Powering Punjab’s reform: Charging richer farmers for power is a step in right direction

By: | Published: June 11, 2018 3:54 AM

The Punjab State Farmers’ and Farm Workers’ Commission proposal to start charging better-off farmers for electricity is a step in the right direction, but more than that, what is important is the thought process that has gone behind the recommendation.

Farm sector reforms, agriculture, agriculture marketing, Concurrent List,The report’s recommendations go beyond just charging for power—though that is the most revolutionary—and include income support for small farmers, compensation for crop failure through insurance, a law on land-leasing, etc.

The Punjab State Farmers’ and Farm Workers’ Commission proposal to start charging better-off farmers for electricity is a step in the right direction, but more than that, what is important is the thought process that has gone behind the recommendation. According to the recommendation, farmers who pay income tax or farmers who own more than four hectares of land are to pay Rs 100 per BHP of their pumps per month and, over time, the annual power subsidy, of around Rs 6,300 crore at present, be rationed further—while free power meant electricity consumption in agriculture has grown 1.2 times between FY02 and FY15, the share of agriculture in the Gross State Domestic Product has come down from 17.5% in FY08 to 15.06% in FY17.

The draft policy starts off by pointing out that, were Punjab’s farmers to continue to grow just wheat and paddy that are procured by the central government, there is just that much their incomes can grow by every year—in the last four years, the MSP for paddy rose 14% and wheat 20%. Also, the policy points out that, as the central government starts moving to cash transfers under DBT as opposed to today’s physical rations, FCI’s food procurement will also reduce; indeed, as procurement rises in other states, this will also affect Punjab. Any move to rationalise subsidies such as those on fertilisers will also hit the profitability of Punjab farmers.

Given the excessive growth of wheat and paddy has also resulted in a dramatic fall in the state’s water table, it is critical that this be fixed—while just 5% of the state’s groundwater was to be found at depths of more than 20 metres in 1973, this is up to around a third today. Charging for water is an obvious solution, but is never going to pass muster till other states start doing the same. While charging richer farmers for electricity is a start, the impact will always be limited if the central government keeps buying all the wheat and rice the state’s farmers can produce—this year, according to The Indian Express, cotton acreage has dropped by one lakh hectares and the land now grows basmati rice.

The report’s recommendations go beyond just charging for power—though that is the most revolutionary—and include income support for small farmers, compensation for crop failure through insurance, a law on land-leasing, etc. But if Punjab is to diversify in the desired manner, the state or the Centre will have to put serious money behind the initiatives. This could take the form of outright grants to pay farmers per acre subsidies to move to, say, citrus crops or a new policy on MSPs that sets prices according to what is best suited for each state, or tax and other incentives, say, to develop the dairy or processed foods industry. The most important part of the policy is the fact that it realises business-as-usual is not an option any more.

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