By Ashok Gulati
In the recently formed National Democratic Alliance cabinet (Modi 3.0), Shivraj Singh Chouhan is a very appropriate choice for heading the ministry of agriculture and farmers welfare as well as the ministry of rural development. Given that most of the seats that the Bharatiya Janata Party (BJP) lost in the recent parliamentary election were from rural-dominated areas, it gives a clear signal that all is not well there. So, the BJP must fix it quickly, and for that, it needs to have someone with vast experience and who understands the problems of rural areas in general and agriculture in particular.
Chouhan fills this void quite nicely. He has soiled his hands as the longest-serving chief minister of Madhya Pradesh. With his commitment and compassion for agriculture and rural development, MP saw an overall GDP growth of 7% per annum, and agri-GDP growth of 6.8% per annum during 2005-06 to 2023-24. No other state, with the sole exception of Gujarat under Narendra Modi as CM, had such a combo, making it the most inclusive growth model. MP’s growth has been higher than the all-India GDP growth of 6.5%, and agri-GDP growth of about 3.6% over the same period.
The challenge before him now is whether he can boost all India agri-GDP growth to, say, more than 5% per annum, and augment farmers’ incomes. How can it be done?
Here are a few suggestions. First and foremost, he needs to recognise that agriculture is not just the production of food, but a full food system that stretches from production to marketing to consumption. He has to increase productivity in the face of climate change, which is increasingly exacerbated by extreme weather events. There is no better way than investing heavily in climate-smart agriculture, from heat-resistant varieties of various crops to farming practices that give “more crop, per drop” of water. This, in turn, means that he has to immediately raise expenditure on agri-R&D and extension to at least 1% of agri-GDP, up from the current less than 0.5%. The marginal returns on this are above 10 times, according to latest research.
Second, he must ensure that farmers have access to the best technologies as well as the best markets for their produce. Without that, neither productivity is going to catch up with global standards nor will farmers’ incomes increase significantly. But to enable farmers to get the best price for their produce, he has to convince his colleagues in the inter-ministerial group, who would like to keep the prices of food low for consumers. It is this consumer bias in the policy framework that works against the interests of farmers. Export bans at the drop of a hat, stocking limits on traders, unloading government stocks at way below the economic cost of the Food Corporation of India to supress market prices, and suspending futures markets are all tilted against farmers’ interests. This is a big battle for Chouhan. He should start by opening up the export of onions, as Maharashtra’s onion belt farmers are dead against the export bans that have hit their incomes badly. Thereafter, in a calibrated manner, he can go for opening up common rice exports with a 15-20% export duty to recover the cost of fertiliser and power subsidies inherent in rice production.
Third, for other high-value fruits and vegetables, milk and milk products, fishery, and poultry, he has to coordinate with other ministries to build value chains from farm to mega cities and foreign markets so that farmers get the best prices possible. Inviting the organised private sector or cooperatives/farmer producer companies to build these value chains is necessary. They can be incentivised on the lines of the production-linked incentive scheme that exists in industry, or what India did while building value chain for milk in the domestic market on the lines of the Amul model. This will pay handsomely to increase farmers’ share in consumers’ rupee. He can start by taking over the TOP (tomato, onion, and potato) scheme and fix their value chains so that both producers and consumers can benefit.
Fourth, if he has the capacity to convince the Prime Minister and other cabinet colleagues, the fertiliser subsidy amount should be transferred to the agriculture ministry. Today, the fertiliser subsidy of Rs 1.88 trillion (revised budget estimate of FY24) is more than the total budget of the agriculture ministry. The fertiliser subsidy is parked in the ministry of chemicals and fertilisers, which has little to do with farmers. The policy of the fertiliser subsidy, with almost 80-90% subsidy on urea and about 20-25% on DAP (diammonium phosphate) and MOP (muriate of potash) has massively distorted the nitrogen, phosphorus, and potassium balance. As a result, the response of grains to fertilisers, which used to be more than 10:1 in the 1970s, has dropped to about 2:1. On top of this, it must be noted that plants do not absorb more than 35-40% of the nitrogen that is being supplied to them through granular urea. The rest is emitted in environment as nitrous oxide, which is 273 times carbon equivalent. It is like subsidising urea to create poison in the atmosphere. This subsidy needs to go directly to farmers’ accounts, and fertiliser prices should be freed. Digital fertiliser coupons of equivalent value can be issued to farmers, giving them the freedom to use chemical fertilisers, bio-fertilisers, or natural farming. But it will need careful planning, which needs to start now to carry out this big bang reform next year.
Also, a special package for Punjab-Haryana is needed to save them from ecological disaster. The list of issues is much bigger, but given the space constraint, let me stop here. If Shivraj Singh Chouhan can do even these, he will do a great service to Indian agriculture and the peasantry dependent on it.
The author is is a distinguished professor affiliated with the ICRIER.
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