As the Modi government celebrates two years in office, any review of its functioning will be incomplete without examining its record on the farm front. In the two years (FY15 and FY16), while the economy grew at 7.2 per cent and 7.6 per cent respectively, agriculture and the allied sector grew at -0.2 per cent and 1.1 per cent. This implies an average growth rate of less than 0.5 per cent per annum of the sector that employs close to half the country’s labour force.
Two years ago, the current government’s election manifesto promised, among other things, to make Indian agriculture more “productive, scientific and rewarding”. In particular, it mentioned to “take steps to enhance the profitability in agriculture, by ensuring minimum of 50 per cent profits over cost of production”. In the case of irrigation, it promised to “introduce and promote low water consuming irrigation techniques and optimum utilisation of water resources”. However, during these last two years, farmers’ margins over costs, which hovered between 20 and 30 per cent in most agri-commodities during the terminal years of UPA 2, have declined. In most agri-commodities, profitability is down to less than 10 per cent, and in some others, even negative. This was mainly due to back-to-back droughts in 2014 and 2015, downswing in global agri-prices, and lower-than-anticipated increases in procurement prices. Now, the government seems to have replaced the promise in the manifesto with the assurance that farmers’ incomes will be doubled by 2022. The country awaits conceptual and operational clarifications on this new goal.
On the promise of efficient utilisation of water, there have been no major initiatives except slogans like “har khet ko paani” and “per drop, more crop”. The Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), under which these schemes are launched, lack the resources to fulfill any of these promises. The total expenditure budgeted under the PMKSY for FY17 is Rs 5,717 crore, which is far less than what is required to achieve the target of “har khet ko paani”. In all probability, this slogan is likely to remain a dream for at least a decade.
However, the government can be lauded for at least three initiatives: Pradhan Mantri Fasal Bima Yojana (PMFBY), Jan Dhan and Direct Benefits Transfers (DBT) and e-National Agricultural Market (NAM).
On April 1, 2016, the Modi government launched a revised crop insurance scheme (PMFBY) to combat the farm crisis and agrarian distress. It is a commendable step in the right direction though it has come somewhat late. However, like with many schemes, this one too has been designed without sufficient groundwork, which will cripple its performance. For example, efficient and timely assessment of crop damage and payments needs installing automatic weather stations, digitisation of plots, linking them with Aadhaar and bank accounts, and using latest technologies ranging from drones and doves (low earth orbits) to satellites. This is still a work-in-progress and unless the PMO shows perseverance, it may fizzle out.
Second, the PMO gave high priority to financial inclusion and to Jan Dhan. As on May 4, about 22 crore Jan Dhan accounts had been opened with 61 per cent of them in rural areas. Here too, challenges like increasing dormancy of agents, falling first-time accounts, and operational hiccups like lack of connectivity mar the system. Close to 27 per cent of the accounts are zero-balance. More than half of these accounts have not been utilised to receive payment from the government’s welfare schemes or food and fertiliser subsidies through direct benefits transfer (DBT).
The Shanta Kumar panel suggested moving to DBT in both food and fertiliser subsidies, with a view to plug leakages that hover between 30 and 40 per cent of expenditure. The budgeted amount on food and fertiliser schemes is Rs 2,05,000 crore for FY17, plus pending bills of more than Rs 1,00,000 crore. If one shifted to DBT and put the savings in water management, the shape of agriculture and the fortunes of Indian farmers can change for the better.
Third, conceptualising and embarking on creating an unified electronic national-level farmers’ market (e-NAM) is a bold step in the right direction. But if NAM is to succeed, one needs to streamline fees and taxes at state-level wholesale markets, reform agriculture produce market committees (APMCs), introduce grades and standards, etc. Further, encouraging commodity market trade will also help revive the price-discovery role of markets.
But all these are medium to long-term measures, which will take time to bear fruit. One only wishes that they were taken in the first year of the Modi sarkar. But it is better late than never. An average agri-growth of less than 0.5 per cent per year during FY15 and FY16 should prod the Modi government to robust action. Monsoon failure and collapse in global agri-prices are not in the hands of the government, but it is during such a crisis that a government’s vision is tested.
