Income Support Announcement represents a tectonic shift, but inadequate -- My Interview

Chandigarh: Last week, while presenting the Narendra Modi government’s last budget, acting finance minister Piyush Goyal announced a direct income support scheme for small and marginal farmers across the country. Under the Pradhan Mantri Kisan Samman Nidhi scheme, farmers owning less than two hectares will be provided Rs 6,000 per annum by the Centre.

Punjab-based agriculture policy expert Devinder Sharma was among the first, in 2013, to propose the idea of direct income support for farmers. On the sidelines of the 4th International Dialogue on Himalayan Ecology in Chandigarh, The Wire spoke to Sharma about the need for income support, the adequacy of the Centre’s scheme and other reforms that the agriculture sector needs.

The interview has been edited for clarity.

Why did you feel, as early as you did, that India’s farmers needed an income support scheme?

When I looked at the agriculture sector as a whole, there was a very clear message. Farmers were suffering as a result of two things – 1. Lack of public sector investment and 2. Denial of rightful income. I also understood that farmers were victims of market volatilities. There was no way that the markets would be able to rescue farmers.

Looking at global agriculture, it was obvious that agriculture was in decline across countries because farmers were being denied their rightful income.

And you felt that this was happening primarily because of the way markets were designed?

It was primarily because of the economic design. Agriculture is being sacrificed to keep economic reforms alive. Farmers don’t realise that when they cultivate crops, they actually cultivate losses. The same principle works globally, not just in India. The state of Indian agriculture is a result of the economic model that we have borrowed from the West.

Also read: The Trials of an Accidental Farmer in Tamil Nadu

If you look at American or European agriculture, the share of population engaged in agriculture is much lower than that in India. But still it was surviving because of substantial state subsidies including direct income support to farmers.

So you don’t agree with the argument that is sometimes made that we have too many people in agriculture and that is the basic problem.

No, I don’t agree with that. Agriculture cannot survive without subsidies because otherwise volatility of markets will mean that farmers are denied their rightful income.

The prevailing economic design wants two things from agriculture – 1. Provide cheap raw material for the industry and 2. Keep food prices low to keep a check on inflation.

Institutions and think-tanks keep telling us that we have to move people from rural to urban areas. But they don’t say what they will do in urban areas. The idea is that they will provide cheaper labour as daily wage labourers. That is the economic design. Is that a sensible design?

Devinder Sharma. Credit: Youtube

How do you view the recent announcement by the Central government that it will be providing Rs 6,000 per annum as a direct income support to small and marginal farmers?

The announcement itself is a tectonic shift. The time has come when we need to shift from price policy to income policy. Price policy has failed and income policy is the only way to bail out farmers. So, in that sense it is good and it is a big shift.

Is it adequate?

The thing is, it has not been done in a way that it can make an impact now. Rs 6,000 means Rs 500 per month. How do you expect to solve agriculture distress by Rs 500 per month?

What would have been a figure that would have been adequate?

I would say Rs 6,000 per month. I know that there are limitations and that won’t be possible. But still they could have doubled what they have given. They could have provided Rs 12,000 per year to begin with.

And there is no lack of money. I will tell you why. Over the last few years India has provided several lakh crores to the industry. We have provided them fiscal stimulus packages, we have waived their loans through bank recapitalisation.

Also read: Farmers’ Crisis: Are Loan Waivers, MSP Hikes, Assured Income the Solutions?

Did anybody ask the question ‘where will the money come from?’ No questions on ‘fiscal slippage’ either.

Why are these questions only asked when we have to give money to farmers? Nobody wants to close the tap which gives money to corporates.

Why is it important to move from a price policy to an income policy?

If you see in the last three years, prices of crops have continued to be well below MSP. For certain crops they have remained 40-50% below MSP throughout the season. It is clear that the price policy is not working. The economic design ensures that farmers don’t get the rightful price for their produce.

So is an income policy by itself going to be enough to address agrarian distress?

No, you need other reforms. We need to set up enough functional markets. We need to have mandis within a five-km radius so that farmers can easily reach them. Our credit policy needs urgent reforms. We need to move from chemical to non-chemical agriculture. Our storage capacity needs to increase for that we need to invest in warehouses.

There need to be multiple reforms to solve the problem. If industry can be provided 7,000 steps for ease of doing business, why can’t we provide at least 1,000 steps for ease of doing agriculture?

Income Support Announcement represents a tectonic shift, but inadequate. The Wire. Feb 6, 2019

https://thewire.in/agriculture/interview-income-support-announcement-represents-a-tectonic-shift-but-inadequate

READ MORE - Income Support Announcement represents a tectonic shift, but inadequate -- My Interview

Direct Income Support for farmers is a welcome move.

Finance Minister Piyush Goyal in his Budget speech announced a direct income support of Rs 6,000 per year for small farmers owning less than 2 hectares of land, which is certainly meagre by any standards, but is a tectonic shift in economic thinking around the role of agriculture for development. It entails a paradigm shift from the existing ‘price policy’ to move towards ‘income policy’ unlocking the immense growth potential existing in agriculture.  

The announcement of a direct income package of Rs 6,000 for 12-crore small farmers, which actually boils down to Rs 500 per month to be paid in three instalments, is certainly too meagre by any standards. Although the Finance Minister has made a budgetary provision of Rs 20,000-crore for the remaining period of the fiscal to enable the first instalment of Rs 2,000 to be credited in the bank accounts of beneficiary farmers before the forthcoming general elections, the petty amount has evoked sharp reaction from the distressed farming community. And rightly so.

I don’t know how a direct income support of Rs 500 per month per small farming household will be able to pull out 12-crore small and marginal famers from the terrible agrarian crisis that prevails. Nor do I understand how this meagre support will help in reducing the spate of farm suicides. 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. Therefore the question that needs to be asked is how did the policy makers conceive of the idea to provide a paltry direct support which will not even make an iota of a difference.

Considering that the average income worked out by Nabard All India Rural Financial Inclusion Survey 2016-17 stands at a paltry Rs 8,931 per month, it is quite certain that the direct income support of Rs 500 per month will not be enough in achieving the objective of doubling the farm income. Nor is this amount fit enough for any significant farm investments the farmer would like to make. Economic Survey 2016 had earlier computed the average income of a farmer in 17 States, which means roughly half the country, at a pitiful Rs 20,000 a year. In other words, the average income of farming family in half the country stood at less than Rs 1,700 per month. I shudder to think how several million farmers survive in that miserly income.

