All eyes on agriculture
With the budget 2017-18 round the corner, we look at the needs of the agriculture sector in the country and what the budget can offer to support its growth.
31 Jan 2017
Farmers thresh paddy during harvest at Sangrur, Punjab. (Source: Neil Palmer, CIAT, 2011, Wikimedia Commons)

The agriculture sector in India’s drought-ravaged regions is in a state of crisis. Millions of farmers are pushed out of their farms and into the cities for jobs. As per a report in The Hindu dated May 2, 2013, over 2000 farmers are leaving agriculture every day. A survey conducted by Lokniti, one of the programmes of the Centre for Study of Developing Societies, a research institute of social sciences, found that over 40 percent of Indian farmers were dissatisfied with their economic condition and were leaving farming en masse, putting pressure on urban areas. Agricultural development programmes have not met their purpose in a country where 1.3 billion people depend on the sector. Farming is no longer a popular option and the sector has been in dire need of a booster dose of investment for a long time.

Income security for farmers

When finance minister Arun Jaitley expressed the government’s ambition to double the income of farmers by 2022 in his budget speech of 2016-17, it was met with doubts from many corners. In this budget too, it is expected that yet another grand plan to drought-proof India’s vulnerable districts and to converge the existing flagship schemes on water conservation and storage in water scarce areas will be announced. Will these give a boost to agriculture and change the focus from the country’s food security to farmers’ income security?

Economist and Infosys chair professor for agriculture Ashok Gulati, in an article published in The Indian Express, points to a number of ambiguities around this claim. As per India’s Economic Survey of 2015-16 the green revolution based agriculture is faced with a stagnant productivity of land, leading to a significant decline in the income of farmers. A cover story in India Spend titled 'Why it is hard to double farmers’ income by 2022' observes that the real income of farmers in 2022, adjusted for inflation and increased expenditure, will still be close to that of 2016. The article notes that there are four main hurdles to be addressed--increasing input costs, the irrelevance of minimum support price, the absence of market infrastructure, and the fact that only 15 percent of farmers benefit from insurance.

Alliance for Sustainable and Holistic Agriculture (ASHA), an alliance of about 400 diverse organisations drawn from more than 20 states across India has been pushing for assured income for all farm households. As per ASHA, “A substantial number of farmers are being left out of the current minimum support price and procurement systems and even the cost of cultivation is not getting covered by the prices of the produce, leave alone any living income for farmers for a dignified life”. ASHA demands that in this budget, the government establish a permanent, statutory Farmers’ Income Commission to ensure basic living incomes to all agricultural households.  

Irrigation efficiency needs improvement

Ashok Gulati in his article suggests that investing more in irrigation was critical to raising farmers’ incomes and the government’s flagship programme Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) was an important step in this direction. The central allocation under PMKSY was just Rs 5,767 crore in Budget 2016-17, while the minimum annual investment needed would be Rs 300,000 crore for the next five years if the ambition of doubling farmers’ real income has to be met, says Gulati. Budgetary allocations for marquee programmes such as the PMKSY may see increased focus as per a report in Investment Guru India.

As per ASHA, “The allocation for PMSKY should at least be doubled and its focus should be on rainfed areas. Rainfed areas constitute 60 percent of the cultivated area, they are the most distress-prone and have great potential for enhancing production and farm incomes. A mere increase in irrigation coverage is not enough and dramatic changes need to be made towards improving irrigation efficiency through systems like drip irrigation. The government should give subsidies to small farmers to adopt this technology and tax concessions to technology providers. A greater thrust towards India’s hidden groundwater economy is also required.”

Redeveloping barren lands

As per a recent article in Firstpost, “To offset the demonetisation effect, the government may announce certain new schemes and increase allocations to popular ones. There may be incentives or schemes announced for increasing the farm land coverage by redevelopment of barren lots”. Will these elements in the budget hold appeal for India's poor? In a context where farmers continue to give up their farms (and sometimes their lives even), what would another scheme on redeveloping lands mean? While bringing marginal lands, which have not been used for crop production under cultivation, the needs of fodder, energy and livelihood security need to be carefully looked into. This should not be done at the cost of encroaching on common lands, forestlands or in ecologically fragile areas where geo-environmental constraints impose limitations on the level of resource productivity. 

