Distinguished food and trade policy analyst, award winning journalist, writer and researcher DEVINDER SHARMA was trained as an agricultural scientist and quit journalism to write on food and trade policies. He tells SARBJIT DHALIWAL how unfairly independent India continues to treat its farming community
You have been advocating the need for direct income support for farmers. Now that the government has announced an income support of ₹6,000 per year to small farmers owning less than five acres, do you think cash transfer is the way to address farm crisis?
For more than four decades now farm incomes have remained more or less static. Several studies have shown that the real farm incomes have been on the decline. More recently, a Niti Aayog study has shown that in the five-year period, between 2011-12 and 2015-16, real farm income had grown by less than half a per cent every year, 0.44% to be exact.
Following Demonetisation, with farm gate prices slumping across board, we have seen reports of farmers throwing tomato, potato, onion and garlic on the streets. Irate farmers had re-ploughed standing crops of vegetables and reports of farmers endlessly waiting at the market to dispose of their farm produce, had appeared frequently. Farmers’ anger was clearly visible, and following the electoral debacle in the Hindi heartland, the government borrowed the idea to bring in direct income support to farmers.
Like the concept of universal basic income, I believe direct income support is a significant shift in economic thinking. For several years now, I have been asking for direct income support. Even in the US and Europe, farmers have been given direct income support for long. The time has come in India to move from ‘price policy’ to ‘income policy’ which means over the next few years, the government will have to further provide farmers with an assured or a guaranteed monthly income. After all, how long can we leave farmers to face the tyranny of the markets?
But many people say ₹6,000 support is too little and too late ...
Yes, ₹6,000 a year actually translates into ₹500 a month or less than ₹17 a day. I don’t understand how the government thinks that with such a meagre amount, small and marginal farmers will be able to get out of the terrible agrarian crisis that prevails. I don’t know how the government thinks ₹500 per month will enable farmers to get out of the suicide trap.
It seems the immediate objective is to ensure that the first instalment of ₹2,000 lands in the bank accounts of small farmers before the ensuing general elections, for which a budgetary provision of ₹20,000 crore has been made.
That there is a drought of practical ideas and thinking at the policy planning level was never in doubt; otherwise there is no reason the farm crisis should have multiplied to such a severity. But to provide ₹500 per month to a small farmer and then think it will do the miracle is a clear-cut reflection on the disconnect that prevails between policy planning and the ground realities. No wonder agriculture is in dire crisis.
The least that could have been done was to double the income support amount, from ₹6,000 to ₹12,000 per small farming family.
But where will the money come from?
That’s a question I hear whenever farmers loans have to be waived or they have to be given any financial support. No one has ever asked where the money will come from when huge corporate bad loans are written off. Between April 2014 and April 2018, ₹3.17 lakh crore of corporate loans have been struck down, and no questions over fiscal imbalance caused or where from will the money come have ever been raised.
Take the case of 7th Pay Commission. Arun Jaitley has earlier informed that it will entail an additional annual burden of ₹1.02 lakh crore which will benefit 45 lakh central government employees and another 50 lakh pensioners.
But when the 7th Pay Commission is implemented by the state governments, PSUs, colleges/universities, a Credit Suisse Bank study says the annual burden will be in the range of between ₹4.5 lakh crore and ₹4.8 lakh crore. Did you hear anyone asking from where will the money come from or whether it will add to fiscal deficit?
Now coming to income support, if only the government had doubled the income support to ₹12,000 per year per small farmer, I am aware that the budgetary allocation would have also doubled. Piyush Goyal has said that ₹6,000 support will require an additional finance of ₹75,000 crore in a year. If the amount had been doubled, the budgetary requirement would increase to ₹1.5 lakh crore.
Before you raise an alarm over where will the money come from, let me tell you that the immediate need was to discontinue an economic stimulus package of ₹1.86 lakh crore that is being paid to India Inc since 2008-09 when the global economic meltdown took place. No one knows why this stimulus package still continues to be paid. No one ever asked the fiscal implications of this package, which means the country has spent ₹18.60 lakh crore in 10 years. Is that a small amount? And look, the tap still continues to flow.
Why couldn’t this economic stimulus package be stopped and diverted to agriculture? If done, I am sure the Union Finance Minister could have announced a direct income support of ₹15,000 per month to farmers.
