Finance Minister Arun Jaitley and his team are beginning pre-budget consultations with various stakeholders for the upcoming FY17 budget. Generally, the consultations start with agriculture, slated for January 4. It’s good practice and courteous to invite farm experts and farmers’ representatives. Often, one finds these meetings full of anguish on the farmers’ side, while sometimes very sanguine suggestions also come from farm experts. But no more than 5 per cent of these suggestions are ever reflected in the budget. Would this year be very different?
What are the key issues in the farm sector and what can the FM and his team do in a year’s time? In brief, farmers are under severe stress, with profitability in farming falling alarmingly. The BJP manifesto had promised to raise profitability levels in agriculture to 50 per cent above costs, when these were hovering around 20-30 per cent in most crops during the UPA’s terminal years. But the reality now is that profitability has plummeted to less than 5 per cent in major crops, and is negative for others. The high hopes that farmers had of the NDA government are fast dissipating. Consequences of this should be clear from the panchayat election results in Gujarat, where the BJP lost almost 75 per cent of the seats.
The writing is already on the wall, and if ignored, the next casualty may be Punjab, where farmers are already up in arms. The FM should visit Amritsar, the constituency he unsuccessfully contested from in 2014, and talk to basmati farmers. He will know what’s happening on the ground. It’s not just basmati or common rice. You talk to cotton farmers from Punjab to Gujarat, and they are in serious trouble. So are sugarcane farmers in UP and Maharashtra. It’s all-pervading gloom in agriculture today. Back-to-back droughts and tumbling commodity prices (except perhaps tur dal) have already broken farmers’ backs. It’s time the Centre paid heed to farming policies.
The prime minister is now exhorting the bureaucracy to make transformational changes in policies and programmes, since he realises piecemeal changes will not take his government far. But transformational changes were already suggested last year by the Shanta Kumar panel for food and fertiliser subsidies and restructuring the Food Corporation of India’s role. The key recommendations were to move towards cash transfers and outsource much of the storage functions to the private sector. If these suggestions were implemented in earnest, one could have plugged massive leakages in the PDS, saved large resources that could have been ploughed back into irrigation, raised productivity and moved towards better drought-proofing. Although the PM and FM have received positive responses to DBTs, and have tasted success in cooking gas, it requires a bolder effort and courage to convert food and fertiliser subsidies to DBTs. That’s been missing so far.
Food management remains in a shambles, with high levels of inefficiency and leakage. The FCI is demoralised due to mounting arrears that have crossed Rs 70,000 crore. The fertiliser industry is now almost sick, with no major fresh investments. Production is stagnating and imports rising. The reason, again, is high and unpaid bills, crossing Rs 40,000 crore. The budgetary allocation for these two subsidies hovers around Rs 2,00,000 crore. Another Rs 1,10,000 crore remains under the carpet as unpaid bills. The FM should be transparent in bringing this total of Rs 3,10,000 crore into the budget as explicit subsidies. He should then see where the fiscal deficit actually stands.
The PM and FM also talk of financial inclusion as the central policy pillar of their transformational strategy. The Jan Dhan Yojana was great in opening accounts. But if half of those accounts don’t show any transactions, that platform remains underutilised. It’s worth leafing through the latest report on financial inclusion by the RBI, which also talks of moving various farm subsidies towards DBT and going for more science-based crop insurance systems.
The existing crop insurance system system isn’t serving peasants well. It needs to be recast. Crop damages need to be assessed in a few days with the help of automatic weather stations (AWS), satellites, drones and low-earth orbits (LEOs). Compensation should be sent directly to farmers’ accounts, with digitised farm records locked-in with Jan Dhan accounts, Aadhaar and mobile numbers. The FM and his team know all this. I had the privilege of making a special presentation to them on this. I also hear of favourable responses, but progress so far has been very slow. If these were normal times for the peasantry, it wouldn’t have mattered much. But farmers are under severe stress. Delay not only means heavy political damage but also bad implementation of good policies.
Last, water is going to be increasingly critical for drought-proofing Indian agriculture. All sources of irrigation will have to be tapped. It may be worth noting that the time taken to complete major and medium irrigation schemes funded through the Rural Infrastructure Development Fund (RIDF, under Nabard) is much less than for those funded by the state. A transformational strategy could be doubling the allocation under the RIDF. Agri-market reform is another transformational strategy that the government needs to work on for unifying markets.
There’s enough consultation material with the FM to revive agriculture. What is needed is the courage to implement and to go beyond the courtesy of the consultative process.