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Sunday, July 22, 2018

From Plate to Plough: Four years of neglecting farmers

Government is nowhere close to fulfilling the promises made in BJP’s 2014 manifesto — profitability of cultivation has fallen and dominance of Food Corporation of India continues.

Written by Ashok Gulati , Shweta Saini | Updated: May 13, 2018 11:30:20 pm
farmers distress, agriculture sector, rural sector, narendra modi, indian farmers, farming protests, Modi govt, farmers subsidy, manmohan Singh, indian express In the last four years, profitability of cultivation fell rather than increased; and FCI paraphernalia expanded and deepened — rather than getting reformed.(Illustration: Sarfaraz Alam)

This month the BJP-led NDA government completes four years in office at the Centre. It is appropriate, then, to look back at the promises made in the BJP’s manifesto and evaluate the government’s performance in the four years. We restrict our analysis to agri-food issues that impact the largest number of people in the country. The problems of the agriculture sector are possibly what Prime Minister Narendra Modi aimed to address the most when he called for “sabka-saath, sabka vikas”.

Modi set expectations of the farming community soaring even before he assumed the prime minister’s office. In October 2013, he asked Indian farmers to donate their used farm-implements to build the Statue of Unity in memory of Sardar Vallabhbhai Patel. Sardar Patel represented farmers nationally and was behind the setting-up of the first dairy cooperative in Gujarat. Building his statue with metal from used farm-implements was an ingenious idea that helped Modi connect with Indian farmers.

The BJP’s election manifesto for the 2014 Lok Sabha elections made several promises to farmers. We discuss two of these promises in this article, the others will be covered in subsequent articles.

The manifesto promised that the BJP, if elected, would ensure that farmers earn at least 50 per cent more than their costs of production. It also promised that a BJP-led government would “radically transform Food Corporation of India (FCI)” by “unbundling FCI operations into procurement, storage and distribution for greater efficiency”.

It took the PM four years to act on the first promise. In this period, profit margins of almost all major crops have fallen. Bonuses given prior to May 2014 on paddy and wheat procurement in states like Chhattisgarh and Madhya Pradesh were withdrawn. Moreover, increase in MSPs — 3-4 per cent — fell short of covering rising costs of production. Tumbling farm prices in 2016-17 and 2017-18 further squeezed margins. Agitations by farmers, since the past two years, finally shook the government, which then started rethinking the ways to fix minimum support prices (MSPs) at 50 per cent above farmers’ costs. Then started the mystery about the cost-base: Was it supposed to be A2+FL (paid out costs plus imputed family labour) or C2 (comprehensive cost)? A2+FL is about 38 per cent lower than C2. Farmers expected their profit margins to be 50 per cent above C2, but it seems the government may use A2+FL as its base. This has increased the resentment among farmers. Many feel let down. With one year to go for the Lok Sabha elections, it will be crucial for the BJP to rebuild the farming community’s lost trust. Will that is done through loan waivers, interest free loans, or other instruments, will be for all to see.

On the second promise, however, the government moved swiftly. Within three months of assuming office, in August 2014, PM Modi set-up a High-Level Committee (HLC) under the chairmanship of Shanta Kumar, who had served as the Union Minister for Food in the Atal Bihari Vajpayee government. The committee was mandated to suggest measures to restructure the FCI. This aroused expectations of a radical change in India’s food management system. The HLC submitted its report in January 2015. Inter alia, it recommended four measures: One, rationalise FCI’s procurement operations by moving them away from Punjab, Andhra Pradesh, Chhattisgarh to Bihar, Odisha and UP; two, reduce the population covered under the National Food Security Act from 67 per cent to 40 per cent, increase the monthly grain-entitlement of beneficiaries and gradually introduce cash transfer in PDS, by first targeting cities with more than 1 million population and then extending it to grain-surplus states, giving the option between cash and grains to others; three, it recommended that FCI’s grain stocking and movement operations be outsourced to the private sector and the corporation’s storages be modernised by bringing in private players; and four, introduce direct cash subsidy to farmers and deregulate the fertiliser sector.

It has been three years since the report was released and barring a few pilot projects that use DBTs with respect to food and fertiliser subsidy, there hasn’t been much change in the FCI’s role and functioning. In fact, the recent announcement of raising MSPs by 50 per cent above A2+FL will further deepen the role of the FCI and NAFED. This will inevitably raise the country’s food subsidy bill and increase the NAFED’s losses because of the pulses and oilseeds purchases it will have to make. The biggest disruption, however, will be the large-scale efficiency losses in agri-markets.

India’s premier food security programme, the public distribution system (PDS), is said to have benefited from the government’s digital drive and its DBT Mission. Aadhaar-linking of ration cards, regular update of beneficiary list and use of Point-of-Sale(POS) machines in ration shops are said to have led to deletion of 2.75 crore bogus ration cards (out of 24.3 crore total ration cards), and reduced grain pilferage. Evidently, this should lead to progressively reduced grain offtakes from the central pool leading to a contained food subsidy bill. However, since 2013-14, PDS grain offtakes have grown from 46.7 MMTs to 54.4 MMTs (2017-18) (Figure). The food subsidy bill has gone up from Rs 92,000 crore (2013-14) to Rs 1,69,000 crore (BE 2018-19) (Figure). But the real devil is in the details. Unpaid FCI food subsidy bills have accumulated over the years, and as of March 31, 2018, they stood at a massive Rs 1.34 lakh crore. Additionally, there are outstanding bills of DCP states for which no reliable estimates are available. After adding all this, the country’s real food subsidy bill amounts to nearly Rs 3 lakh crore.

The conclusion is, alas, that the two promises remain largely unfulfilled. In the last four years, profitability of cultivation fell rather than increased; and FCI paraphernalia expanded and deepened — rather than getting reformed. Further, the Indian farmer feels that she has lost the growth momentum as the average agri-GDP growth rate in the four years of the Modi government (2.4 per cent) is less than half of what was experienced during last four years of Manmohan Singh government (5.2 per cent in 2010-11 to 2013-14).

We hope PM Modi realises gravity of the situation and reverses this trend, and wins back the trust of the Indian farmer.

Gulati is Infosys Chair Professor for Agriculture and Saini is Senior Consultant at ICRIER

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