Since the government has already made an annual budgetary provision of Rs 75,000-crore for PM-Kisan (beginning with the full-fledged budget expected after elections) there is no reason why the direct payment amount couldn’t have been double. At Rs 12,000 per small farmer, the budget allocation would have certainly doubled, which means a hike in budgetary allocation to Rs 1.5-lakh crore. To the question where will the money come from, the best and easy instrument available for the Finance Minister was 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. While there is no economic justification for the package, it continues to be paid for ten years now. In simple words, Rs 18.60 lakh crore has been paid to the industry since 2008-09 and no question has ever been raised about the fiscal imbalance accruing. I see no reason why this money couldn’t have been transferred to farmers account.    

Like in Telangana’s Rythu Bandhu scheme, the Centre too has kept the direct income support limited to land owning farmers. The only difference being that while the Rythu Bandhu scheme is open ended, which means even if a farmers has ten acres of land he will get a proportionate support, the Centre is restricting it to farmers owning less than 2 hectares. It however excludes tenant farmers, who form nearly 40 to 50 per cent of the farming population, from getting the same benefits. At the same time, direct cash payments landing in the bank accounts of absentee landlords remains a big problem.

Nevertheless, as someone who has been a strong advocate for direct income support, it is gratifying to see direct payments now becoming an economic necessity. Agriculture has been and still remains a victim of the tyranny of markets. For more than four decades now, agriculture incomes had remained static with many studies providing an empirical evidence of declining real farm incomes. I have always maintained that agriculture has been deliberately kept impoverished to keep the economic reforms alive. Keeping the food inflation low and by ensuring a cheaper raw material for the industry, the entire economic burden has been quietly passed on to farmers.

An economic model, where agriculture is treated with disdain and has been very cleverly projected as an uneconomic activity, has to be reversed. To say that the Rs 500 a month cash dole to small farmers may be increased in the future as the government's resources grow is a reflection of the same faulty economic thinking. As a result most economic resources have been slowly and steadily shifted to the industry. Since 2004-05, the industry has got Rs 55-lakh crores of tax concessions. Niti Aayog estimates these concessions to be 5 per cent of GDP. Knowing that income saved is income earned, this in reality is no less than direct income support. In addition, the industry has been provided with massive incentives, which in reality are subsidies. On the other hand, an OECD-ICRIER study has worked out a total loss of Rs 45-lakh crores in the period 2000 and 2017 on account of low farm prices.

If only the farmers were paid their legitimate dues, the face of agriculture would have been much bright. In addition, I fail to understand why governments have refused to take steps for ease of dong farming. Agriculture alone has the potential to reboot the economy, and can sustain millions of livelihoods thereby reducing the pressure on job creation.

Providing direct cash payments to small and vulnerable groups is the first step in augmenting farm incomes. I am sure with the passage of time direct cash amount will see an incremental increase. This has to be simultaneously followed with the setting up of a Farmers Income Commission, with a mandate to ensure a minimum monthly income of Rs 18,000 per farming family per month. This will open the doors to agriculture receiving more public sector investments, more holistic reforms, and in bargain being turned into an economic activity. # 

Farmers need much more than cash dole. The Tribune. Feb 6, 2019

https://www.tribuneindia.com/news/comment/farmers-need-much-more-than-cash-dole/724400.html

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Direct Benefit Transfer is not Direct Income Support

No sooner did Finance Minister Arun Jaitley say that “agriculture needs a lot of support for the Indian economy to grow at a steady pace” hinting at the possibility of a package of proposals to be announced for the distressed agriculture sector, a wave of industry sponsored voices across the country, including the credit rating agencies as well as the investment portfolio economists, have begun to question the need for such ‘populist decisions’.

“The aggregate fiscal deficit will come in higher at 3.2 per cent in financial year 2020, which is higher than the financial year 2019 mid-year outlook forecast of 2.8 per cent,” India Rating warns. “A fresh round of economic crisis is in the making”, screams another headline. For almost a month now, ever since the State governments in the Hindi heartland of Madhya Pradesh, Chhattisgarh and Rajasthan announced farm loan waivers, bankers and economists have been crying foul. Some are even questioning the fiscal prudence of providing direct income support along the lines of the Rythu Bandhu scheme in Telengana that provides financial assistance to small and marginal farmers.

Before we try to analyse the question of fiscal imbalances, let’s first look at what measures are likely to be announced in the forthcoming interim budget. Quoting sources several newspapers had earlier reported that the farm package would include interest-free loans without collateral and a direct income support package of Rs 10,000 per acre per year. Among the numerous suggestions was a proposal from the State Bank of India for a financial support of Rs 12,000 per family per year in two instalments, to be split for each of the cropping season. Niti Aayog had its own estimates.

Meanwhile, constrained by the outgo on tax revenue foregone, latest reports saying that the government has hardly any fiscal space left for the proposed additional spending on agriculture. The easy option being contemplated by Niti Aayog therefore is to combine all farm subsidies, including subsidies on fertilizer, crop insurance, irrigation and interest subvention, and transfer it in cash to farmers. Since the Finance Minister had already budgeted Rs 70,100-crore for farm subsidies for the fiscal year 2018-19, ending on March 31, the cash transfer of subsidies will not entail any additional budgetary expenditure.

While news agencies say that the rupee and bonds rebounded after the report pegged the cost lower than the over Rs. 2-lakh crore estimated initially, it is certainly not a farm package that is expected to enthuse farmers. Already reeling under terrible distress, with real farm incomes declining for four decades now, agriculture is in urgent need of immediate relief as well as a series of strong measures for course correction leading to an increase in farm incomes. But if direct benefit transfer (DBT) is all that the government has up its sleeves, there seems to be no respite in offing for the beleaguered farming community.

Direct benefit transfer is basically a change in mechanism to deliver subsidies. Launched on Jan 1, 2013, the focus of direct cash transfer is to bring in transparency and reduce pilferage in subsidy distribution. Therefore DBT can by no means be considered as a direct income support measure. DBT only replaces the input subsidies that the farmers are getting for crop cultivation. The cash that the farmers get eventually will be used for paying for inputs like fertiliser, pesticides, irrigation etc. In other words, the cash payment is merely a replacement of the subsidy component.   

There is a clear cut difference between DBT and direct income support that the policy planners must understand. Niti Aayog however is giving an illusion of income support when in reality it actually ends up computing the total subsidy outgo and presents it deceptively as an income support of roughly Rs 15,000 per hectare. It is worrying to see many mainline economists too propagating the same line, which in real sense means that there is a visible reluctance to really help the farming sector in distress, and to initiate steps to bail it out in the long run. DBT is being wrongly projected as a continuation of Telengana model of direct income support, which has now been adapted in divergent forms by Odisha, West Bengal, Jharkhand and Karnataka.

