UNION BUDGET: Agriculture

Raw deal for farmers

Print edition :

A farmer belonging to Erukkattur village in Tamil Nadu’s Tiruvarur district trying to salvage the paddy crop in his inundated field, a file picture. Millions of farmers have not benefited from the government’s crop insurance scheme. Photo: M. SRINATH

The Budget lacks any serious effort to address the main issues of unemployment, agrarian distress and falling incomes, revealing a high level of official insensitivity.

A Budget during a time of recession, increasing unemployment, agrarian distress, falling incomes, demand constraint and malnutrition would have done well to first acknowledge the mess that policies have created and then taken steps to provide employment, boost rural incomes, increase purchasing power and thereby demand.

Coming amid reports that there were nearly 47,000 distress-driven farm suicides between 2014 and 2017, with a 36 per cent increase in agricultural worker suicides, the Budget was expected to, at the very least, ensure food and livelihood security for the poor. Assured remunerative prices for crops, expansion of the scope of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and social security pensions would have improved purchasing power and led to a turnaround.

However, the Budget lacked any serious effort to address the crisis. A juxtaposition of the ground reality with Finance Minister Nirmala Sitharaman’s allocations reveals a high level of insensitivity.

Allocations for agriculture and allied activities, fertilizer subsidies, irrigation, rural development and land resources in the Revised Estimates for the current year are almost Rs.25,000 crore less than what was originally budgeted. In fact, the Revised Estimate for almost every scheme of the Ministry of Agriculture and Farmers’ Welfare has been reduced in the current year, and these cuts have been maintained for the coming year too.

Farmers’ incomes

The Budget talks of a 16-point agenda to double farmers’ incomes by 2022, but there is no commensurate allocation to make it a reality. Economic Survey data show that the growth rate of gross value added (GVA) for agriculture had fallen drastically from 6.3 per cent to 2.8 per cent between 2016-17 and 2019-20.

Farm incomes have been continually falling, for a number of reasons such as higher costs of production as a result of higher input costs and cuts in subsidies; unremunerative prices; and absence of assured procurement even at those prices. Other reasons include inadequate compensation for crop losses or insurance against yield or income losses owing to weather or market conditions and the absence of alternative employment guarantees for agricultural workers in the event of drought or natural calamities.

The situation has only worsened following rising prices, increasing costs of health care and education and absence of social security schemes. The 16-point agenda put forward for agriculture does not contain concrete steps to address these issues. During the 2014 general election, the most attractive promise of the Bharatiya Janata Party (BJP) for farmers was that the minimum support price (MSP) would be fixed at 1.5 times the comprehensive cost of production (C2+50 per cent, where C2 implies comprehensive cost, including all actual paid-out costs plus imputed value of family labour, rental value of own land, and interest on value of own fixed capital assets excluding land).

The cost calculations of the Commission on Agricultural Costs and Prices (CACP) are far below the actual costs and do not reflect the ground realities. Owing to low procurement, farmers do not get even these low prices, implying that the prices set are purely notional.

MSP farce

The Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA) was launched to ensure that no farmer would be denied MSP. However, under this scheme, in the first year, 2018-19, the expenditure was merely Rs.4,100 crore. The allocation was cut drastically in 2019-20 to Rs.1,500 crore; now, the Finance Minister’s revised figures reveal that this was scaled down to Rs.321 crore. If the scheme has to bail out farmers and ensure that the MSP is guaranteed, the allocation ought to be over Rs.1 lakh crore.

When PM-AASHA was launched, it was claimed that it would include three components: a price support scheme, a price deficiency payment scheme and a “robust” procurement mechanism through a private procurement and stockist scheme, all of which remain only on paper.

The Budget allocation for 2020-21 is only Rs.500 crore, a substantial part of which will likely be spent on advertisements and propaganda. Assured procurement of farm produce remains a distant dream.

If we look into the MSP of kharif and rabi crops announced, it will not be difficult to understand why farm incomes are dwindling even as costs are increasing. For the kharif marketing season (KMS) in 2019-20, the hike announced for paddy prices is just Rs.65 a quintal, or 3.7 per cent. Even taking the C2 cost as arrived by the CACP, that is Rs.1,560 a quintal, C2+50 per cent would come to Rs.2,340 a quintal. But the MSP announced is only Rs.1,815 a quintal.

The support prices are based on gross undervaluation of costs. For instance, the projected procurement price for paddy for KMS 2018-19 by the Punjab government was Rs.2,490 a quintal, while the CACP calculation for Punjab was Rs.1,174 a quintal.

The C2 cost for paddy in Bihar is Rs.1,605 a quintal but the CACP price is only Rs.1,398 a quintal. The Odisha government’s projected procurement price is Rs.2,344 a quintal, while the CACP is considering a price of only Rs.1,713 a quintal. This is the case with most crops.

The government has now altogether discarded the C2 cost and stuck to A2+FL (actual paid out costs plus imputed value of family labour), which is way below C2 costs. The MSP for the rabi marketing season 2020-21 follows a similar pattern.

The CACP’s weighted average C2 cost for wheat is Rs.1,848 a quintal. The CACP considered the cost of production to be only Rs.923 a quintal, 50 per cent below the C2 costs projected by State governments and also about 36 per cent below its own C2 projection of Rs.1,425 a quintal. For every rabi agricultural commodity, the MSP fixed is way below C2+50 per cent, regardless of whether one takes the CACP projections or the projections by State governments.

The promise of reducing costs of production by subsidising inputs has been long discarded in favour of deregulation of inputs to facilitate corporate profits. This Budget has seen a drastic cut in fertilizer subsidies. Even in nominal terms, the allocation for fertilizer subsidies for 2020-21 is 11 per cent less than the allocation for the current financial year. This will directly result in a rise in fertilizer costs. The Budget also has no proposals for expanding access to irrigation, providing support to sharecroppers or ensuring livelihood security of rural workers.


