

To understand the betrayal, we must look at the different types of costs. A2 refers to the costs that cover all paid-out expenses, including in cash or kind, that a farmer incurs on all inputs such as seeds, fertilizers, pesticides, hired human and animal labour or machines, irrigation, fuel, and electricity. A2+FL adds an imputed value of unpaid family labour to A2. C2 costs as claimed by the Minister are based on objective criteria that are comprehensive and over and above A2+FL, and account for rentals, interest foregone on owned land and fixed capital assets, insurance premium, and transportation and marketing costs.

It must be noted that the C2 calculations are disputed and farmers’ organisations have been calling for an accurate calculation of costs. The weighted average cost of production taken into consideration by the CACP also disregards State government cost calculations.

Table 1 shows that the MSPs of all the crops fall well below C2+50 per cent. Even if we agree that the BJP and Modi were all the while talking about providing 50 per cent above A2+FL prices, they were not offering anything new. Moreover, the CACP considers the margin over A2+FL as gross returns and margin over C2 as net returns. The net returns over C2 and gross returns over A2+FL under the previous United Progressive Alliance (UPA) regime (taking the average of 2009-10 to 2011-12 for rabi crops), when compared with the same under the NDA regime in 2015-16, clearly demonstrate that the percentage of gross and net returns under the NDA regime is much lower. This also holds good when we compare the averages for 2009-14 and 2014-18.

This is not to say that farmers got remunerative prices during the Congress-led UPA. Both regimes have not taken steps to ensure assured remunerative prices through the expansion of the procurement mechanism; rather, they have been working to dismantle the procurement mechanism as well as public stockholding. One may announce a very attractive MSP at even double the C2 cost but it is meaningless and only notional without assured procurement. The BJP government is silent on this issue.

There is no procurement mechanism in most parts of the country, without which there is no assurance of the announced MSP accruing to farmers. Nothing has been done in this direction.

The Finance Minister’s claims that the government has already implemented the recommendations for the rabi season and that it will pay the promised MSP for the next kharif season are a blatant misrepresentation of facts as shown in the accompanying table.

Reduced outlay

Jaitley also stated that if the price in the agriculture produce market was less than MSP, the government should purchase either at the MSP or work in a manner to provide MSP for farmers through some other mechanism. Even if we take the Finance Minister’s announcement at face value, there are no allocations for meeting the expenses and for ensuring payment of deficit in price to farmers in the event of them receiving below-MSP prices. His claim that NITI Aayog, in consultation with the Central and State governments, will put in place a foolproof mechanism so that farmers get adequate prices for their produce is a case of putting the cart before the horse.

Just as was the case with the demonetisation fiasco, where there were no new notes printed and no foolproof mechanism to prevent a currency crisis, in this case too the promise has not been backed by the establishment of a foolproof mechanism to ensure procurement at the MSP or for the payment of deficit to farmers.

It is notable that the outlay for the Price Stabilisation Fund, a much-hyped programme aiming to address problems arising out of volatility in prices, has been slashed from Rs.6,900 crore in 2016-17 to just Rs.1,500 crore in 2018-19. This will affect farmers growing commercial crops such as rubber, tea, coffee, and spices.

The Budget then announced the launch of a new scheme called ‘Operation Greens’ with an outlay of Rs. 500 crore to address the challenge of price volatility of perishable commodities such as tomato, onion and potato. The Prime Minister has already started claiming that it would be as beneficial to the farmers as the Amul model. Clearly, the effort and sacrifices that helped in the success of Operation Flood and Amul are being undermined. The allocation for the market intervention and price cupport schemes, which was Rs.950 crore in the Revised Estimates, has been drastically cut to Rs.200 crore.

Debt burden

The BJP-led government has betrayed the farming community and the rural poor by refusing to announce any policy for liberation from indebtedness for the peasantry. The debt burden that is pushing farmers to commit suicide will continue to rise. While the BJP manifesto had clearly made the promise of cheaper agricultural credit, there have been no steps in that direction or to ensure access to institutional credit, crop insurance and subsidies for hitherto excluded Dalits, Adivasis, tenant farmers, sharecroppers, landless, agricultural workers and women.

