Raising farm income

The goal of doubling farmers’ income can’t be seen in isolation from the need to promote sustainable and diversified agriculture

agriculture, agriculture sector
India's agriculture has to provide food and nutritional security to the largest population on this planet. (IE)

It was on February 28, 2016, that prime minister Narendra Modi shared his dream of doubling farmers income in the year India completes 75 years of Independence and enters the amrit kaal. Now that we have entered the amrit kaal, it is a good time to revisit that dream and see if it has been fulfilled, and if not, how best it could be realised.

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First of all, let me say that it was a noble dream because unless the incomes of farmers from agriculture go up, we cannot have a sustained high growth of overall GDP. This is because the manufacturing sector starts facing a demand constraint soon after meeting the demand of well-off urban consumers. After all, agriculture engages the largest share of work force (45.5% in 2021-22, as per the Periodic Labour Force Survey). So, focusing on agriculture, even if it is in a dream, is the right way to ensure long term high growth of the overall economy.

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India’s agriculture also has to provide food and nutritional security to the largest population on this planet. However, if this objective has to be achieved in today’s context, it must encompass policies that also protect the basic resources of this planet, such as soil, water, air, and bio-diversity. It is here that one finds a paradoxical situation. Let me elaborate.

Supporters of PM Modi would say that the government is already giving a lot of subsidies to farmers. And I tend to agree with them. Take the case of fertiliser subsidy, whose budget crosses Rs 2 trillion. Even when the global prices of urea crossed $1,000/tonne, the Indian price of urea remained flat at around $70/tonne. This is perhaps the lowest price of urea in the world. On top of this is the PM-KISAN of Rs 60,000 crore. And further, many small and marginal farmers also get free ration of at least 5 kg/person/month through the PM’s Garib Kalyan Anna Yojana. There is also a subsidy for crop insurance, credit, irrigation (drip), etc. States also give power subsidies in abundance and on irrigation water from canals, etc. Even farm machinery for custom hiring centres is being subsidised by many states. The combined value of these subsidies would easily cross Rs 4 trillion per annum. However, we need to evaluate the impact of all these on farmers’ incomes and also on the environment.

Maybe the Comptoller and Auditor General (CAG) should take up the audit of all subsidies given by the Centre and by the states to examine their outcomes in terms of incomes of farmers and environmental consequences. The results of such an audit, if taken up, are not likely to be very palatable. But that can induce us to streamline these policies to make them farmer- and planet-positive.

However, I do want to bring in the other side of policies too. While input subsidies do help raise farmers’ incomes on one the hand, there could be output trade and marketing policies adopted by the government that suppress farmers’ incomes onthe other. For example, the ban on exports of wheat, or 20% export tax on rice, suspension of several commodities from the futures markets, and imposition of stocking limits on certain commodities from time to time. Even unloading of 2.5 million tonnes of wheat right now to bring down prices of wheat in the mandis just before the procurement so that the government can buy at the MSP, which is lower than the market price. These are hidden policy instruments of ‘implicit taxation’ of farmers’ incomes. One has to net out this market support and input subsidy support to see where our farmers stand. The results that we have estimated are not showing ‘pro-farmer approach’. In fact it is pro-consumer. This is the fundamental problem with our policy framework.

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The policy of heavy subsidisation of input subsidies, especially fertiliser and power, along with assured and open-ended procurement of paddy and wheat in some states is playing havoc with environment. They are all crying for rationalisation.

One of the ways to move forward is to re-align these support policies keeping in mind the environmental outcomes. Millets, pulses, oilseeds, much of horticulture that consumer less water, and less fertilisers may be given carbon credits to incentivise them. But if people keep getting free/heavily subsidised wheat and rice, why will the masses will adopt millets? We need to make subsidies and support crop-neutral, and if they need to be skewed, they should be in favour of those crops that are benign to the planet’s basic resources. Can we do that?

But let me get back to farmers incomes as no policies can succeed unless farmers’ incomes increase. In my recent visit to Madhya Pradesh, I found one corporate working on 100 acres to develop medicinal plants, which they have already scaled up to 5,000 acres on farmers’ fields. The lands are too poor to grow wheat or paddy, and farmers are readily adopting these medicinal plants as it gives them better incomes. The corporate is giving them assured buy-back to reduce their market risk. Another corporate I met is buying soybean at Rs 6,000/quintal, much above the MSP of Rs 4300/quintal, to make tofu, soya milk powder, soya ice cream, and even frozen soya yogurt!

The bottom line is that we need innovations of technologies, products, institutions, and policies, for more diversified, high-value agriculture that is also planet-friendly.

On the question of doubling farmers’ income, we must realise it is going to take time. It can be by increasing productivity through better seeds, better irrigation, etc. It will have to combined with unhindered access to best markets for their produce. Further, diversifying to high-value crops, and even putting solar panels on farmers’ fields as a third crop could help raise incomes sustainabily. It is only with such concerted and sustained efforts that one can hope to double farmers’ incomes. Else, the dream will remain unfulfilled.

The writer is distinguished professor, ICRIER

Views are personal

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First published on: 06-03-2023 at 04:00 IST
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