2 years of Modi: Farm sector needs urgent action, says Ashok Gulati

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Updated: May 26, 2016 9:08:20 AM

The monsoon failure may not be in the hands of the government but better irrigation and water management certainly is

However, during the last two years, instead farmers’ margins over costs—which hovered between 20-30% in most agri-commodities during the terminal years of UPA II—improving, the profits have actually collapsed. However, during the last two years, instead farmers’ margins over costs—which hovered between 20-30% in most agri-commodities during the terminal years of UPA II—improving, the profits have actually collapsed.

As the Modi government enters its third year of power, any review of its functioning over the last two years will be incomplete without examining its performance on the farm front. In the FY15 and FY16, the economy grew at 7.2% and 7.6%, respectively, while the agriculture sector grew at minus 0.2% and 1.1%—the sector that employs close to half of the country’s labour force saw an average annual growth rate of less than 0.5%.

Two years back, the NDA’s election manifesto had promised, among other things, to make Indian agriculture more “productive, scientific and rewarding”. In particular, it promised to “take steps to enhance the profitability in agriculture, by ensuring minimum of 50% profits over cost of production”. In case of irrigation water, it intended to “introduce and promote low water consuming irrigation techniques and optimum utilization of water resources”.

However, during the last two years, instead farmers’ margins over costs—which hovered between 20-30% in most agri-commodities during the terminal years of UPA II—improving, the profits have actually collapsed. In most agri-commodities, profitability is down to less than 10% and is even negative for many others. This is mainly due to back-to-back droughts in 2014 and 2015, the downswing in global agri-prices and lower-than-anticipated increases in procurement prices. Instead of chasing its pre-poll promise, the government seems to have gone with a new slogan: “doubling farmer’s income by 2022”. While the country awaits conceptual and operational clarifications on this, the list of slogans continues to grow.

On the promise of efficient utilisation of water, there are no major initiatives except slogans like “har khet ko pani” and “per drop, more crop”. The Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) does not have enough resources to fulfill any of these promises. The total expenditure budgeted under PMKSY for FY17 is R5,717 crore, far less than what is required to achieve “har khet ko pani”. In all possibility, this financially paralysed dream is likely to remain a just a dream for at least a decade, if not more. Notwithstanding these, on the farm front, the government can be lauded at least on three accounts: Pradhan Mantri Fasal Bima Yojana (PMFBY), Jan Dhan Yojana and Direct Benefits Transfers (DBT) and e-National Agricultural Market (NAM).

On April 1, the Modi government launched the revised crop insurance scheme (PMFBY) to combat agrarian distress. It is a commendable step, though it came somewhat late in the game. Like in the case of other schemes, this lacks robust groundwork, which could cripple performance. For example, timely assessment of crop damage and payments need installing automatic weather stations, digitisation of plots, linking them with Aadhaar and bank accounts, and using drones, ‘low-earth orbits’ and even satellites. This is still a work-in-progress and unless the PMO shows perseverance, this can fizzle out.

The PMO also made financial inclusion and opening of Jan-Dhan accounts a top priority. As on May 4, about 22 crore Jan-Dhan accounts had been opened and 61% of these are rural accounts. Here, too, there are challenges, such as the increasing dormancy, falling rate of first-time accounts, and operational hiccups like connectivity issues. Close to 27% of the accounts are still zero-balance ones. More than half have not been utilised towards DBT payments, with DBT itself yet to be effected for food and fertiliser subsidies.

The Shanta Kumar panel had suggested moving to DBT for both food and fertiliser subsidies, to plug the 30-40% leakage seen in these schemes. The budgeted amount for food and fertiliser schemes is R2.05 lakh crore for FY17, apart from the pending payments of more than Rs 1 lakh crore. Moving disbursal to the DBT route and using the resulting savings for water management would change Indian agriculture and the farmers’ lot for the better.

Conceptualising and creating an electronic, pan-Indian farmers’ market (e-NAM) is a bold step. But if NAM is to succeed, fees and taxes at the state-level wholesale markets must be streamlined, the APMC reformed and standards for produce introduced. Encouraging commodity market trade will also help revive the price-discovery role of the markets.

All these are medium- to long-term measures. One only wishes that they were taken in the very first year of the Modi sarkar so that there could have been a much better situation today. But, better late than never. Average agri-growth of less than 0.5% in its first two years should shake the government into urgent action. Agreed that the monsoon failure and collapse in global agri-prices are not in the hands of the government, but it is during such crises that visionaries are tested.

Farmers are unhappy today and agriculture is stagnant. Farm suicide is perversely high, with widespread rural indebtedness. The government must move fast and take bold steps if it wants the masses to benefit and poverty to be eliminated. Only an action-oriented agenda—as set by the well-meaning slogans—backed by sufficient resources and buoyed by perseverance can save the farming community.

(Co-authored with Shweta Saini)

Gulati is Infosys chair professor of agriculture and Saini is consultant, Icrier

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