Opinion Subsidies in fact
There is much work to be done before farm subsidies can be lowered
There is much work to be done before farm subsidies can be lowered
Contrary to the popular belief that farmers are a pampered lot in India,they comprise about 50 per cent of the workforce and yet account for less than 14 per cent of GDP. The gains from 20 years of liberalisation have eluded them and the old inequalities remain. Successive governments have introduced policies that treat only the effects of such deep-rooted problems,not the problems themselves.
Farm subsidies polarise opinion: those that influence policy want to do away with them altogether,while millions of farmers find them grossly inadequate. Nowhere in the world is farming economically viable without subsidies,and India is no exception. Farm subsidies come in various forms. In 2009,the EU gave $988 per hectare as farm subsidy and the US gave $190,compared to a mere $149 in India. Per capita subisidies worked out to be $239 in the EU and $102 in the US. In India,they were a meagre $21.
Policymakers speak of fertilisers being overused in India. Yet,apart from Punjab,Haryana and a few scattered regions of the country,fertiliser use is much lower than the recommended optimum level. Compare Indias fertiliser use with that of other countries. In 2010,China used 400 kilogrammes per hectare of NPK to produce 5,399 kg per hectare of foodgrain. In the same year,Indian used only 166 kg per hectare of NPK to produce 2,237 kg per hectare of foodgrain. Bangladesh,meanwhile,used 224 kg per hectare and Pakistan used 185 kg.
India is faced with the herculean task of doubling food production,even with the land-to-man ratio falling from 0.34 in 1951 to 0.15 in 2009. To double production and achieve the targeted 4 per cent agriculture growth rate,fertiliser consumption needs to be increased by 3 per cent every year. A reduction in farm subsidies will lead to a fall in consumption and complete removal will cause an 18 per cent drop in farm production.
The primary objective of the pricing policy for fertilisers is to reduce the subsidy,rather than to promote the balanced use of fertilisers. In 2010,the subsidy for nutrient-based fertilisers was introduced,even as the price of potash rose by nearly four times and phosphate by about two-and-a-half times. The price of urea remained stagnant. The resulting nutrient imbalance is destroying soils,causing pest infestations and lowering yields,among other problems. The imbalance in fertiliser use cannot be addressed by reducing the use of some nutrients. It needs to be restored by increasing certain nutrients,which are not being used in their prescribed quantities. This must also be supported by better outreach to farmers and by giving them access to better technology.
Farm subsidies definitely need to be reworked. But we cannot do away with subsidies,or make fertilisers more expensive,just because there is no unanimity on how to go about it. An increase in fertiliser prices must be offset by an increase in foodgrain prices for farmers. Most are small and marginal farmers. Subsidy distribution could be rendered more equitable by making it inversely proportional to the size of the holding. Curious solutions have been suggested instead. It has been suggested,for instead,that small farmers buy inputs that they can ill afford and be compensated during or after procurement. This will sink farmers further into the quagmire of debt and poverty.
The sharp depreciation of the rupee has compounded the problem of subsidies. For seven months now,no subsidy has been released to the fertiliser industry,which is likely to face a shortfall of Rs 30,000 crore because of inadequate budget provisions this year. Hostile policies have also meant that no major fertiliser plants have come up in the last 13 years. In 2011,we imported 27 per cent of our urea requirements. The average subsidy release for imported urea was Rs 21,939 per metric tonne,while on indigenous urea,it was only Rs 6,663 per metric tonne. Needless to say,imported fertilisers prove to be more lucrative for those middlemen who give and receive kickbacks.
Subsidies are essential for the survival of farmers. Farming,Indias largest private sector activity,is unprofitable for most. First change that reality,fulfil past promises,create alternative jobs and help develop skills. Only then can farm subsidies be lowered. Farm subsidies are not charity or wasted expenditure,as many would want us to believe. They help increase productivity,generate employment on the farms,ensure low food prices and stanch the flow of rural population into towns and cities. It is worrying that the current misconceptions do not rise from ignorance among policymakers. Most of them recognise the ground realities but choose not to act.
The writer is chairman,Bharat Krishak Samaj
express@expressindia.com
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