N.C. Saxena, former member, Planning Commission, in a paper titled 'Participatory Planning for Wasteland Development' writes,"The transfer of communal land rights to individual and commercial interests has exacerbated rural landlessness, poverty and unemployment. The issue, therefore, is one of determining the system most suitable to the historical, political, social and ecological needs of the people and the area concerned”. So any programme for the rejuvenation of degraded lands should create community assets and meet fuelwood or fodder needs of the people. 

Allocation to erstwhile programmes like RKVY must increase  

Rashtriya Krishi Vikas Yojana (RKVY), a scheme launched in 2007 to promote decentralised agriculture planning and a revitalised agriculture sector was fraught with lacunae which need to be addressed. The budget needs to revive RKVY to incentivise the states to increase public investment in agriculture and allied sectors. As per an audit by the Comptroller and Auditor General (CAG) in 2015, only 62 percent of work under the RKVY programme was completed. As per the Centre for Budget and Governance Accountability (CBGA), a Delhi-based think tank focusing on public policies and government finances, greater budgetary allocation combined with strengthening of institutional mechanism of RKVY has helped in improved agricultural planning. Funds are being utilised better and adequate flexibility has been given to the states to articulate the local needs of the sector. This has played an important role in improving the performance of agricultural sector in the past few years. It adds that “inadequate human resources and targeted investments, lack of proper decentralised planning and monitoring mechanisms are some of the major problems in the implementation of this scheme, which still need to be fixed”. Further, the budget needs to also incentivise farming towards a shift from resource intensive wheat-rice cropping to other cereals and pulses.

Agricultural insurance needs to pick up

Government of India boldly put forth the new scheme--Pradhan Mantri Fasal Bima Yojana (PMFBY)--towards insurance of crops in early 2016, just as the country was getting out of an excruciating drought. The farmers could now benefit from both lower premiums and higher sums insured. The PMFBY was to deal with the mismatch between the risk associated and the profit margins in farming. However, the progress so far has been slow. Though farmers were in need of a safety net when faced with crop losses, the subscription base of the programme was low. Until mid-2016, barely a fifth of farmers and 23 percent of the total cropped area in India had been covered under the crop insurance scheme. This, despite the fact that the premium has been kept very low at two percent for kharif crops, one and a half percent for rabi crops and five percent for horticultural crops. This was made possible through subsidy inputs to the farmers all the way through the governmental mechanism.

There was practically no participation of non-loanee farmers in the crop insurance scheme till recently. The saving grace of the scheme were the loanee farmers for whom it was mandatory; credit was provided to farmers by institutional sources like banks only if secured through insurance. Even then, just over 25 percent of the credit taken by farmers is insured indicating a huge implementation gap. Bankers say that crop insurance is not their priority. It prevents them from meeting their priority sector commitments and this explains the low coverage.

The challenge the government faced was of bringing the non-loanee farmers under the scheme. The government had hoped to widen the net of crop insurance but reports from September 2016 suggest that only 2.53 crore farmers have insured their crops so far as against 3.69 crore farmers in 2014-15 under the National Agricultural Insurance Scheme and the Modified National Agricultural Insurance Scheme last year. If early indicators are to be believed, the states are reluctant to implement the Centre’s ambitious crop insurance scheme. This is because of the excess financial burden the states are expected to bear by way of sharing the premium jointly with the Centre.

The government needs to take steps towards increasing the insurance penetration among the farming community in this budget. Also, now the scheme promises calculation of loss at the village level, a far cry from the demand of farmers that the assessment is done at the level of the individual cultivator. The budget needs to bring tenant farmers and sharecroppers under the ambit of PMFBY, as they are now not covered under the insurance scheme.

These budgetary interventions can go a long way in protecting the interests of the farmers. We will know soon if the agriculture sector will get a meaningful budget push this year.

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