Union Budget 2018: Assurance on MSP but for govt, rural is more about infrastructure than agriculture

All that is stated in Finance Minister Arun Jaitley’s speech is that the “Niti Aayog, in consultation with central and state governments, will put in place a foolproof mechanism so that farmers get adequate price for their produce.”

Written by Harish Damodaran | New Delhi | Updated: February 2, 2018 7:40:05 am
Finance Minister Arun Jaitley on MSP in Union Budget 2018 Finance Minister Arun Jaitley presents the Union Budget 2018 in Parliament on Thursday (PTI Photo)

The Union Budget Thursday promised that the minimum support prices (MSP) for all crops will be fixed so as to guarantee farmers a 50 per cent return over their production cost. And that the Centre would ensure that farmers will “get the full benefit of the announced MSPs”.

But in the absence of any budgetary provision — there is a “market intervention-cum-price support scheme”, for which the allocation is a mere Rs 200 crore in the coming fiscal — it is not clear how this is going to be done. All that is stated in Finance Minister Arun Jaitley’s speech is that the “Niti Aayog, in consultation with central and state governments, will put in place a foolproof mechanism so that farmers get adequate price for their produce.”

This lack of clarity isn’t a surprise. For all the Modi government’s assertions about doubling farm incomes, “rural” for it has always been less about agriculture and more about infrastructure. It’s been less about wheat, chana, groundnut, cotton or sugarcane and more about providing people in villages access to roads, pucca houses with toilets, irrigation, electricity, LPG connections and banking facilities.

That may explain the relative success of the Modi government’s schemes focusing on rural development and infrastructure creation.

Finance Minister Arun Jaitley on MSP in Union Budget 2018 Finance Minister Arun Jaitley during a press conference in New Delhi on Thursday, after presenting the Budget in Parliament (Express Photo/Tashi Tobgyal)

Thus, 57,000 km of rural roads are planned to be constructed under the Pradhan Mantri Gram Sadak Yojana (PMGSY) during 2018-19, over and above the 51,000 km likely to be achieved in the current fiscal — a substantial step-up compared to the levels during the last years of the UPA regime or even the initial three years of this government (see table).

By March 2019 – when the next national elections are due – it is expected that every rural inhabitation in India with a minimum population of 500 in the plains and 250 in hilly, tribal and desert areas would get connected by an all-weather road.

The same focus and ambition is seen in the Pradhan Mantri Awas Yojana-Gramin (more than 1 crore rural houses, with minimum 25 sq m size and having toilet provision, to be built over two years); Saubhagya (providing 4.06 crore un-electrified households with electricity connections by March 2019); Ujjwala (providing free LPG connections to 5 crore poor households, a target that has now been raised to 8 crore and again to be achieved in time for the Lok Sabha polls); Pradhan Mantri Jan-Dhan Yojana (18.23 crore bank accounts created in rural areas as on January 24); Accelerated Irrigation Benefit Programme (where an irrigated potential of 43.15 lakh hectares has already been created, out of the targeted 68.17 lakh hectares through 106 major and medium projects to be completed by end-2019).

The above schemes have two significant features.The first is that they are well-funded. The PMGSY alone, for instance, is going to receive Rs 19,000 crore of Central budgetary support in 2018-19. Adding states governments’ share of another Rs 10,000 crore takes the total to Rs 29,000 crore.
The PMAY-G will similarly see spending of about Rs 96,000 crore during 2017-18 and 2018-19, which includes Rs 44,000 crore of budget support, Rs 21,000 crore of borrowings through NABARD and the rest being the states’ share.

Finance Minister Arun Jaitley on MSP in Union Budget 2018 The media surrounds Finance Minister Arun Jaitley on his way to Parliament on Thursday, to present the Union Budget 2018 (Express Photo/Renuka Puri)

Secondly, these are target-oriented schemes with clear deadlines and dashboards tracking implementation on a near real-time basis. The same focus and scale is, however, missing in the Modi government’s agriculture-specific programmes, which have largely come a cropper.

Take its flagship crop insurance scheme, the Pradhan Mantri Fasal Bima Yojana, which seems to have benefited companies far more than farmers. In 2016-17, the gross premium collected by insurers from farmers and the government (both Centre and states), at Rs 22,004, exceeded the Rs 12,020 crore of claims paid.

Farmers in many cases are not even aware of their premiums being deducted, with the companies themselves having no direct connection with their supposed customers. The premiums are collected and passed on by the banks that extend credit to farmers, making it more of a loan — than a crop-insurance scheme.

Nor have claims been settled using smartphones, GPS, drones and remote sensing technologies, as was originally claimed.

The inability to make any tangible impact on the ground applies to other agri schemes as well – whether it is e-NAM (the pan-India electronic trading portal to connect all agricultural mandis), soil health cards, Paramparagat Krishi Vikas Yojana (for organic farming) or Rashtriya Gokul Mission (for conservation and development of indigenous cattle breeds).

This lack of focus is also manifested in the choice of minister. As Agriculture Minister, Radha Mohan Singh clearly does not enjoy the stature that his predecessors – Sharad Pawar or, for that matter, even Ajit Singh – enjoyed. Indeed, there is nobody in the Union Cabinet, apart from maybe Nitin Gadkari, having a granular understanding of crop cycles or the way farm commodity markets work.

This lack of understanding may also be behind ill-timed policy decisions – be it imposition of minimum export price restrictions on onion and potatoes, bringing back draconian provisions on stockholding and trading under the Essential Commodities Act or not lifting these and allowing duty-free imports even in the face of bumper domestic production.

But in all these, the prime minister himself may have some role.

In Gujarat, too, Modi is known to have been more of a rural infrastructure than an agriculture-oriented chief minister. That did, in fact, pay off: Without irrigation, Bt cotton cultivation would not have been a success in Gujarat, just as the phenomenal growth of Amul’s dairy cooperatives after 2002 was largely courtesy rural roads and assured electricity that made village-level bulk chilling of milk possible.

In today’s scenario of falling crop prices, however, a pure rural development-focused vision may not seem to be enough. But Modi is someone who also knows that “Bharat” is no longer just “Krishi”. According to National Sample Survey Office data, only 57.8 per cent of rural households in 2012-13 were “agricultural”, i.e. having at least one member engaged in farming.

Even for these families, just 59.8 per cent of their income was earned from cultivation and animal husbandry. In other words, the effects of agrarian distress can, to a significant extent, be neutralised through policies targeting the other rural half – for whom a pucca house with toilet and electricity/LPG connection may matter more than the price of paddy.

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