Although agriculture needs a holistic approach to draw it out from the terrible crisis that it has sunk into over the decades, my suggestions to the government would be to initiate the following:  

1) After the farm loan waiver, which benefits roughly 30 to 40 per cent of the farming population, the remaining should be provided with a one-time direct income support of at least Rs 50,000 per family. These are the people who had timely repaid the crop loans and are also in need of immediate relief. This will also ensure that credit line in future is not squeezed. As to where the money will come from, it will come from the same kitty from where economic stimulus package of Rs 1.86-lakh crore for India Inc which still continues since 2009, came from.       

2) Time has come for setting up a Farmers Income Commission with the mandate to ensure a monthly income of Rs 18,000 to every farming family. The Commission for Agricultural Costs and Prices (CACP) should be renamed as a Commission for Farmers Income and Welfare with the mandate to ensure a minimum monthly living income package of Rs 18,000, which should incorporate the income accruing from MSP, FPO and other market interventions. Take the average farm income in every district, and whatever is the shortfall should be paid by income transfer directly in Jan Dhan accounts of farmers.

3) Time to revisit the FRBM Act which provides for a limited outlay for agriculture and rural sectors. For instance, according to CBGA only 6.7 percent of the Madhya Pradesh budget in 2017-18 went for agriculture and allied activities whereas 85% of the population is directly or indirectly engaged in agriculture. Similarly, the macro-economic policies the Reserve Bank of India lays out too are responsible for keeping farming impoverished. By mandating the inflation target at 4 per cent, it actually deprives farmers of the rightful income.

4) Expand the existing network of regulated markets. Against the requirement of 42,000 APMC mandis in 5-km radius, only about 7,600 mandis exist at present. Also, make it obligatory for trade in eNAM markets to purchase at the MSP that is announced for 23 crops. The modal price that eNAMs provide, which is based on the average of the day's price, is nothing but a distress price actually aimed at helping in commodity trading. It is time to learn from the failure of eChaupal that too had the same objectives of eNAM. #

Direct benefit transfer no cure-all for farm crisis. The Tribune. Jan 25, 2019.
https://www.tribuneindia.com/news/comment/direct-benefit-transfer-no-cure-all-for-farm-crisis/718855.html?fbclid=IwAR29TlgzW196zfysvl9IG9r2cxjFXUvdXAV7K9jKOI_MgV5Wi6xDemPJWZQ

READ MORE - Direct Benefit Transfer is not Direct Income Support

For farmers, the question being asked is where will the money come from

Courtesy: Rediffmail 

Newly elected to US Congress from New York, the young and articulate Alexandria Ocasio-Cortez, is a strong advocate for social justice. She has been questioning the dominant economic policies challenging corporate tax cuts and demanding more budgetary allocations for health, education and housing. In a recent TV interview, where she outlined her thinking of what good economics should mean for the people, journalist Anderson Cooper asked: “How are you going to pay for all of this?”

Now, shift the focus to India. In the past few years, nearly Rs 2.3-lakh crore of farm loan waivers have been announced by Karnataka, Madhya Pradesh, Maharashtra, Andhra Pradesh, Rajasthan, Telangana, Punjab, Rajasthan, Chhattisgarh and Tamil Nadu. While the possibility of many more State governments announcing such waivers before the 2019 elections is scaring bankers, the new RBI governor Shaktiman Das has struck a note of caution on farm loan waivers, saying it will lead to credit indiscipline. Merrill Lynch, the investment banking arm of Bank of America, had earlier warned that the farm loan waivers will amount to 2 per cent of the GDP.

The question that I am being repeatedly asked is where will the money come from. On a TV show the other day, the anchor was very clear when she asked: “Given that the fiscal position is very tight across the States, aren’t you worried that the farm loan waiver spree will upset all calculations? Haven’t the farm loan waivers already set a bad precedent as a result of which other welfare schemes will be scaled back?”

The issue we were discussing was the Rs 36,359- crore loan waiver that the Uttar Pradesh government had implemented. In my answer I said that even with its limitation of not reaching out to every indebted farmer, the UP loan waiver had benefitted 4.4 million farmers. This is not a small number, and the beneficiaries outnumber the population of Ireland. Compare this with the Rs 72,000-crore loan waiver that was accorded to a handful of power distribution companies between 2012 and 2014 and surprisingly no questions were asked about credit indiscipline then nor did anyone talk of UP not having the capacity to fund power discom loan waivers and resort the higher market borrowings.  

On another business channel, I was told the farm loan waivers are a deadly poison. It’s a wrong way of addressing a real issue, and leads of moral hazard. In my reply I quoted an RBI document, which states that in the four year period between April 2014 and April 2018, Rs 3.16-lakh crore of corporate bad debt has been written-off. According to another statement in Parliament, as on Sept 30, 2018, besides the public sector undertakings, there were only 528 borrowers who had non-performing assets (NPAs) of Rs 6.28-lakh crore while only 95 of them had defaults exceeding Rs 1,000-crore. While the Rs 2.3 lakh-crore farm loan waiver, when fully implemented, will benefit an estimated 3.4 crore farming families, there is no qualm over a massive corporate write-off which provides a bailout to only a few companies.  

The immediate response to my counter-question made a panellist to immediately retort by saying ‘two wrongs don’t make it right’. Well, in that case do you mean to say that one wrong – which is the corporate loan write-off – is right? How can any sensible economist justify the massive corporate write-off and turn his ire towards the poor farmers, I asked. In fact, the bad corporate loans are piling up. The gross Non Performing Assets (NPAs), which is a sophisticated terminology to cover up the bank defaults, have further increased by a whopping 11.2 per cent reaching Rs 10.39-lakh crore in 2017-18, and only Rs 40,400-crores have been recovered through the much talked about Insolvency and Bankruptcy Code (IBC) and Sarfaesi Act. At no stage have I seen any TV programme that calls for putting an end to rising NPAs but a number of shows have focused on waiving the waivers, calling for immediately stopping the farm loan waivers.

 

While no questions are being asked about the ‘economic viability’ of the massive write-offs of a handful of corporate waivers, a lot of heat is being unnecessarily generated over farm loans depicting a clear-cut bias in economic thinking. Surprisingly, whenever I raise the question of Rs 18.60-lakh crore going to the industry in the past 10 years as an economic stimulus package, a deafening silence follows. What is little known is that it was in 2008-09 that the government started a stimulus package of Rs 1.86-lakh crore to the industry at the time of global economic meltdown in 2008-09, a package that still continues and has been paid for ten successive years. In simple terms, the industry is getting a direct income support every year and one has ever questioned whether the stimulus package has created any fiscal indiscipline. No one ever asked where the money did come from for the Rs 18.60-lakh crore financial stimuli.

