The just concluded assembly elections in Uttar Pradesh [UP] were fought in the backdrop of deteriorating law and order situation, hostile environment for investment, crumbling infrastructure [sans a few pockets in urban areas], widespread farmers distress, their high level of indebtedness and acute shortage of bare necessities viz. home, food, education, health, water and electricity.
The poor investment climate and pathetic law and order discouraged industrialists and businessmen from setting up factories/shops even as existing establishments were facing closure. Together with farming being un-remunerative/losing proposition, this made a deadly cocktail leading to large-scale loss of jobs and in turn, migration of youth en mass to other states such as Maharashtra and Gujarat.
Promises galore
BJP led by Modi promised liberation from all these maladies by restoring the rule of law, guaranteeing safety to the citizens [especially women/girls], waiving loans of small and marginal farmers, procurement of farmers produce at minimum support price [MSP] and ensuring timely payment, building infrastructure viz. roads, rails, gas pipelines etc at an accelerated pace and provision for all basic facilities such as electricity, health, education etc.
Now, that the party has been catapulted to the seat of power with a thumping 3/4th majority [unparalleled in the history of independent India], over 200 million people of the state are impatiently looking at for fulfillment of all the promises. The former has responded with alacrity and from the initial moves, it does appear that the latter will not be disappointed.
The anointment of Yogi Adityanath as the chief minister [along with two deputies needed to ensure effective and efficient governance in a state of continental size such as UP] by itself is the surest guarantee for quick restoration of law and order on one hand and resurrection of administrative machinery that was lying dormant till date on the other. This in turn, will ensure that development work picks up pace and welfare schemes are effectively implemented. The impact of the iron man is already being felt on the ground.
Yogi and Modi working in sync
In view of BJP being in power both at the centre and state, there will be perfect coordination and synchronization in the acts of their respective administrations enabling timely implementation of development and welfare schemes. The central schemes for reaching out electricity and gas connections to every home will gather pace. The process of building homes for poor will be accelerated. Building roads, rails, port, waterways will be put on fast track.
A robust infrastructure – both physical [roads, rails, port, waterways, power etc] and social [schools, colleges, hospitals, community centers, old-age homes etc] and maintenance of law and order is the sine qua non of an ideal investment climate for setting up industries and business establishments. Besides, in the very first meeting of the cabinet on April 5, 2017, Yogi – government has set up a committee to formulate an industrial policy for attracting investment to the state.
However, the big challenge relates to redeeming the pledges made to farmers. In the above meeting, the cabinet also decided to waive outstanding debt [as on March 31, 2017] of all small and marginal farmers [holding size 1-2 hectare and up to 1 hectare] with a cap of Rs 100,000 per farmer. This will cost about Rs 30,500 crores. Additionally, about 700,000 farmers have been exempted from paying back their loans that had turned in to NPAs [non-performing assets]. This will cost another about Rs 5500 crores.
Farm loan waiver
Considering that the union government has refused to extend help either by way of support from its budget or asking public sector banks [PSBs] to foot the bill, this liability of Rs 36,000 crores will fall on the state exchequer. In view of deteriorating finances during last 5 years and fiscal deficit at 4.5% of state GDP – way above 3% set under Fiscal Responsibility and Budget Management [FRBM] Act – the state will face a daunting task to absorb this burden.
The government has alluded to issuing farmers welfare bonds to fund this liability. But, this will end up further increasing state’s already high debt. Moreover, the cost of servicing incremental loans will be higher due to violation of prudent limit under FRBM – leading to downgrade of sovereign rating and attendant higher interest cost. On the other hand, relaxing FRBM norm [if only to enable lower interest cost] will tantamount to fiscal indiscipline.
The problem associated with loan waiver won’t end with this. Even as this waiver is limited only to crop loan with a cap of Rs 100,000/-, the expectation level of farmers is much higher. They are clamoring for waiver of all loans including term loan [e.g. funding for tractor] as also consumption loan without any ceiling. According to one estimate, the total outstanding loans are Rs 92,000 crores and pressure is building on government to extend waiver to entire amount.
Minimum support price [MSP]
The other vital aspect of farmer related problems is scant attention thus far given by state authorities to making requisite institutional arrangements for buying their agriculture produce. Thus, even as the state produces about 25 million tons of wheat [nearly 25% of India’s wheat production], state agencies purchase a meager 800,000 tons or less than 4% of the total.
This leaves the farmers completely at the mercy of intermediaries/traders who exploit resultant weakness by buying their produce at price substantially lower than the MSP. The price realization barely covers their cost of production, resulting in meager income or even loss [in case, the price drops to level below the cost]. No wonder, UP farmers live in abject poverty despite their getting subsidies on inputs viz. fertilizer, seeds, irrigation, power etc.
Yogi – government has ambitious plans to increase procurement to 8 million tons even as the cabinet has decided to open up 5000 centers all over the state. This will require setting up of infrastructure viz. handling, warehousing, testing and quality check facilities at places within reasonable distance of farmers fields besides mobilization of administrative machinery [primarily deployment of manpower] on a massive scale. This will require massive resources.
Combating trader-politician nexus
There is much bigger hurdle. This has to do with deeply entrenched vested interest. For decades, a latent collaborative conspiracy between politicians and intermediaries/traders [in several cases, politicians and their relations also happen to be grain traders] has been at work to ensure that the state machinery remains weak and is unable to discharge its procurement obligations. How else, one explains procurement of wheat languishing at a measly 4%?
Let it be understood no unmistakable terms, to the extent a farmer is denied an opportunity to secure MSP for sale of his produce, the benefit accrues to the trader-politician lobby. Clearly, over the years, it is this lobby that has indulged in self-aggrandizement at the cost of farmers. It will be at work even now to frustrate Yogi-government efforts in give back to farmers their legitimate dues. How far it succeeds in getting over this hurdle, remains to be seen.
If, Yogi succeeds in achieving the 8 million ton target of wheat procurement, this will also yield collateral benefits by way of reduced import from other states for meeting the requirements of public distribution system [PDS]. That will correspondingly reduce handling and transportation cost of moving food over long distance [unavoidable in sourcing supply from other states] and to that extent, reduce subsidy burden on the exchequer.
Hopefully, his government will make similar moves in extending support to farmers growing crops other than wheat [for instance, in case of potato, a three member committee has been set up to come up with suitable recommendations] thereby helping them in realizing remunerative price and selling all of their produce.
Supply of agri-inputs
Finally, with requisite backing of union government, the state will take necessary steps to ensure supply of all agricultural inputs viz. fertilizer, seeds, pesticides, irrigation, power, credit etc in required measure and full transmission of the benefit of subsidy on these inputs. In turn, this will help in keeping cost of crop cultivation low to bolster farmers income.
In sum, given the poor state of UP’s economy, dilapidated infrastructure, deteriorating law and order, majority of farmers in distress and finances of government in dire straits, Yogi has huge challenges at hand. But, he has made a good beginning and should be able to sustain the momentum to deliver on all the promises.