Budget 2019: Ease of Doing Farming

Considering that nearly 50 per cent of the country is reeling under a serious drought, with June being one of the five hottest months in the past 100 years, and with growth in real farm incomes remaining almost ‘near zero’ in the past seven years, the Finance Minister Nirmala Sitharaman has a difficult task cut out when she presents her maiden budget on July 5. But expectations are riding high.

There is no denying that agriculture is in a desperate need for reforms but the bigger challenge for the new government will be on how to increase real farm incomes. Economic Survey 2016 had estimated the average income of a farm family in 17 States of India, which means roughly half the country, at a paltry Rs 20,000 a year, and with a major study conducted by OECD-ICRIER pegging the loss farmers suffered on account of being denied the rightful price, between the years 2000 and 2017, at a whopping Rs 45-lakh crores, farmers have been at the receiving end. As if this is not enough, recent studies show farm incomes plummeting to the lowest level in 15 years, and huge job losses for the rural farm and non-farm workers as well. 

Farmers have toiled hard to produce bumper harvests. And yet, with each passing year, the plight of a farming family has only worsened. Agriculture in reality has been a victim of macroeconomic policies which aim at keeping food inflation low, provide cheaper raw material for the industry, and meet the obligations of international trade. While the terms of trade were against agriculture, public sector investment between 2011-12 and 2016-17 declined to 0.4% of the Gross Domestic Product (GDP). Private sector investment too dipped to 1.8% in the same period. With public and private sector investment on the decline, coming down to a low of 2.2% of the GDP in 2016-17, the neglect of agriculture was all too apparent. 

There is hardly a day when farm suicides are not being reported from one part of the country or another. Take the case of Punjab, where even after the loan waiver of Rs 2-lakh per farmer was initiated in January 2018, as per Bhartiya Kisan Union calculations there have been 430 farm suicides reported in the year gone by. Between 2000 and 2017, a house-to-house survey by three public sector universities had calculated a total of 16,600 farm suicides. If such is the depressing farm scenario in the frontline agricultural state, the agrarian distress prevailing in the rest of the country can be easily imagined.

The launch of Prime Minister Kisan Samman Nidhi Yojna (PM-Kisan) in Feb 2019, which provides all landowning farmers with a meagre direct income support of Rs 6,000 a year, or Rs 500 per month, the government made its intent clear that it is keen to revive agriculture. It also is an indication of government’s willingness to provide direct income support. The scheme has been now extended to all 14.5-crore landowning farmers , and it now needs to be further extended to 14.4-crore landless farmers. Already a budget provision of Rs 87,000-crore has been made and to include another 14.4-crore landless farmers the total budgetary allocation would be around Rs 1.6- lakh crore. To the question where will the money come from, the best and easy instrument available for the Finance Minister is to immediately scrap the annual fiscal stimulus package of Rs 1.86-lakh crore being doled out to the industry, in operation since the global economic meltdown in 2008-09. There is no economic justification for the package. It continues to be paid for ten years now.

In 2018-19, farm credit to the tune of Rs 11.68-lakh crore was extended to agriculture. This may further be revised to Rs 12-lakh crore in this budget. But the bigger challenge remains on how to reach this to the small and marginal farmers. Economic & Political Weekly had recently estimated that not more than 15 per cent small farmers have access to institutional credit, and that’s the reason why farm loan waivers have not been able to stem farmer suicides. The task therefore should be on how to bring more farmers under the ambit of institutional credit. In addition, among the foundational reforms that the country is crying for the government should announce setting up of a National Commission for Farmers Income & Welfare with the mandate to provide every farming family with an assured income of Rs 18,000 per month. This should be provided by way of top-up approach over the average income that farmers get in each district. That data for this is available.  

Expanding the network of Agricultural Produce Market Committee (APMC) regulated markets, from the existing 7,000 mandisto a probable target of 42,000 mandisin 5 kms radius, should be accorded top priority. This should be accompanied with a budgetary provision for setting up grain silos and warehouses across the country. Since the BJP manifesto had committed to provide Rs 25-lakh crore of investment in agriculture in the next 5 years, a beginning should be made by investing at least Rs 5-lakh crore this year on setting up mandis and godowns.

