1. Column: Govt must fast-track agri reforms

Column: Govt must fast-track agri reforms

Doing so would benefit millions of small farmers, but so far that govt vision or initiative has not been seen...

Updated: January 2, 2015 4:15 AM

Indian farmers have suffered a double whammy in 2014. In a country where more than half of gross cropped area is rain-fed, a deficit of 12% monsoon rains compared to the long period average can trigger many undesirable consequences. The kharif and rabi areas sown under different crops were down by 2.4% and 6.5%, respectively, compared to last year. Although the government did not declare it a drought year, technically, 2014 was nothing short of that. Productivity and production are likely to suffer and agri-GDP may come down significantly. As if this was not enough, prices started tumbling down—from basmati to cotton to vegetables to edible oils, all have rolled down in varying degrees. Although consumers heaved a sigh of relief, the heat is now on the farmers. Less than 5% of farmers had any crop insurance. The net result is becoming increasingly clear: Falling farm incomes and increased distress this agri-year.

Farmers have high expectations from the Narendra Modi-led government. BJP’s election manifesto had promised them 50% profitability over costs. However, the very first year under the new government may in fact bring down their profitability even below what they were getting in the preceding two years or so. This does not augur well for the Modi government as well as for Indian farmers.

In his earlier incarnation as the chief minister of Gujarat, Modi had shown how agriculture can be transformed, attaining almost 3 times the rate of growth being achieved at the all-India level. But Gujarat is a small state as far as Indian agriculture is concerned. To rev up agriculture on a higher growth trajectory, one needs to have a clear vision and undertake major initiatives. This can benefit millions of small farmers and would be truly a sign of ‘inclusive growth’. But so far that vision or initiative has not been seen on the radar of the new government. We have heard quite a bit about Swachh Bharat, Make in India, smart cities, and so on, but not a word about agriculture. This is somewhat concerning.

It is interesting to note that the public resources going in to the agri-food space in India are not small. Take food and fertiliser subsidies, which amount to more than R2 lakh crore (including the arrears). This is almost10 times the public investment in agriculture. It is like putting the cart before the horse—that is the biggest tragedy of Indian agriculture, and the root cause of farmers’ woes. If one can trim and target these two subsidies better, which can be done by moving towards cash transfer schemes, the savings would be to the tune of R40,000 crore-plus. This needs to be put back in agriculture through investments in water, in agriculture R&D, rural roads, and so on. The returns on public investments are 5-10 times higher than through these subsidies, and can provide food security to the country in a much more sustainable manner as well as augment farmers’ incomes. Such investments will also help drought-proof Indian agriculture, give farmers the strength to cope with extreme climate changes, and thus stabilise their incomes. In the absence of these investments, the clamour for loan waivers will only increase. Today, it is in Andhra and Maharashtra. Tomorrow it will spread to other states, even in almost fully-irrigated states like Punjab and Haryana. Political pressures are already building up. Giving in to such pressures can only provide temporary breathing space, but the long-term solution demands a clear vision and bold policy of turning the culture of subsidies and loan waivers into one of investments.

Can the new government rise to this challenge? May be. Some smart moves have been made: the APMC Act in Delhi has been reformed, which was on the list of demands for more than 10 years now. But the government has to build on it by inviting private players and giving them land in Delhi to set up competing mandis. Just changing the law is not enough. The government must also move on this in other BJP-ruled states as quickly as possible. Will it do? Not sure.

Another sensible thing done is the postponing of the implementation of the National Food Security Act. Given that leakages in the existing PDS hover anywhere between 40% and 50%—our calculations show 46.7% leakage in 2011—there is no use putting in more resources in a leaky bucket until that is fixed. This can save some resources. But much more needs to be done. The new government had taken the right decision to liquidate 15 million tonnes of grains in the market, given that it was sitting on 30-40 MMT of dead stocks for more than 3 years. But, how far has that decision been acted on? Not more than 2 million tonnes have been liquidated so far, too slow to make an impact and save resources for public investments.

The fertiliser sector is crying for a change, and the window of opportunity is now when there is ample grain with the government. Will the government move?

In brief, time is slipping by every day, and the government’s movement is too slow in agri-food space. The problems are gigantic. Unless farmers see something positive and big coming soon, they will start losing hope and that would be most unfortunate.

We hope the government starts acting fast and fulfils the aspiration of the people, with a clear vision and operational strategy. Can the farmers hope for acche din in 2015?

By Ashok gulati & Shweta Saini
Gulati is Infosys Chair Professor and Saini a consultant with ICRIER

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