Not surprisingly, farmers are unhappy and agriculture is stagnant. Farmer suicides are perversely high and rural indebtedness remains a grave issue. The government needs to move fast and deploy bold steps on the agri-front if it wants the farming community to benefit and poverty eliminated. An action-oriented mission-mode execution of agendas set by the well-meaning slogans, backed by sufficient resources may facilitate a turnaround.
Two years ago, the current government’s election manifesto promised, among other things, to make Indian agriculture more “productive, scientific and rewarding”. In particular, it mentioned to “take steps to enhance the profitability in agriculture, by ensuring minimum of 50 per cent profits over cost of production”. In the case of irrigation, it promised to “introduce and promote low water consuming irrigation techniques and optimum utilisation of water resources”. However, during these last two years, farmers’ margins over costs, which hovered between 20 and 30 per cent in most agri-commodities during the terminal years of UPA 2, have declined. In most agri-commodities, profitability is down to less than 10 per cent, and in some others, even negative. This was mainly due to back-to-back droughts in 2014 and 2015, downswing in global agri-prices, and lower-than-anticipated increases in procurement prices. Now, the government seems to have replaced the promise in the manifesto with the assurance that farmers’ incomes will be doubled by 2022. The country awaits conceptual and operational clarifications on this new goal.
On the promise of efficient utilisation of water, there have been no major initiatives except slogans like “har khet ko paani” and “per drop, more crop”. The Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), under which these schemes are launched, lack the resources to fulfill any of these promises. The total expenditure budgeted under the PMKSY for FY17 is Rs 5,717 crore, which is far less than what is required to achieve the target of “har khet ko paani”. In all probability, this slogan is likely to remain a dream for at least a decade.
However, the government can be lauded for at least three initiatives: Pradhan Mantri Fasal Bima Yojana (PMFBY), Jan Dhan and Direct Benefits Transfers (DBT) and e-National Agricultural Market (NAM).
On April 1, 2016, the Modi government launched a revised crop insurance scheme (PMFBY) to combat the farm crisis and agrarian distress. It is a commendable step in the right direction though it has come somewhat late. However, like with many schemes, this one too has been designed without sufficient groundwork, which will cripple its performance. For example, efficient and timely assessment of crop damage and payments needs installing automatic weather stations, digitisation of plots, linking them with Aadhaar and bank accounts, and using latest technologies ranging from drones and doves (low earth orbits) to satellites. This is still a work-in-progress and unless the PMO shows perseverance, it may fizzle out.
Second, the PMO gave high priority to financial inclusion and to Jan Dhan. As on May 4, about 22 crore Jan Dhan accounts had been opened with 61 per cent of them in rural areas. Here too, challenges like increasing dormancy of agents, falling first-time accounts, and operational hiccups like lack of connectivity mar the system. Close to 27 per cent of the accounts are zero-balance. More than half of these accounts have not been utilised to receive payment from the government’s welfare schemes or food and fertiliser subsidies through direct benefits transfer (DBT).
The Shanta Kumar panel suggested moving to DBT in both food and fertiliser subsidies, with a view to plug leakages that hover between 30 and 40 per cent of expenditure. The budgeted amount on food and fertiliser schemes is Rs 2,05,000 crore for FY17, plus pending bills of more than Rs 1,00,000 crore. If one shifted to DBT and put the savings in water management, the shape of agriculture and the fortunes of Indian farmers can change for the better.
Third, conceptualising and embarking on creating an unified electronic national-level farmers’ market (e-NAM) is a bold step in the right direction. But if NAM is to succeed, one needs to streamline fees and taxes at state-level wholesale markets, reform agriculture produce market committees (APMCs), introduce grades and standards, etc. Further, encouraging commodity market trade will also help revive the price-discovery role of markets.
But all these are medium to long-term measures, which will take time to bear fruit. One only wishes that they were taken in the first year of the Modi sarkar. But it is better late than never. An average agri-growth of less than 0.5 per cent per year during FY15 and FY16 should prod the Modi government to robust action. Monsoon failure and collapse in global agri-prices are not in the hands of the government, but it is during such a crisis that a government’s vision is tested.
Not surprisingly, farmers are unhappy and agriculture is stagnant. Farmer suicides are perversely high and rural indebtedness remains a grave issue. The government needs to move fast and deploy bold steps on the agri-front if it wants the farming community to benefit and poverty eliminated. An action-oriented mission-mode execution of agendas set by the well-meaning slogans, backed by sufficient resources may facilitate a turnaround.