Ashok Gulati writes: How Shivraj Singh Chouhan can transform Indian agriculture

The challenge before him now is whether he can boost the all-India agri-GDP growth to say more than 5 per cent per annum and augment farmers’ incomes? How can it be done?

Here are a few suggestions. First and foremost, he needs to recognise that agriculture is not just production of food, but a full food system that stretches from production to marketing to consumption. He has to increase productivity in the face of climate change which is increasingly threatened by extreme weather events. There is no better way than to invest heavily in creating a climate-smart agriculture, from heat-resistant varieties of various crops to farming practices that give “more crop, per drop” of water. This, in turn, means that he has to immediately raise expenditure on agri-R&D and extension to at least 1 per cent of agri-GDP, up from current levels of less than 0.5 per cent. The marginal returns on this are above 10 times as per latest research.

Second, he must ensure that farmers have access to the best technologies in the world as well as the best markets for their produce. Without that, neither productivity is going to catch up with global standards nor are farmers’ incomes going to increase significantly. But, to enable farmers to get the best price for their produce, he has to convince his colleagues in the inter-ministerial group who would like to keep the prices of food low for consumers. It is this consumer bias in the policy framework that works against the interests of farmers. Export bans at the drop of a hat, stocking limits on traders, unloading government stocks at way below the economic cost of FCI to suppress market prices, suspending futures markets, are all tilted against farmers’ interest. This is a big battle for Chouhan — let him start by opening up the export of onion, as Maharashtra onion-belt farmers are dead against the export bans which have hit their incomes badly. Thereafter, in a calibrated manner, he can go for the opening up of common rice exports with a 15 to 20 per cent export duty to recover the cost of fertiliser and power subsidies inherent in rice production.

Third, for other high-value fruits and vegetables, milk and milk products, fishery and poultry, he has to coordinate with other ministries to build value chains from farm to mega cities and foreign markets so that farmers get the best prices possible. Inviting organised private sector or cooperatives/farmer producer companies to build these value chains is necessary. They can be incentivised on the lines of the PLI scheme that exists in industry, or what India did while building value chains for milk in the domestic market on the lines of the AMUL model. This will increase the farmers’ share in the consumers’ rupee. Let him start by taking over the TOP scheme (tomatoes, onions and potatoes) and fix their value chains so that producers and consumers both can benefit.

Fourth, if he has the capacity to convince the Prime Minister and other cabinet colleagues, the fertiliser subsidy amount should be transferred to his MoA&FW. Today, the fertiliser subsidy of Rs 1.88 trillion (revised budget estimate of 2023-24) is more than the total budget of the MoA&FW. And the fertiliser subsidy is parked in the Ministry of Chemicals and Fertilisers, which has little to do with farmers. The policy of fertiliser subsidy, with almost 80 to 90 per cent subsidy on urea and about 20-25 per cent on DAP and MOP has massively distorted the N, P, and K balance. As a result, the ratio of grains to fertilisers, which used to be more than 10:1 in the 1970s, has dropped to about 2:1. On top of this, it must be noted that plants do not absorb more than 35-40 per cent of the nitrogen being supplied to them through granular urea. The rest is emitted in the environment as nitrous oxide which has 273 times the carbon equivalence for a 100-year timescale. It is like subsidising urea to create poison in the atmosphere. This subsidy needs to go directly to farmers’ accounts, and fertiliser prices need to be freed. Digital fertiliser coupons can be issued to farmers of equivalent value and they can be given the freedom to use chemical fertilisers or bio-fertilisers or opt for natural farming. But it will need careful planning, which needs to start now so as to carry out this big-bang reform next year.

Also, a special package for Punjab-Haryana is needed to save them from ecological disaster. The list of issues is much bigger, but given the space constraint, let me stop here. If Shivraj Singh Chouhan can do even these, he will do a great service to Indian agriculture.

Gulati is distinguished professor at ICRIER. Views are personal