Take the case of 7th Pay Commission. Finance Minister Arun Jaitley has said in Parliament that the addition financial burden will be Rs 1.02-lakh crore every year. This will benefit 45 lakh central government employees and 50 lakh pensioners. When implemented across the country, with State governments, Public Sector Undertaking (PSUs) and colleges and universities fulfilling its obligations, the total annual burden will swell to Rs 4.5 to Rs 4.8 lakh crore, says a Credit Suisse bank study. No questions were ever asked where the money will come from and not did anyone question the widening fiscal deficit as a consequence. But talk of a farm loan waiver or any direct income support initiatives for farmers, the media gets hyper active in questioning the fiscal arithmetic.

In the US, as Alexandria explained, “Money will come from the same source from where the money for massive corporate tax exemptions come; from where the money for defence budgets come; and from where the money for space programme comes.” In India too, the money will come from the same kitty from where the budgetary allocations for 7^thPay Commission comes; from where the money for corporate tax exemptions come; and from where the money for massive bank write-offs for NPAs come. #

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There are fundamental problems in the design of the crop insurance scheme

A well designed crop insurance scheme is the best safety net 

Pradhan Mantri Fasal Bima Yojna (PMFBY), the flagship programme launched with much fanfare in 2016 has run into rough weather. With both the area covered and the number of enrolled farmers declining, the country’s premium crop insurance scheme is certainly in need of an overhaul.

While the Parliament’s Committee on Estimates, chaired by the senior BJP leader Murli Manohar Joshi, has in its latest report called for re-formulation of the agricultural insurance scheme, seeking transparency in its working and asking for more financial allocations to attract increasing participation from farmers, there are fundamental flaws in the design of the scheme that renders it rather ineffective.

At a time when farm gate prices had remained subdued over the past few years, and when fluctuating climatic conditions – drought, floods, as well as freak weather patterns including hailstorm, strong winds etc. had flattened the standing crop at many a places, PMFBY could have come as the much needed safety net. But a badly designed crop insurance programme has failed to come to rescue of the beleaguered farming community. Take the case of Haryana, where standing crops in 1.85 lakh acres in 15 districts were damaged in September by heavy rains and resulting floods. Interestingly, while the revenue estimates of the crop damage are ready, the crop losses suffered do not tally with the crops that were insured by the private crop insurance companies. This is because the insurance companies just collected the premium amounts from the banks without actually doing a ground assessment to know what crops were under cultivation.

The government perhaps did not visualize that there were serious problems in the way the scheme was designed. The methodology itself was faulty. No wonder, some estimates show the enrollment under PMFBY has declined by 17 per cent, from 40.2 million in 2016 to 33.2 million by 2018. Instead of rectifying the forcible enrolment, as a result of which the premium amount is automatically deducted from the bank accounts of loanee farmers, the banks have now been asked to provide the premium amount (in case of irregular accounts) by giving an overdraft for which the farmers will also have to pay interest. The basic objective being to show an increase in the number of farmers enrolled. Forcible addition of number of farmers under the scheme should not be seen as a measure of its success.  

Once the premiums are collected, a threshold limit is ascribed for the maximum claim in the event of a crop loss. In other words, if the threshold limit is low, the claim a farmer makes would get him a fraction of the loss he incurs. To illustrate, let’s look at an example from Bundli district in Rajasthan. A study conducted by Centre for Science and Environment (CSE) had shown that for soybean crop farmers were insured for a maximum of Rs 16,539 per hectare against a maximum output value of Rs 50,000. Similarly for paddy, the maximum a farmer could be compensated for was Rs 17,096 whereas the output value stood at Rs 65,000. This is also linked to the process of auction that is adopted while estimating the losses to be insured. Companies first give their preference of the regions where they want to operate, and then an open bidding is held. As a result of selective bidding the gross premium swells. Such a flawed system of estimating premium amounts does not operate anywhere in the world. This defeats the basic purpose of bringing in 12 private companies for crop insurance. Instead of building competition among the private players, the design allows for monopolization and formation of cartels. 

I have never understood the rationale of treating village or village panchayat as a unit of insurance. Why can’t the compensation be paid treating the farm as a unit? Of course, the insurance companies would not like to undertake this arduous exercise but at time when remote sensing and drone technology is available, there is no reason why the insurance companies should not be directed to treat an individual farm as the base for insurance claims. Further, since 24 crop-cutting experiments are mandated for each district, four for major crops and eight for other crops, a total of 40-lakh crop cutting experiments are required to be held every year. This could have been a huge employment generation opportunity if the government had insisted that the companies create its own workforce rather than allowing outsourcing of its agricultural officials for the purpose. But then, who wouldn’t like making profits without making adequate investments. 


Fundamental flaws in crop insurance scheme's design makes it ineffective. LiveMint. Jan 9, 2019
https://www.livemint.com/Politics/vPD0hLee4cWmmoEVvQteRJ/Fundamental-flaws-in-crop-insurance-schemes-design-renders.html?fbclid=IwAR2ZYX80-STaq1tl5IvhtI6uCiC9Vo1P_8O4KjZUuI_7AFVwvPqa2zIJDYE

READ MORE - There are fundamental problems in the design of the crop insurance scheme

Let 2019 be an Year of Agricultural Reforms

For four years in a row, Pradeep Sharma, a potato grower from Agra district in UttarPradesh has been suffering losses. Cultivating potatoes in 10 acres this year, he brought 19,000 kg to the mandi only to get a profit of Rs 490 after selling his entire produce. In anger, he sent his paltry earnings to the Prime Minister saying perhaps he will come to understand my problems. A few days earlier, a Madhya Pradesh farmer, Bherulal Malviya, had died of shock after selling his 27,000 kg of onions for just Rs 10,000 in Mandsaur market.

Such distressing media reports depicting the misery of the farming community have donned the media headlines for quite some time now. With losses mounting over the years, farmers have been literally surviving on loans, taking credit from both formal and informal sources. As of Sept 2016, Rs 12.60-lakh crores was the outstanding agricultural loan. Compare this with the average income of Rs 20,000 per year in 17 states, roughly half the country, the desolation is clear. 

Picture the terrible agrarian distress that prevails in the ongoing debate over whether farm loan waiver is the right answers to address farmer’s woes, and secondly, how will the state governments bear the fiscal burden? The speed at which the newly elected Chief Minister’s of Madhya Pradesh, Rajasthan and Chhattisgarh have announced farm loan waivers soon after assuming office, questions are being asked over the ‘economic viability’ of an otherwise ‘politically sound’ measure, the bigger question being tossed around is where will the money come from?  

