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Fields of ferment

Why assembly election verdicts should occasion a rethink on loan waivers, MSP raises

Written by Ashok Gulati
December 13, 2018 1:49:57 am
A new deal for the farmer The story of the last four years, both globally and in India, has been one of glut and depressed price realisation for farmers. (File photo)

The results of the elections to state assemblies should be a humbling experience for the BJP. Political pundits have started analysing the verdict, since the reasons for the BJP’s defeat have important implications for the parliamentary election of 2019.

One factor that is being flagged by analysts is farm distress. Farmers across the country are not happy with what has happened to their incomes and this is increasingly getting reflected in their protests. The Union minister for agriculture had earlier described these protests, and farmers spilling milk and dumping onions on roads, as “political drama”. Any further denial of the ground reality will only result in heavy losses for the BJP in the Lok Sabha elections. Saner voices within the party — Nitin Gadkari, for example — have openly admitted that the farm crisis is a reality and drastic measures are needed to mend matters.

The government’s latest big ticket announcement on agriculture was that of MSPs of kharif crops at 50 per cent margin over cost A2+FL. But as I have written in several earlier pieces in this newspaper, market prices remain way below the MSP. The government is not capable of procuring large quantities of as many as 23 commodities for which the MSPs were announced. And therein lies the lesson for the BJP and Congress, as well as the farmer unions. Price policy has its limitations when it comes to augmenting farmers’ incomes. Higher MSPs, without an adequate procurement mechanism and storage and distribution facilities, will not solve the farmers’ problems. And, the government cannot procure all agri-commodities.

So, what are the alternatives? In the medium-term, large-scale agri-marketing reforms are needed — I had alluded to this requirement in ‘Quick fix for farmers’ (IE, December 10). Supply side reforms — including those pertaining to technological improvements and water management — to boost productivity in a sustainable manner will take time. But politicians don’t have that much time in the run-up to the parliamentary elections. They are likely to announce loan waiver schemes. So far, such schemes have been announced by individual state governments but the other states could follow suit soon, and this could cost the nation Rs 4 to 5 lakh crore. But that would only be a temporary relief to farmers, a sort of atonement for not carrying out reforms in agriculture. Systematic changes and a stable policy is the need of the hour.

In this context, one may look at Telangana’s Rythu Bandhu scheme under which the government gives Rs 4,000 per acre (that is, about Rs 10,000/ha) as investment support to farmers before every sowing season. Farmers can use this money to buy seeds, fertilisers and pesticides rather than borrow from informal sources at exorbitant interest rates — and fall into a debt trap in case of crop failure. The state has an outlay of Rs 12,000 crore for this scheme, which is a little less than 7 per cent of its budget. The land records had to be updated, which was done in a record time of 100 days. The scheme does favour the landowners — the state government hopes that the market will adjust the land rentals for tenants. But it is certainly much better than higher price support, which will create distortions and give rise to inefficiency in the system.

In a nutshell, politicians need to move from price support policies or loan waivers to income/investment support on a per acre basis. And the money should be directly deposited into the farmers’ accounts, linked with their Aadhaar number, and the information sent to their mobile phones through an sms. This is both good economics and good politics.

Here, the role of professionals advising the politicians becomes important. Unless they are ready to speak openly, and without fear, on matters of national interest, they are not worthy of the chairs they occupy. The classic example is that of the drum-beating of MSPs at 50 per cent above cost A2+FL and fulfilling the Swaminathan Committee formula. It was “recommended” by a professional body, the Commission for Agricultural Costs and prices (CACP). Is this the commission’s mandate?

Another classic example is the slogan of doubling farmers’ real incomes by 2022-23. Hardly any seminar goes by without this matter being raised by professionals who echo the government’s point of view without even realising what it entails. This means raising real incomes of farmers by almost 13 per cent per annum in the next five years, when during 2002-03 to 2015-16, these incomes increased by just 3.6 per cent per annum. This is like promising to raise the overall GDP growth of the country from, say, 7 per cent today to 20 per cent in the next five years. Doesn’t this sound absurd to professionals? But instead of alerting their political bosses, many of our professionals keep repeating the slogan of doubling farmers’ incomes.

I wish there was more professional debate on agrarian issues within political circles. It is in the interest of each party and, of course, the farmers. Differences of opinion must be welcomed. What is good for the country and how it can be achieved in the best possible manner should be the key criteria for policy making. Short-term interests must be in sync with the medium to long-term agenda for agri-reforms.

As manifestoes are being written for the parliamentary elections, it is high time to ponder over these issues. And, there is one magnum opus of more than 800 pages, Rural Manifesto, by Varun Gandhi, that deserves a careful look. It may have some good ideas for every party.

(The writer is Infosys Chair Professor at ICRIER)

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