But more importantly, much of the problems farmers confront are related to governance. Like the ease of doing business for the industry, agriculture too needs Ease of Doing Farming initiatives to remove the hurdles and bottlenecks farmers encounter during cultivation, harvesting and marketing operations. Nirmala Sitharaman would appreciate this much better because it was during her tenure as Commerce Minister that 7,000 steps for ease of doing business were laid out. I wonder why she can’t unroll a mechanism to provide 5,000 steps for Ease of Doing Farming. #

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How to make agriculture economically viable

Speaking from the ramparts of Red Fort on August 15, 1955, Jawaharlal Nehru had said: “It is very humiliating for any country to import food. So everything else can wait but not agriculture.” As India readies to celebrate 75 years of Independence in 2022, agriculture remains the Achilles heel of an economy poised to be the third largest in the years to come. Considering that nearly 49% of the workforce is engaged in agriculture, and knowing well that real farm incomes have almost stagnated or declined for the past two decades, addressing the acute agrarian distress that prevails remains the biggest challenge. 

The Niti Aayog’s own estimates show the growth in real farm incomes at around near-zero in the past two years, and prior to that between 2011-12 and 2015-16, real farm incomes had risen by less than half a percent every year. Economic Survey 2016 had earlier worked out the average income of a farming family in 17 states of India to be a meagre Rs 20,000 a year, which means farming families in roughly half the country were surviving on less than Rs 1,700 per month. An ICRIER-OECD study has shown conclusively that farmers suffered a cumulative loss of Rs 45-lakh crore in the 17-year period between 2000-01 and 2016-17. This was on account of farmers being denied a rightful price for their produce. As if this is not enough, recent studies show farm incomes plummeting to the lowest level in 15 years, and huge job losses for the rural farm and non-farm workers as well. 

Farmers have toiled hard to produce bumper harvests. And yet, with each passing year, the plight of a farming family has only worsened. Agriculture in reality has been a victim of macroeconomic policies which aim at keeping food inflation low, provide cheaper raw material for the industry, and meet the obligations of international trade. While the terms of trade were against agriculture, public sector investment between 2011-12 and 2016-17 declined to 0.4% of the Gross Domestic Product (GDP). Private sector investment too dipped to 1.8% in the same period. With public and private sector investment on the decline, coming down to a low of 2.2% of the GDP in 2016-17, the neglect of agriculture was all too apparent. 

Agriculture has been crying for reforms. But because the policy emphasis has remained on moving people out of agriculture to the urban centres, which are in need of cheap labour, farmers have in reality been penalised to grow food. Prices have been deliberately kept low to keep consumers and industry satisfied. This has to change. Policy makers must treat agriculture as an economic activity, which alone has the capacity to reboot the economy. An indication to this is provided in the Bharatiya Janata Party manifesto which promises to invest Rs 25 lakh crore in agriculture in the next five years, and provide a higher minimum support price (MSP) to farmers. Coupled with the launch of Prime Minister Kisan Samman Nidhi Yojna (PM-Kisan) in Feb 2019, which provides all landowning farmers with a direct income support of Rs 6,000 a year, the intent to revive agriculture is in sight. Further, addressing the Niti Aayog the Prime Minister announced the setting up of a high-level task force for undertaking structural reforms in agriculture.

Telangana launched its innovative Rythu Bandhu scheme, providing Rs 8,000 per acre per year, in 2018. Odisha launched its Krushak Assistance for Livelihood and Income Augmentation (KALIA) variant in Dec 2018. Since then several states — West Bengal, Jharkhand, Andhra Pradesh, Karnataka and Haryana — have started paying farmers directly, some incorporating the allocation available under PM-Kisan. In other words, governments are realising the need to provide direct income support to farmers. The essential foundational reforms should include setting up a National Commission for Farmers Income and Welfare, with the mandate to assure a monthly income of Rs 18000 per family by way of a top up approach. This will create a huge demand, thereby reinvigorating the industry and triggering a high economic growth. At the same time, initiating an Ease of Doing Farming programme will go a long way in removing the hurdles and bottlenecks farmers encounter during cultivation, harvesting and marketing operations.