It doesn’t end here. After Telangana launched the trend-setting Rythu Bandhu programme providing a fixed amount of Rs 8,000 per acre (now raised to Rs 10,000) per year as direct income support to farmers, it has triggered a chain reaction among States to announce similar or improved versions of financial aid. First, the erstwhile Congress government in Karnataka came up with similar package to provide Rs 5,000 per hectare to dryland farmers, and after the recent electoral debacle in the Hindi heartland, and fearing the Congress and BJP’s promise to waive farm loans if voted to power, and obviously in an effort to woo farmers ahead of the forthcoming Assembly elections, Odisha declared an economic package. Instead of a loan waiver, Odisha announced Rs 10,180-crore package for three years under the Krushak Assistance for Livelihood and Income Augmentation (KALIA) programme for land owning farmers, tenant farmers as well as landless labourers and sharecroppers. This will benefit 57-lakh households.

Jharkhand was quick to follow it up with Rs 2,250-crore schemes to help 22.76 lakh small and marginal farmers with a financial support of Rs 5,000 per acre per year, with an upper limit of 5 acres. And while Haryana is contemplating a pension scheme for farmers, West Bengal was quick to come up with Krishak Bandhu Scheme under which each farmer will get cash support of Rs 10,000 per acre per year. In addition, it will provide a life insurance cover of Rs 2 lakh per farmer, irrespective of the cause, for farmers between the age of 18 and 60. The premium will also be paid by the state government.

Let’s first look at the loan waivers. After Chhattisgarh announced the farm loan waiver, Rs 1,248-crore has already been transferred to bank accounts of 3.5 lakh farmers in the first phase, waiving a maximum of Rs 2-lakh each. In Punjab, despite the slow progress, a total of 4.14 lakh small and marginal farmers who had defaulted on cooperative and commercial banks have got a loan waiver of approximately Rs 3,500-crore. For the country as a whole, a total of Rs 2.3-lakh crore of farm loans announced by Karnataka, Madhya Pradesh, Maharashtra, Andhra Pradesh, Rajasthan, Telangana, Punjab, Rajasthan, Chhattisgarh and Tamil Nadu will benefit and estimated 3.4-crore farm families.

Compare this with corporate loan write-offs. This will tell us where the money is getting siphoned-off. According to the Reserve Bank of India, in the four year period between April 2014 and April 2018, Rs 3.16-lakh crore has been written-off while only Rs 32,693-crore of the outstanding amount has been recovered. Accordingly, as on Sept 30, 2018, besides the public sector undertakings, there were only 528 borrowers who had non-performing assets (NPAs) of Rs 6.28-lakh crore while only 95 of them had defaults exceeding Rs 1,000-crore. While no questions are being asked about the ‘economic viability’ of the massive write-offs of a handful of corporate waivers, a lot of heat is being unnecessarily generated over farm loans depicting a clear-cut bias in economic thinking.

Meanwhile, gross NPAs have further increased by a whopping 11.2 per cent reaching Rs 10.39-lakh crore in 2017-18, and only Rs 40,400-crores have been recovered through the much touted Insolvency and Bankruptcy Code (IBC) and Sarfaesi Act. The surge in NPAs is happening despite providing an economic stimulus of Rs 18.60-lakh crore to the industry in the past 10 years. It was in 2008-09 that the government started a stimulus package of Rs 1.86-lakh crore to the industry at the time of global economic meltdown in 2008-09, a package that still continues. In simple terms, the industry is getting a direct income support every year.  

Although considered to be ‘less distorting’ than farm loan waivers, reports indicate that the Centre is looking at the possibility of providing a direct income support of Rs 4,000 to farmers. Estimates point that the proposed direct support will cost the exchequer Rs 2-lakh crore. While this amount may appear big, the fact of the matter is that Rs 4,000 a year comes to less than Rs 340 a month, almost equal to the price of two cups of coffee/tea at any trendy coffee shop. If Rs 340 per month is considered to be an appropriate financial sop for the beleaguered farming community, it only shows the extent of deprivation and income inequality that prevails.  

While farm loan waivers are an economic necessity, and the state governments will have to find adequate resources, direct income support should not be seen as a permanent solution to the agrarian crisis. Agriculture needs a set of robust reforms in addition to the immediate sops being considered. Let 2019 be the year of agricultural reforms, and if the government can provide 7,000 steps, both small and big, for ease of doing business I see no reason why a similar amount of initiatives cannot be considered for ease of doing agriculture. After all, it involves 52 per cent of the country’s population. There lies the perfect economic prescription for Sabka saath, Sabka Vikas.

Let it be year of farm reforms. The Tribune. Jan 4, 2019
https://www.tribuneindia.com/news/comment/let-it-be-year-of-farm-reforms/708313.html

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After Dec 11, agriculture has been pushed to the center stage of Indian politics. But will it usher in a new renaissance?

The writing was on the wall. The anger that rural Gujarat voters had exhibited in last year’s Gujarat Assembly elections, edging the ruling BJP overwhelmingly in the Saurashtra region, was a clear pointer to the serious agrarian distress that prevails in the hinterland. Failing to keep a tab on the rural pulse, and unable to assuage the growing farmers anger that was spilling on to the streets, the electoral debacle in the predominantly agricultural belt of central Hindi heartland – Madhya Pradesh, Chhattisgarh and Rajasthan – was already scripted.

Interestingly, while Congress romped home riding on the promise of farm loan waiver and a higher procurement price for paddy, K Chandrashekhar Rao in neighbouring Telangana swept the Assembly polls riding the popularity of a direct income support scheme Rythu Bandhu for farmers. Under the novel investment scheme, the first of its kind in the country, land-owning farmers will get a support of Rs 8,000 per year, to be split in two -- Rs 4,000 each for kharif and rabi crop season. Benefitting nearly 58 lakh farmers, Telangana government has made a budgetary provision of Rs 12,000-crore for this scheme for 2018-19. The direct payment amount has since been raised to Rs 10,000 per farmer, and soon thereafter Jharkhand has been quick to follow up by launching a similar scheme providing Rs 5,000 per acre.

The speed at which the newly elected Congress governments in Madhya Pradesh, Chhattisgarh and Rajasthan implemented the farm loan waiver promise clearly shows the political urgency the party felt it needs to accord to agriculture. While Madhya Pradesh has waived outstanding farm loans to a maximum of Rs 2 lakh per farmer, which is expected to cost Rs 35,000-crores, Rajasthan and Chhattisgarh have announced a full loan waiver costing the state exchequer Rs 18,000-crores and Rs 6,100-crores, respectively. More than 8.3 million small and marginal farmers stand to benefit from the loan waiver when fully implemented.