No effort has been made to address the debt situation in rural areas, where private moneylenders continue to hold sway and 44 per cent of rural debt comes from non-institutional sources.

The government has said that agricultural credit has been increased by 10 per cent, by Rs.1 lakh crore to Rs.11 lakh crore, but this is not a budgetary provision. The amounts would be disbursed through all three institutions of agricultural credit: commercial banks, credit cooperatives and regional rural banks. This is a simple and mechanical 10 per cent increase without: (a) any attention to a far higher increase in the cost (including wage) pressures in agriculture; (b) any directed efforts to make fresh agricultural loans to the non-loanee farmers and bringing them into the ambit of formal finance; (c) correcting for the institutional imbalance in agricultural credit with a near-collapse of the cooperative system in most parts of India following demonetisation; and (d) addressing the regional and borrower-level disparity in the distribution of agricultural credit.

According to official data, about one-fourth of the agricultural credit in 2016 was extended by urban branches in India. Only about 41 per cent of the agricultural credit is given to small and marginal farmers (represented by loans of up to Rs.2 lakh), while about 14 per cent of agricultural credit carries a loan size of more than Rs.1 crore, going to institutions and corporates engaged in agricultural production.

The Finance Minister speaks about lessee farmers’ inability to avail themselves of crop loans but has not made any concrete move to overcome the problem. This is despite the presence of examples such as the Andhra Pradesh Licensed Cultivators’ Act and provision of loan eligibility cards for tenant/lessee farmers. The allocation for interest subvention for short-term credit to farmers has also been retained at the same figures as last year.

Employment hit hard

The Budget offers nothing to agricultural workers and the rural poor who have suffered falling incomes and have been forced to migrate. While the BJP had claimed in its manifesto that it would link the MGNREGA to agriculture, nothing has happened to strengthen and expand it. No increase in MGNREGA allocations has been made. The allotment of Rs.55,000 crore is exactly the same as the revised estimate for 2017-18. Even by conservative estimates, more than Rs.80,000 crore will be required for the proper implementation of the programme. This callous lack of increase is despite the fact that over 56 per cent of wages were pending and more than 15 per cent of the wage seekers did not find any work in 2016-17.

As of January 25, eight States had a net negative balance of Rs.1,555 crore in terms of MGNREGA funds, that is, they spent more than they received from the Centre. In 2016-17, of the 89 million job seekers only 76 million found work. States have been witnessing a drastic cut in allocations and the average number of workdays under the MGNREGA has been well below what is stipulated in the Act. Without addressing these issues the Budget talks of creating employment of 321 crore person-days, but no concrete proposals are to be found anywhere in the Budget documents.

The Budget comes even as the Economic Survey paints a grim picture stating that Indian agriculture will likely grow at 2.1 per cent and climate change could reduce annual agricultural incomes by 15-18 per cent on an average and up to 20-25 per cent in unirrigated areas. Despite such a prognosis, the allocation for agriculture in the Budget is only 2.36 per cent.

Allocation to the Rashtriya Krishi Vikas Yojana saw a drastic cut from Rs.4,500 crore in the Revised Estimates to Rs.3,600 crore in the latest Budget. The failure of the much-hyped Pradhan Mantri Fasal Bima Yojana has been acknowledged even by the CAG Report, which has noted that corporates have been profiteering at the expense of farmers.

It is to be noted that economists have estimated that a growth rate of more than 14.86 per cent is required for five years to double farmers’ incomes by 2022. The NITI Aayog economists and policymakers have disputed this and claimed that agriculture would require an annual growth rate of only 10.4 per cent to double farmers’ incomes by 2022. Even if the NITI Aayog claim is accepted, one can see how far away we are from any such goal.

The promises in the Budget speech are reminiscent of an anecdote narrated by a veteran peasant leader to expose the betrayal of promises by the government; in it, when the masses demand sugar, the leader scribbles the word sugar on a piece of paper and asks them to savour it. The promises of the Modi-Jaitley duo are no different. The Modi government has desperately conjured an illusion with an eye on the next elections and its claims of the Budget being “pro-farmer” are deceitful.

Vijoo Krishnan is joint secretary of the All India Kisan Sabha.

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