Expanding the network of Agricultural Produce Market Committee regulated markets, from the existing 7,600 to a probable target of 42,000 mandis, should be accorded top priority. In addition, strengthening Farmer Producer Organisations (FPOs) and encouraging startups in agriculture to draw out entrepreneurship should make agriculture an attractive proposition. In China, seven million educated youth, including holders of postgraduate degrees, were sent to rural areas in 2018, and reports say 60% have stayed back. To bridge the rural-urban divide, China plans to send millions of educated volunteers to the villages every year and is encouraging young migrants in cities to return. To spur rural development, India, too, needs to draw a lesson to make agriculture economically viable, environmentally sustainable and attractive. It is surely possible provided we change our mindset and let 2022 be the milestone to restore the pride in agriculture, make farm distress history, and turn farming into a vibrant economic enterprise. #

To spur rural development, India must make agriculture economically viable. The Hindustan Times. June 22, 2019. https://www.hindustantimes.com/analysis/to-spur-rural-development-india-must-make-agriculture-economically-viable/story-XXK8pGACkUftlI1A259lON.html

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Ease of Doing Farming

     

    Farmers queued up for selling wheat in a Madhya Pradesh mandi 

--web photo

*     * Nearly 144 farmers from Araria district in Bihar have been waiting to receive the compensation promised under the Pradhan Mantri Fasal Bima Yojna (PMFBY) for the paddy crop loss they suffered in 2017.

        * Onion farmers in Mandsaur in Madhya Pradesh are suffering silently for the low prices they are getting this year. Even at a low of 50 paise a Kg there are not enough buyers. Most farmers have dumped their produce in the fields. 

         * In Punjab, farmer widows are waiting endlessly for the promised compensation of Rs 2 lakh each. Elsewhere in the country, farm widows have been running from pillar to post seeking the relief they are entitled to.

         * At Itarsi in Madhya Pradesh an irate farmer calls up the Deputy Commissioner to complain about the faulty weighing of his crop produce at the local APMC mandi. He is arrested, probably because the DC is annoyed at a farmer calling him directly. 

There is no end to such glaring lapses or bureaucratic hurdles that farmers encounter almost every other day. From the governance perspective, these may seem insignificant to those who live on assured monthly income that is credited to their bank accounts unfailingly on the first of every month. The suffering that daily wage workers have to undergo has only to be realised when studies show only 32 per cent of labour charges that were due to them upon completion of the works have been paid to them on time in the first two quarters of 2017-18 . Take the case of sugarcane farmers, who expect payment only once in a year when the crop is brought to the sugar mills. Even then, till mid-February this year, more than Rs 23,800-crore of the cane payments remains outstanding. On an average, a sugarcane farmer has to wait for at least two years before being paid.

The hardship that farmers and farm workers experience at every step is simply baffling. It is difficult to even visualise the trauma and human suffering a farm family has to undergo after being denied the rightful price of the produce forcing the farmer to throw tomato, potato, onion and other vegetables on to the street. What happens to the farming family whose standing bumper crop is destroyed by cattle and wild animals. To see the standing crop being damaged by strong winds or untimely rains is nothing short of a hammer blow from nowhere. I have seen people in the cities being casually dismissive about such reports saying this happens now and then in agriculture. But if their own salaries get delayed by a month or two, they resort to loud protests and the dharnas.     

In fact, much of the agrarian distress that is prevalent across the country is an outcome of a massive governance failure by way of denial of physical, social, natural and human capital that is essential to create a conducive environment for agriculture. When Rajiv Gandhi said that only 15 paise out a rupee reaches the rural beneficiaries, he was only referring to the huge loss of economic resources that are pocketed by the bureaucratic chain on the way. In addition, there are innumerable hurdles and obstacles that farmers and farm workers confront at the time of production, harvesting and marketing of the crop that makes farming a losing and an unattractive enterprise. Even loan disbursement and recovery comes laced with a number of problems that farmers face. According to the National Crime Record Bureau (NCRB) almost 80% of farm suicide cases were related to bank recoveries.