Undeterred by the warnings being issued by economists, bankers and planners saying that farm loan waiver will upset the balance sheets and set in a bad precedence, Congress President Rahul Gandhi has warned “My message to farmers is that this country belongs to you and the Congress and other opposition parties will work together to ask Prime Minister Narendra Modi to write off your loans. We’ll not let him sleep until he waives your loans. If Modi doesn’t act, the Congress will do it 100%.” 

His argument is backed by sound reasoning. After all, when corporate bad loans to the tune of Rs 3.16 lakh crore between April 2014 and April 2018, were written-off, there was no hue and cry from the economists or bankers. Travelling through the rural belt before the elections, angry farmers did confront me at a number of places asking if huge loans of corporate can be written-off why not for farmers. In fact, their anger was specifically directed at former Chief Economic Advisor, Arvind Subramanian, who had gone on record saying that corporate loan write-off leads to economic growth. On the other hand, when farm loan waivers were first announced in Uttar Pradesh after the Yogi Adityanath government was sworn in, former RBI governor Urjit Patel had said that it will upset the national balance sheets and lead or moral hazard.

Nevertheless, the clear electoral verdict in the Hindi heartland has finally brought agriculture to the centre stage of Indian politics. Agriculture has emerged on the top of the political agenda, and the message has gone loud and clear. It is probably for the first time that the electoral verdict has brought in a visibly renewed confidence among the farming community. Rising above the divisive electoral policies that kept them split on the basis on religion, caste and ideologies, they now feel their collective electoral strength. The recent election results have shown them the power to topple governments. This is a major factor that will certainly influence the 2019 general elections.

After all, in a country which roughly has 50 per cent population engaged directly or indirectly in farming, farmers are finally in a position to be a lot more assertive. For over four decades now, real agricultural incomes have remained frozen. A recent OECD study has shown farm incomes have remained static in India for the past two decades. Earlier, an UNCTAD study had shown farm gate prices across the globe, factored against inflation, had remained static between 1985 and 2005. A recent Niti Aayog study has concluded that real farm income had only grown at less than half a percent, 0.44 per cent to be exact, in the five year period between 2011-12 and 2015-16 despite the fact that production had gone up steadily.  

Farmers in reality are being penalised to grow food. Barring a few exceptions, they have been consistently paid less than the cost of production over the years. To maintain food inflation under control, the entire economic burden has been conveniently passed on to farmers. To be born in debt and live in debt all through his life is virtually like living in a hell. Credit pe credit, was the only way to survive, and the debt kept mounting. Such is the economic deprivation that prevails, that even the Economic Survey 2016 stating that the average income of a farming family in 17 states of India or roughly half the country stands at a mere Rs 20,000 per year failed to shock the nation. With policies and economics failing farmers, the emergence of farmers on the political horizon is the only way forward. Only time will tell whether this political turnaround will usher in the new renaissance. #

After Dec 11, farm crisis on top of political agenda. Deccan Herald. Dec 23, 2018

https://www.deccanherald.com/specials/sunday-spotlight/after-dec-11-farm-crisis-top-709477.html

READ MORE - After Dec 11, agriculture has been pushed to the center stage of Indian politics. But will it usher in a new renaissance?

Direct Income Support is the need of the hour

Riding on the popularity of the Rythu Bandhu scheme, which provides Telangana farmers with a direct income support of Rs 8,000 per acre per year, Chief Minister K Chandrashekhar Rao romped home sweeping the electoral verdict in recent Assembly elections. Encouraged by the positive response, and knowing it could pay him rich dividends, he had raised the amount to Rs 10,000 per year just before the elections.  

The first of its kind in the country, and what essentially began as an exercise to work out an input subsidy scheme to offset the cost of seed, fertiliser and pesticides, the Rythu Bandhu scheme has finally turned into a direct income support for the debt-ridden farming community. Under the novel investment scheme, land-owning farmers will get a support of Rs 4,000 each for kharif and rabi crop season. Benefitting nearly 58 lakh farmers, Telangana government has made a budgetary provision of Rs 12,000-crore for this scheme for 2018-19. More than the budget provisions, what makes this scheme effective is the way it was implemented. Within a month the land records were put in order, and the distribution of money has been as per the promise. Buoyed by the public response, and the appreciation it has received from a wide array of experts, economists and others, KCR is now keen to replicate it across the country. “This will require an additional Rs 3.5-lakh crore. It shouldn’t be a problem allocating the amount for farmers. It will be fruitful for them,” he said.

It is a question of priorities. Finding financial resources for a terribly distressed farming community should not be a problem, if the intent is clear. According to the 2016-17 NABARD All India Rural Financial Inclusion Survey, Telengana (79%), Andhra Pradesh (77%) and Karnataka (76%) are among the top in the chart in the list of States with highest indebtedness. That farmer’s had expressed their gratitude for a slender income support of Rs 8,000 per year, which narrows down to roughly Rs 666 per month, is only a reflection of the acute rural deprivation that prevails. This shows the urgent need to pullout majority households from indebtedness. Writing-off outstanding loans is one way to address the complicated issue, providing direct income support is perhaps less distorting and more beneficial in the long run. After the loan waiver, direct income support followed by a more comprehensive assured income programme must begin. 

Several years back, when I first called for providing farmers with direct income support, mainline economists had laughed it off. At a time of globalisation and economic liberalisation, where markets ruled the roost, a number of questions were thrown up. It has taken some years for the people to grasp the implications, understand what I meant, and while the idea was sinking in, KCR certainly set the ball rolling. There are gaps but with the passage of time the scheme will get better. I am sure tenant farmers will subsequently be included, and there will be mechanisms to draw out absentee landlords and government/private sector employees who also hold agricultural lands. 

Telangana’s example was soon followed by Karnataka in a much truncated form. Just before the last Assembly elections in May, the outgoing Karnataka Chief Minister Siddaramaiah launched a new scheme, called Raitha Belaku, extending a direct income support of Rs 5,000 per hectare for dryland farmers, with an upper cap of Rs 10,000. The scheme entailed an expenditure of Rs 3,500-crore every year, and around 70-lakh farmers would directly benefit, he had claimed. And with news reports of Congress toying with the idea of providing Rs 3,000 per month by way of income transfer to small and marginal farmers in Madhya Pradesh, I am sure assured farm income will eventually become a norm rather than an exception. Even in Punjab, considering that every third farmer is below the poverty line, direct payments for marginal farmers should be tried.