A plan to set up Grameen Agricultural Markets was announced in 2018-19 for better marketing facilities and upgradation of 22,000 rural haats (markets). After two years, the implementation has not even begun and only 0.5 per cent of the allocated Rs.2,000 crore has been spent.

Of the much-hyped “Dairy Infrastructure Development Fund” of Rs.10,881 crore announced three years back, only Rs.440 crore has been spent.

This Budget has allocated only Rs.60 crore under this head. Allocation for “Rainfed Area Development and Climate Change” has also been reduced.

The much-hyped Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), announced during the last Budget, promised Rs.6,000 a year to farmers owning up to two hectares. For 2019-20, Rs.75,000 crore was allocated for PM-KISAN, and it was claimed that 14.5 crore farmers would benefit from it.

On the eve of the last Lok Sabha election and even on voting day, many farmers got the first instalment of Rs.2,000. However, after one full year of its implementation, data reveal that not even a third of the intended beneficiaries have received Rs.6,000

According to data provided by the Ministry of Agriculture and Farmers’ Welfare in response to a Right to Information (RTI) query, until November 30, 2019, only 26 per cent of beneficiaries had received all three instalments.

Of the intended 14.5 crore beneficiaries, 7.6 crore farmers, or a little over 52 per cent, received one instalment of Rs.2,000. The government claims that Rs.48,937 crore has been released under the scheme.

However, if 14.5 crore farmers had to be given Rs.6,000 each, the total amount required would be around Rs.87,000 crore. Millions of tenant farmers, sharecroppers and landless farmers are already excluded from the scheme.

In a recession year, when the Budget was expected increase allocations to bring even the hitherto excluded poorer sections of the peasantry under its ambit to put more money into their hands to boost purchasing power and demand, the allocation for PM-KISAN has been retained at Rs.75,000 crore.

MGNREGA allocation

An important component of rural incomes is agricultural labour. The scope of the MGNREGA ought to have been expanded to provide at least 200 days of employment a year with increased wages; instead, the government has reduced the allocation from Rs.71,001 crore (Revised Estimate 2019-20) to Rs.61,500 crore in 2020-21, when the total demand from States amounts to nearly Rs.1 lakh crore.

Alarmingly, at a time of increasing hunger and malnutrition, the Budget has cut food subsidies drastically from Rs.1.84 lakh crore in the Budget Estimate of 2019-20 to Rs.1.16 lakh crore in 2020-21. The Revised Estimates for food subsidies show a decline of about 41 per cent over the budgetary allocations. The budgetary allocation for this year is Rs.18,650 crore less than last year’s allocation.

The government is also reducing allocations to the Food Corporation of India (FCI) for lifting grain for distribution under the National Food Security Act (NFSA) . The FCI is forced to borrow to meet the shortfall, with the aim of window-dressing fiscal deficit numbers. This has led to a massive debt burden of over Rs.2.2 lakh crore on the FCI, which plays a critical role in procurement and implementing the NFSA.

Corporate profits

The Pradhan Mantri Fasal Bima Yojana (PMFBY) scheme, which was aimed at providing succour to farmers hit by crop losses, has ended up helping insurance companies make profits. According to RTI information, for the 2018 kharif season, the insurance companies collected a premium of Rs.20,747 crore but settled claims of only Rs.7,696 crore.

After three years of making profits, the insurance companies said that 2019 was a bad year and that claims might exceed the premiums collected in the year.

Heavy rains leading to floods had resulted in huge crop losses in a year when many regions had already suffered losses following drought-like conditions.

The north–eastern States and West Bengal, Bihar and Odisha were adversely affected. The All India Kisan Sabha had to organise continuous protests even to ensure that compensation was paid by the companies, which find different ways to evade responsibility.

As per provisional figures released by the government, in 2018-19 the total premium collected was Rs.29,035 crore, with farmers contributing Rs.4,889 crore. As many as 5.64 crore farmers enrolled for the scheme.

While the gross premium collected in 2016-17 was Rs.22,008 crore, the claims payout was only Rs.16,617 crore; in 2017-18, as against a premium collection of Rs.25,481 crore, the insurance firms paid out Rs.21,705 crore. In 2018-19, they collected Rs.29,035 crore and only Rs.14,246 crore had been paid out.

There are a large number of outstanding claims whose pay-outs are pending. Many districts have several crops with premium rate of around 50 per cent and above. Also, only 35-40 districts account for nearly 50 per cent of all claims and only 30 per cent of the gross cropped area is insured.

Credit issues

The latest Budget has done little to make credit accessible at affordable interest rates or free farmers from indebtedness. As in previous years, thousands of crores of rupees in the name of agriculture are ending up in a few hundred accounts, clearly indicating that agribusinesses are benefiting at the expense of farmers.

The Budget also has changed the direction of the refinance operation of the National Bank for Agriculture and Rural Development (NABARD) to increase focus on non-banking finance companies (NBFCs).

This is in direct contravention of the core mandate of NABARD when it was formed in 1982—to have a strong focus on small and marginal farmers. Already, NABARD’s refinance to Reliance Capital to the extent of Rs.1,100 crore has reportedly turned into a non-performing asset (NPA). NABARD has also reportedly financed a huge amount to Dewan Housing Finance Ltd that has turned into an NPA.

A strike called on January 8 by the working class was actively supported by a Grameen Bharat Bandh, where millions belonging to the peasantry and the oppressed joined, making it the biggest strike in recent history. On February 5, massive united protests were held across the country against the Budget and more protests are planned by the All India Kisan Sangharsh Coordination Committee on February 13.

Vijoo Krishnan is Joint Secretary, All India Kisan Sabha.

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