That makes me wonder why we can’t come up with a sustainable index on ease of doing farming. Sound and efficient regulations are not only critical for business enterprises but are absolutely essential for a thriving farming sector, ending extreme poverty and hunger and at the same time meeting the targets of Sustainable Development Goals (SDGs). After all, in a country where 600 million people are directly or indirectly dependent on agriculture, a set of reforms will not only help remove the bottlenecks but also create a favourable environment for attracting public and private sector investment and wooing entrepreneurship in farming. On the lines of the World Bank Group’s Doing Business Index, which was launched in 2003, a similar kind of ease of doing farming index can be prepared that will usher in prosperity where it is needed most, and at the same time propel millions of farm livelihoods into a profitable and attractive enterprise.

At present India is ranked 77 among 190 countries, in the ease of doing business index. Just because the World Bank has been pushing it, a number of institutes and universities all across have been coming up with their own index that have helped fine tune the index to enable business competitiveness. On the other hand, while much of the talk for doubling farm income is bogged down in productivity details, initiating an ease of doing platform, followed by a time bound action plan, will lay out a strong foundation for revitalising agriculture. More so as a time when the country is moving from jobless to job-loss growth, reviving agriculture is the only way forward. I am not seeking an ease of doing index only for agribusiness enterprise but for farming as a whole. National Bank for Agriculture and Rural Development (NABARD) could be the promoter and numerous agricultural universities/institutes; NGOs, farmer organisations as well as mass movements could be roped in to help develop the index.

Roughly about 7,000 big, small, medium and nano steps have been taken on ease of doing business, the then commerce and industry minister Nirmala Sitaraman had informed in 2017.  Earlier, soon after the NDA government was sworn in, the CII had presented in August 2014 a list of 60-points regarding green clearance norms. In six months time, the government came back with an action plan for 29 of the listed points. The urgency with which the government has moved on making it easy for business to operate is what is required for reforming agriculture and moving it out of the economic mindset that fails to treat farming as an economic activity. Agriculture alone has the potential to reboot the economy, and an ease of doing farming index will unleash the immense potential it carries.

After all, if 7,000 steps can be laid out for ease of doing business imagine the rural transformations if another 5,000 steps are initiated for ease of doing farming. The face of Indian agriculture will change for the better, forever. #

Ease of Farming Index. The Tribune. May 15, 2019
https://www.tribuneindia.com/news/comment/ease-of-farming-index/773003.html  

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What should the next PM do to address agrarian crisis

Woh Subah Kabhi To Aayegi

Pic courtesy: Hindu Business Line

The launch of PM –Kisan Samman Nidhi Yojna (PM-Kisan) scheme just before the code of conduct came into force, providing for a direct transfer for Rs 6,000 per year into the bank accounts of small farmers, even though meagre, was in a way an obvious admission of the severity of the agrarian crisis. Five years into power, and despite the promise of doubling farmers’ income by the year 2022, farm incomes had in reality plummeted to its lowest in 15 years necessitating a dramatic policy measure to provide farmers with some semblance of hope.

At a time when the Niti Aayog had admitted that farm income rise in the past two years (post 2016) had remained almost at near-zero and prior to that, in the five year period 2011-12 to 2015-16, real farm income had risen by less than half a per cent every year, 0.44 per cent to be exact, the introduction of PM-Kisan was the outcome of a realisation that agriculture is in dire crisis and was crying for direct income support. For the first time, the government signalled willingness to move from ‘price policy’ to ‘income policy’ and this in my understanding is a tectonic shift in economic thinking.

The launch of PM-Kisan under which the transfer of the first instalment of Rs 2,000 was swiftly made in to the accounts of beneficiary small farmers that the government could immediately identify, was soon followed with an electoral promise of Nyuntam Aay Yojna (NYAY) by the Congress president Rahul Gandhi. Promising to provide Rs 6,000 per month into the bank accounts of 20 per cent of the poorest if voted to power, the Congress too has finally admitted that direct income support is what is urgently required to pull out the poorest of the poor from abject poverty, which would in case include a large proportion of small and marginal farmers. Let’s not forget, as per Economic Survey 2016, the average income of a farming family in 17 states of India, which means roughly half the country, is a paltry Rs 20,000 a year or in other words less than Rs 1,700 per month.