Agriculture has been on the receiving end for over four decades now. As per Economic Survey 2016, the average income of a farming family in 17 States of India, which means roughly half the country, stands at a meagre Rs 20,000 a year. According to Niti Aayog real farm incomes in the five year period, between 2011-12 and 2015-16, grew at less than half a percent every year, 0.44 per cent to be exact. No wonder, the rural landscape remains equally depressing – falling incomes, mounting rural indebtedness, rising farm suicides, unmanageable glut at the time of harvest, and swelling rural to urban migration. At a time when tax concessions to the tune of 5 per cent of GDP are given to big business, public investment in agriculture has remained as low as 0.3 to 0.5 per cent of GDP.

With declining farm incomes and public sector investment shrinking over the years, agriculture has been a victim of a deliberate bias in economic thinking. For all practical purposes, agriculture is considered to be a non-economic activity. The macro-economic policies are heavily tilted against agriculture. While farm loan waivers, for instance, are considered to be a drag on the national economy, it is believed that huge corporate write-offs lead to economic growth. Unlike farm loan waivers, which become a State government’s headache, the corporate loans are the responsibility of banks and are seen as non-performing assets (NPAs) of the banking sector.

Direct income support will to some extent help in addressing these glaring disparities. At a time when farmers face extreme volatility in markets at times of harvest, and price distortions because of unwanted imports, direct payments will act as an agricultural safety net. It has to be accompanied by several initiatives in agricultural reforms, including redesigning credit, markets and cropping patterns and finally leading to an assured monthly income package to make an everlasting impact. 

To begin with, two steps are important:

 1.  Farm loan waivers too needs be clubbed with bank NPAs, and should be treated the same way as corporate write-offs. Since both the corporate and the farmers take loans from the same banks, how can the default by farmers become a State’s headache, which is expected to provide for loan waivers thereby adding on to its fiscal responsibility? While at the same time corporate bad loans are treated as a bank's headache? Why not treat farm loans as also bank's responsibility? Freeing up farm waivers will give State governments more room to provide for direct payments and to enhance farm incomes.

       2.  The Commission for Agricultural Cost and Prices (CACP) which fixes the MSP for 24 crops, needs to be now renamed as Commission for Farmers Income and Welfare with the mandate to ensure an assured monthly farm income of at least Rs 18,000 per month per family. This should be based on the average income derived from direct payments, MSP, FPOs etc, at a district level and the balance should be paid by income transfer.  #

Direct payment to farmers is a safety net. The Tribune. Dec 20, 2018.
https://www.tribuneindia.com/news/comment/direct-payment-to-farmers-is-a-safety-net/701050.html?fbclid=IwAR1XMZR5etyN73eficpO81b7optg7Ecw64qcqEUQ9w8jYC4bVAGae43zoDc

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Onion price crash: It's a bloodbath

Pic: LiveMint

Shreyas Aabhale is a young farmer from Sangamner in Ahmednagar district in Gujarat. This 21-year-old farmer was aghast when he found that he had earned only Rs 6 after selling 53.14 quintals of onions. In frustration, he sent a cheque of Rs 6 to Chief Minister Devendra Fadnavis. A few days later, another farmer, Chandrakant Bhikan Deshmukh, from Andarsul in Yeola tehsil in Maharashtra was able to sell onions at a price of 51 paise per kg. As a mark of protest, he also sent a money order of Rs 216 to Chief Minister Devendra Fadnavis. This is what he had earned after deducting mandi charges, and the transportation cost.

Both of them were probably inspired by Sanjay Sathe from Nashik in Maharashtra who had earlier sent a money order of Rs 1,066 to the Prime Minister’s Disaster Relief Fund. This is all he had earned, after deducting the expenses he had incurred, selling 750 kgs of onions. He received another shock when the Prime Minister’s Office returned the money order he sent, probably unable to accept the contribution in view of the shock waves the news had already created.

As onion prices are tumbling, a real bloodbath is being enacted on the farms. In Lasalgaon mandi, the biggest trading centre for onions in the country, prices had crashed to Rs 100 to Rs 300 per quintal. On an average, farmers were getting not more than 15 per cent of the cost they had incurred in cultivation. Unable to bear the shock, two farmers in Nashik district had reportedly committed suicide.  

In Neemuch mandi in Madhya Pradesh, onion prices had crashed to 50 paise per kg. In several other instances, irate farmers had thrown onion on the streets and some had heaped onions on the roadside giving it free to people passing by. The same is the story for garlic. Last year, the farmers of Hadoti, which comprises four districts of Kota, Bundi, Baran and Jhalawar in Rajasthan, shifted to garlic, a lucrative crop. In March when the crop was harvested, a glut in the market saw prices crash to Rs 1 per kg, making it unviable to even transport the crop to the mandi. Newspaper reports say the abysmally low garlic prices forced five farmers to commit suicide in the same belt.

Subsequently, garlic prices crashed in Madhya Pradesh mandis too forcing farmers to dump the produce in frustration. Some even emptied their bags in wells and ponds.

The plight of onion or garlic growers is no exception. A few months earlier, 65 per cent drop in wholesale prices of tomato in Nashik market forced a number of farmers to dump tomatoes on the roads. This pattern of price crash is nothing new. For past three years in a row, reports of angry farmers throwing onion, potato, tomato and other vegetables like peas, cabbage, cauliflower etc on the streets have appeared regularly. In fact, a video of an angry farmer sitting on a roadside and breaking pomegranate in exasperation one after another for not getting a price that covers up his cost of cultivation has already gone viral. It shows how severe and widespread is the malaise of price crash after a bountiful harvest ruining in the process tens of hundreds of farm livelihoods.     

What do you expect farmers to do when open market prices fall to considerably less than the Minimum Support Price? In the month of November alone, prices for farmers across the board dropped between 15 to 25 per cent approximately. Even in the case of paddy, where the government steps in to procure surplus paddy at the Minimum Support Price (MSP), prices dropped by 20 per cent. Some studies have shown that out of the 23 agricultural commodities for which the MSP is announced every year, excess production of 21 crops actually lead to an unmanageable surplus as a result of which the prices crashed.

Attracted by higher prices and favourable weather conditions, farmers put in their best to achieve record production. But their excitement is short-lived. Price crash across the country over the last few years, for instance has left farmers in the lurch. While it is perfectly alright to blame the ad hoc export import policy for the failure to find a stable market for exports, the promise of a Market Intervention Scheme (MIS) has failed to rescues loss making farmers. In fact, the assurance of launching Operation Green – on the lines of Operation Flood – aimed at market intervention for the TOP crops – an acronym for tomato, onion and potato -- at time of a price drop still remains on paper. It is time to think that if an effective cooperative system could be evolved for the highly perishable commodity – milk – there is no reason why India cannot envision a similar strategy for other perishables.  

