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PM Modi’s dream budget to solve the farm crisis

Sankara Narayanan

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According to a news report from the capital, the 2018 Union Budget will be Modi budget as the PM is meeting finance minister Arun Jaitley and top officials of the PMO & finance ministry on a daily basis. Normally, the prime ministers have adopted hands-off approach to the budget-making exercise and interact with their FMs once or twice on policy issues.

Thus 2018 budget will have the stamp of Modi. He is clearly looking for that one big idea to hit upon the farm sector which is in distress. He wants agriculture and farm sector to be the main focus of his budget which can also lead to job creation.

Instead of hiking the MSP of the crops, the government is focusing on reducing cost of farming, providing technology, giving the farmer fertilizer needed, storage and marketing facilities. The agriculture produce import is being restricted and export of sugar and other crops is being liberalized. The focus will be on increased allocation for NREGA.

Before taking up the issues of agriculture, a few points need to be dealt. In 2014, on the floor of the Parliament, Modi ridiculed the NREGA as a sham scheme of Congress forcing people to dig holes even after its 60 year rule. Strangely now he wants to provide additional allocation to persist with this hole digging yojana.

Modi in his 44 month-rule has created very many Indias viz Make in India, Startup India, Clean up India, Digital India, Start up India, Skill India, Stand up India, Sit down India etc and none of them could deliver the badly needed jobs. Now he suddenly remembers the farm sector as a magic wand for job creation.  

Last year only Modi government drastically cut down duties almost to zero level and allowed import of certain agri-produce. Now we hear import restriction and export promotion. The severe drubbing received recently in Gujarat’s rural constituencies has brought this change in approach. The Gram Gnanodaya while making the budget is not by conviction; it is perforce.   

At the outset, guillotine has been applied on the hike on the Minimum Support Price (MSP). During the 2014 election campaign, PM-aspirant Modi made a solemn promise to the farmers that if BJP was voted to power, the MSP for about a dozen crops would be raised as per the recommendations of the Swaminathan Committee (cost price plus 50% profit).
 
After assuming power in May 2014, this solemn promise was totally ignored. But indications were on and off given about the fate of this promise. In Feb 2015, the Addl Solicitor General of Modi government told the apex court that it was not feasible to give 50% profit to the farmers as it would *distort the market*.

Later BJP chief Amit Shah made it a nation-wide joke by calling it a Jumla or a kahavat. We were told in clear terms not to take election-eve promises as gospel truth. Death-knell for MSP was initiated immediately after the Nairobi WTO ministerial when Modi sarkar had ratified the Trade Facilitation Treaty. The final rites on the MSP were conducted by the little known Union agriculture minister Radha Mohan Singh in Oct 2016. He told in Chandigarh categorically that MSP as per Swaminathan Committee’s recommendation was not possible to implement. Not a single media person questioned PM Modi why was it not thought of when the solemn promise was given during election campaign.

Now the mantra is to focus on reducing cost of farming, providing technology, giving the farmer fertilizer needed, storage and marketing facilities. These initiatives are supposed to lift the farmer from the debt and death trap.

Food policy analyst, researcher and writer Dr Devinder Sharma has a different narration on the proposed magic wands. Agri-economists have always been for raising crop productivity to enhance farm incomes. Mainline economists invariably are blaming low crop productivity to be the reason behind the continuing agrarian distress.

We have heard economists repeat the same prescription year after year – use technology to raise productivity, reduce cost of production, go for crop diversification, improve irrigation efficiency – per drop more crop and shift to electronic trading to bypass the hoard of middlemen. PM Modi is also reportedly proposing the same set of medicines in the dream budget.

All these suggestions are definitely required to prop up agriculture; but that's not the end of it. Punjab is the latest to emerge as a farming graveyard. If lack of irrigation and low crop productivity are the reasons, why Punjabi farmers are driven to despair? This is where the entire prescription being doled out for improving farm incomes goes wrong.

Punjab has 98 per cent assured irrigation and the yields match international standards. It has good road connectivity and the grain mandis are available adequately. The yield of wheat stands at 4,500 kg/hectare which matches the wheat yield in America. In case of paddy, the average yield is 6,000 kg/hectare, quite close to paddy productivity in China. With such high yields, abundant irrigation and adequate number of mandis, why should Punjab farmers be taking to suicide?

Average monthly income for farmers in Punjab, who are no less efficient and productive than farmers anywhere in the developed world, stands much lower. The net return for wheat and paddy in Punjab is about Rs 3,000 per hectare. Therefore the question that needs to be asked is how come with a productivity level higher than in America, income of Punjab farmers is a pittance. This is in reality not even a living wage.

The net return is low because policy makers have intentionally kept the output price low. Keeping the farmers deliberately impoverished by denying them their due return and then expect them to provide us cheaper food year after year and still make a decent living has certainly been too much of an imagination. Farmers in the US or EU are well off not because of higher productivity but because of huge subsidy, including direct income support, they receive.

PM Modi therefore must acknowledge that the answer lies in correcting the great imbalance in incomes. Parity between farm incomes and incomes of other section of the society has to be maintained. Farmers are dying not because they are in any way less efficient but because they have been denied their legitimate income all these years.

Reference:
‘Farmer suicides: Have the economists failed farmers?’ by Devinder Sharma published on May 8, 2016 (https://www.linkedin.com/pulse/farmer-suicides-have-economists-failed-farmers-devinder-sharma/?trk=hp-feed-article-title-publish)

Jan 23, 2018


Sankara Narayanan [email protected]

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