Agriculture has remained at the bottom of the spectrum. For almost four decades, farm incomes have practically remained static, if adjusted against inflation. Farmers have been denied their rightful price, and in fact market prices have prevailed much below the administered prices for most crops for most harvesting seasons. According to a joint study by OECD-ICRIER, between 2000 and 2017, farmers have suffered a cumulative loss of Rs 45-lakh crores on account of low prices. And still, the farmers have demonstrated immense resilience and somehow survived against all odds. Any other sector of the economy would have collapsed by now. No wonder, rural distress is at its peak, which is quite evident from the spate of farm suicides that shows no signs of ending. To avoid any more embarrassment, the government has refrained from making public the farm suicide data for the past two years.

Although the political narrative of muscular nationalism after the attack at Pulwama has overshadowed the issue of agrarian distress, the biggest challenge for the incumbent government would be to first address the complex issue of continuing rural distress. Considering the massive increase in the number of farm protests across the country over the past few years, the new Prime Minister will find it difficult to postpone the problem anymore. Continuing with the promise of direct income support, a series of initiatives both short term and for the long run will be required to pull agriculture out of crisis. In my understanding, here are a series of steps that the Prime Minister must focus on:

      1. Set up a Commission for Farmers Income and Welfare: This Commission should work out farm prices, provide an assured farm income package and spell out other welfare measures. This Commission should subsume the existing Commission for Agricultural Costs and Prices (CACP) and ensure a minimum monthly income package of Rs 18,000 per farmer family. The income package should be arrived as a top-up over the monthly average income a farming family is getting in a district. This data is available and it should not be difficult to work out the prevailing average farm income per district.   

2    2. Farm Loan Waiver: A one-time loan waiver for farmers should be immediately done. Already some states have waived farm loans totalling Rs 1.9 lakh crore since 2017. It s expected that the total quantum of bad loans in agriculture should be around Rs 3.5 lakh crores, which needs to be waived. Farmers cannot be expected to become economically productive without first offloading the past burden. The nation needs to stand with farmers at this hour of difficulty. The farm loan waiver should not be a financial burden on the state governments either, but instead be routed through the banks like in the case of corporate loan write-off. Let the Centre recapitalise the banks for the farm loan waivers just as it does for the corporate NPAs.

      3. Public Sector Investments: Reserve Bank of India data shows that public sector investment in agriculture had hovered between 0.3 to 0.4 per cent of the GDP between 2011-12 and 2016-17. Consequently private sector investment in agriculture too has been low. Considering that nearly 50 per cent population is directly or indirectly engaged in farming, it is time to shift the focus on strengthening agriculture by boosting public sector investment. Unless agriculture receives adequate investments it is futile to expect farming becoming a profitable enterprise.

      4. Ease of Doing Farming: Agriculture is stranded because of tremendous bottlenecks that farmers encounter at every stage. It is more a victim of lack of governance. If industry can be provided with 7,000 steps for ease of doing business I see no reason why agriculture cannot be accorded a similar priority in farming operations. This should be accompanied with the setting up of a task force at the national (as well as state levels) to monitor its implementation at every stage. It should identify the steps that need to be initiated to make farming farmer-friendly.

5    5. Price and Marketing Reforms: There is an urgent need for market reforms, which should essentially begin by expanding the existing network of APMC regulated markets. At present there are about 7,600 APMC mandis against the requirement of 42,000 mandis to be set up in five kms radius. This must be accompanied by reforms in APMC set up helping in breaking the cartels that operate. At the same time, APMC reforms must be accompanied by complete procurement of farmers produce at the minimum support price (MSP). #     

What the next PM should do to alleviate rural distress. Deccan Herald. April 24, 2019

https://www.deccanherald.com/opinion/comment/what-the-next-pm-should-do-to-alleviate-rural-distress-730400.html?fbclid=IwAR0lNi-G_qdV63wiZebFj6ICPVElwNexAo_dy0ytzJdbwDMYyPNlxqGmnkk

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