Dr Ramesh Chand, Member [Agriculture], NITI [National Institute for Transforming India] Aayog – the new incarnation of erstwhile Planning Commission – has reiterated that prime minister’s commitment to double farmers’ income by 2022 is doable.
The average income of a farmers’ family in India is about Rs 6400 per month, but the variations across states are huge. For instance, in Punjab the average income is a high of Rs 18,000 per month, in Bihar, Odisha and Jharkhand, it is less than Rs 5000 per month. This may point towards the possibility of increasing farmers’ income manifold [even more than 100%]. If, farmers of Punjab can do it, there is no reason why those in other states cannot come up.
But, it is easy said than done. Had it been so, we would have seen significant improvement over the years; far from that, income of farmers [excluding those into horticulture and livestock] has in fact declined between 2006-07 and 2014-15. So, what has held back the farmers especially in laggard states? What are the imponderables? Is doubling farmers’ income doable?
The income of a farmer depends primarily on three factors (i) his/her ability to boost crop output/production; (ii) keep expenses incurred on producing that output low and (iii) increase the realization from sale.
As regards (i), the present government has taken initiatives aimed at bringing about a substantial increase in crop yield/productivity. These include increase in area under irrigation [at present, cultivated area under irrigation is just about 47%], issuing soil health card [SHC] to every farmer to ensure that he/she uses fertilizers, pesticides, seeds etc as per soil/crop needs, adopts scientific agricultural practices and neem coating of urea [made mandatory since 2015] which helps in enhancing the efficiency of use and increasing yield.
But, their positive impact is offset by perverse signals emanating from disjointed pricing and subsidy policies for fertilizers. While, on the one hand, sale of urea – main source of nitrogen [N] – is heavily subsidized leading to very low maximum retail price [MRP], on the other, subsidy on complex fertilizers – source of phosphate [P] and potash [K] – is low leading to their high MRP. This result in excessive use of urea and less use of complexes causing imbalance in NPK use ratio and consequent adverse effect on crop yield.
As regards (ii) both the union government and majority of the state governments have consistently followed a policy of keeping the prices of all crucial inputs used in crop production viz. fertilizers, seeds, irrigation, power, credit, pesticides etc at a low level [whether through control or any other means]. To ensure that farmers get these inputs at low price, they spend tens of thousands crores using tax payers money and even borrowings leading to increasing fiscal deficit. Modi – dispensation has continued with these policies.
Unfortunately, the favorable impact of these measures on input cost has been negated by steep increase in the cost of labor. A scheme being implemented by the union government viz. National Rural Employment Guarantee Act [NREGA] has contributed to this. Under NREGA, a member of every poor family is entitled to get work for 100-150 days in a year at a certain threshold wage. Even if he does not get to work, the minimum wage is guaranteed. In this backdrop, a land owning farmer is forced to engage labor at high wage. His plight is aggravated by scarcity of workers in rural areas, courtesy mass exodus to urban agglomerations for more remunerative jobs.
On (iii), successive governments have increased minimum support price [MSP] for major crops – many a times by an amount more than recommended by Commission on Agricultural Costs and Prices [CACP]. Yet, what farmers actually get is much less due to lack of procurement and handling infrastructure with Food Corporation of India [FCI] and other state agencies. The traders exploit these vulnerabilities and buy their produce at throwaway prices often at rates which does not even cover the production cost.
In pulses, despite Modi – government giving substantial increase in MSP and farmers responding by surge in output [22 million tons during 2016-17 up from 17 million tons in 2015-16], in the end, they were a disappointed lot realizing much lower price from sale. The sole reason here was the inability of the state agencies to come forward for timely procurement. In the following year [read: 2017-18], they have put less acreage under cultivation.
So, what is the take away? Despite best of intentions, and government spending massively [be it subsidy on agricultural inputs, higher MSP or spend on infrastructure e.g. irrigation, SHCs etc] even at the risk of causing fiscal destabilization, the net result is that farmers have got in to a deeper morass than they were over a decade ago.
The genesis of the problem lies in too much intervention by the state in pricing, sale and distribution both at the inputs and output stage. The poor connectivity [especially rural roads], procurement, handling and distribution infrastructure and archaic laws such as APMC [agriculture produce market committee] Act – which do not let farmers sell to any entity other than those authorized to buy by politicians and bureaucrats – have made things worse.
If, the approach continues as usual, we will be nowhere near the goal even 10 years from now forget 2022. To succeed in making any headway in this direction, the farmers must be unshackled from the ‘subsidy and control raj’. All subsidies need to go and replaced by an omnibus cash support to poor farmers. Let market forces come into play in both input and output segments. Public agencies can participate as a stakeholder like any other private company.
The government should limit its role to ensure better connectivity with markets by building roads, rails, bridges, ports, airports and waterways which it is already doing and needs to be pursued vigorously. For the rest, it should create an enabling environment by formulating policies which induce investors [including foreign investors] to make investment in the supply chain viz. procurement, processing, testing, standardization, handling, storage, refrigeration and distribution etc.
For instance, even as the government has allowed 100% FDI [foreign direct investment] in food retail, it is coming with a host of riders such as ‘a foreign retailer can deal only in food products sourced entirely from our own farmers’. In the just concluded “World Food India 2017”, MNCs promised an investment of US$ 11 billion. These investments will materialize only when the riders go or their bite is substantially diluted.
Modi believes in empowerment of the poor including farmers. The best way to empower is to remove the crutches [read: subsidies/doles] and enable them stand on their own feet.