In the US, when private markets fail to rescue farmers from a price crash, the US Department of Agriculture (USDA) had time and again moved in to manage the surplus. In 2016, when there was a crash in market prices, the USDA procured 11 million tonnes of cheese worth $20 million from farmers. “This commodity purchase is part of a robust, comprehensive safety net that will help reduce a cheese surplus that is at a 30-year high, while moving high-protein food to the tables of those most in need,” the then Agriculture Secretary Tom Vilsack had said

Earlier too, the USDA purchased 10 million pounds of strawberries, and directed the procurement to schools as well as to the needy. It purchased $6 million of fresh tomatoes in 2011 to help growers faced with oversupply. I wonder why India’s Ministry of Food and Civil Supplies is unable to buy in bulk tomato, onion and potato from farmers in a similar manner. Why can't the perishables be immediately moved to areas which are food insecure? After all, how can one explain food being thrown on streets at a time when 200 million people go to be hungry every night.

Not that US has been able to address the price sump every time a glut takes place but since 2002, the US Farm Bill provides for income support to farmers under what is called ‘price-loss coverage’ system. In 2014, the income support helped peanut growers emerge out of the crisis emanating from a price crash. Unlike the Market Intervention System in India, which is essentially aimed at consumers when food inflation soars, the US has instead put in a strong safety-net mechanism for farmers. #

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With high productivity, assured irrigation, a higher MSP and loan waivers in progress, why are Punjab farmers dying?

At a farm widow congregation in Punjab 

A day after the massive farmer protest in New Delhi, hundreds of farmer widows had assembled at Mansa in Punjab. I sat there listening to the heart-rending testimonies of several farm widows, among the hundreds who had assembled at Mansa. In the land of Green Revolution, to see and meet hundreds of farm widows was not so easy. As they stood to narrate their painful stories, more often than not they just stood in front of the mike, said a few words and wept. The silence that followed said everything.

There is hardly a day when I don’t find news reports of farmers committing suicide. A study conducted jointly by the Punjab Agricultural University, Ludhiana; Punjabi University, Patiala; and the Guru Nanak Dev University in Amritsar had in a house-to-house survey put the alarming death toll figures at 16,600 in the 17 year period, between the year 2000 and 2017. In other words, roughly 1,000 farmers and farm workers have taken the extreme step of ending their life every year in the agriculture frontline State. As the serial death dance on the farm continues unabated, another study by the Punjabi University estimates that one in every three farmers in Punjab is living below the poverty line.

As the widows narrated their agony and enormous struggle, as to how they were coping with the huge void left behind by the only bread-earner in their family, I sat wondering why had Punjab, often called as the food bowl of the country, turned into a hotbed of farmer suicides. Why nearly 98 per cent of the rural household were in debt, and 94 per cent of these households had reported more monthly expenditure as compared to their gross incomes. In other words, the rural households in progressive Punjab were living in debt. To live in perpetual indebtedness, and that to year after year, generation after generation, is the worst humiliation that any human being can suffer. Former Prime Minister Charan Singh had rightly remarked that a farmer is born in debt and dies in debt. What he did not say was that living in indebtedness all through your life is akin to living in hell.  

 

Listening to the farm widows, I tried to put the puzzle in place. If providing an assured Minimum Support Price (MSP) for crops, writing-off of outstanding farm loans, and expanding the irrigation network is primarily the recipe for ensuring farm prosperity then Punjab already has these in place. With 98 per cent assured irrigation, meaning that every farm gets an assured irrigation supply, and with the highest productivity of cereal crops – wheat, rice and maize – in the world, why is it that hundreds of farmers are still forced to commit suicide every year? If productivity and irrigation were the answer to the prevailing agrarian crisis then there is no reason why Punjab farmers should be dying. This only shows that the reasons behind the terrible agrarian crisis that prevail lie much beyond crop productivity and irrigation.  

On top of it, Punjab has a very extensive and elaborate system of procurement of food crops. With a huge network of APMC mandis and purchase centres, Punjab has the best infrastructure for procurement of crops in the country. It also has a vast network of rural roads linking the mandiswith the villages. With mandis and rural link roads in place, whatever stocks are brought to these purchase centres and if it meets the quality specifications are purchase at the fixed support price. Over 98 per cent of the wheat and paddy that is brought to the mandis by farmers is purchased at the fixed price. Farmers are able to sell their produce at the officially declared Minimum Support price, which is much higher than the prevailing market prices. That’s the reason why truckloads of paddy are illegally transported all the way from Uttar Pradesh and Bihar to be sold in Punjab mandis.

In addition, Punjab has also announced a farm loan waiver for a maximum of Rs 2-lakh per small and marginal farmer. Although the electoral promise was to waive all kinds of outstanding loans drawn on cooperative, private and nationalised banks, the State has so far promised to waive roughly about Rs 9,000-crore of farm loans of small and marginal farmers. Of which, approximately Rs 1,000-crore worth of farm loans have been waived off so far. In Maharashtra, against the initial estimate of Rs 34-lakh worth of farm loans to be waived, an estimated Rs 14-lakh crore is now planned to be struck out. Similarly, in Uttar Pradesh, Karnataka, Tamil Nadu and Rajasthan where only a fraction of the promised loan amount is being actually waived. The problem is that despite the election promises the State governments do not have the resources to provide for writing-off the entire outstanding farm loans.

Each of the farm widows reeled out an amount of farm loan, varying between Rs 2-lakh to Rs 12-lakh that their deceased husbands left behind. And that made me wonder how come the economic situation had reached such a despicable levels despite Punjab offering the best of rural infrastructure, irrigation and technological advance.

Punjab, therefore offers an excellent case study to understand, re-strategise and formulate a set of agricultural reforms that are more meaningful and effective. A set of reforms that actually go beyond the rhetoric and lay out a roadmap for the future where the society doesn’t have to treat the small and marginal farmers as a national burden. Instead of treating them as abandoned people, the challenge should be to ensure how the rural masses base could benefit from as well as become part of economic growth. That’s why I have always been saying that the time has come to move away from price policy to income policy. The need is to provide farmers with an assured monthly income, which is not only WTO compatible but also provides economic security to farmers. The demand should be to convert the CACP into a Commission for Farmers Income and Welfare with the mandate to assure a monthly living income of at least Rs 18,000 per farm family. That will be the beginning of Sabka Saath, Sabka Vilas. It’s time to think again. #

READ MORE - With high productivity, assured irrigation, a higher MSP and loan waivers in progress, why are Punjab farmers dying?