I agree, but two wrongs surely don’t make it right ?
I too agree with you. But first tell me why do you think that even one wrong makes it right? Why is it that the former Chief Economic Advisor Arvind Subramanian used to say that writing off corporate loans leads to economic growth and waiving farm bad loans leads to credit indiscipline and former RBI Chief Urjit Patel had even called farm loan waivers as a moral hazard? Isn’t that simply a way to defend the wilful corporate defaulters?
Merrill Lynch had gone to the extent of telling us that farm loan waiver, which has already touched ₹1.9 lakh crore, amounts to 2% of GDP. But it never told us how much would an NPA of ₹10.3 lakh crore would be in terms of GDP. That’s how the blatantly biased economic system works. When you give money to the poor, it is called subsidy, a word that has been demonised. But when you give massive doles or tax cuts to corporate, it is called incentive for growth. No wonder, I have always said that it is socialism for corporate and capitalism for farmers.
Why is that while both the corporate and the farmers draw loans from the same banks, corporate get ‘haircuts’ with bulk of the loans written off by banks, which in turn leads to economic growth, whereas the poor farmer’s assets are seized and auctioned even for small outstanding amounts ₹1 lakh or less.
I have seen farmers going to jail for defaulting on just one repayment. In Punjab, thousands of farmers have received legal notices from banks for not being able to pay back in time and hundreds of them are in jail. Why doesn’t the same happen with corporate big wigs? Why should the banking norms be different for different people?
You have also talked of income disparity. Can you tell us why do you say that agriculture has been deliberately kept impoverished?
I have always maintained that agriculture is being sacrificed to keep market reforms alive. Why I say so is because in the economic liberalisation paradigm, agriculture plays only two roles. First, it has to provide cheaper raw material for the industry, and secondly, it must provide cheaper food to people and keep food inflation low. Therefore farmers alone have carried this burden all these years. Farmers do not realise when they cultivate crops, they actually cultivate losses. The match is invariably fixed against them.
Let me illustrate. In 1970, the MSP for wheat was ₹76 per quintal. Forty five years later, in 2015, the wheat price was ₹1,450 per quintal, an increase of 19 times.
To understand how farmers have been deprived of their rightful price, I made a comparison with other sections of the society. The basic pay (plus Dearness Allowance) of government employees in the same 45-year period had gone up by 120 to 150 times; of university/college professors by 150 to 170 times, of school teachers by 280 to 320 times. If only the basic pay of employees and teachers for instance had risen in the same proportion as the farmers, I am sure a majority would have quit their jobs and many suicides would have been reported.
In addition, employees get a total of 108 allowances. When was the last time you heard of a house rent allowance being included in the MSP for farmers? An educational allowance for the children, health allowance for the farmer’s family members and a travel allowance for them? Why should MSP only take care of out of pocket expenses that a farmer incurs plus family labour along with a small profit margin? Why not calculate farmers cost like the way Cost Accountants do for the agribusiness industry?
Farmers have been demanding a higher MSP, as suggested by the Swaminathan Commission, and they also want a loan waiver. How justified you think are their demands?
Farm loan waiver is the immediate relief farmers need. After all, if for four decades farmers have been denied their legitimate income, and have survived on taking credit and to repay that credit, draw more credit from another source, why shouldn’t the nation stand with them and see that they are relieved of their economic burden once for all? Let’s give an opportunity to farmers to get rid of the entire economic baggage they carry. Waiving farm loans is not an act of generosity or is an attempt at being politically correct, what we need to understand is how and why farmers have been deliberately kept impoverished all these years.
A recent OECD-ICRIER study says that in the past two decades farmers have incurred a loss of ₹45 lakh crore on account of low prices. Earlier, I remember an UNCTAD study had estimated that farm gate prices across the globe had remained frozen between 1985 and 2005 when adjusted for inflation. Can we even imagine how with all these losses has the farming community been surviving year after year? Despite living in hunger themselves, they still produced food for the country.
The Swaminathan Commission’s recommendation is for giving farmers the weighted cost of production plus 50% profit. But the government has manipulated the formula treating the basic expenses in production as A2 plus family labour (A2+FL) and then given 50% over it. This formula gives a much lower price than what Swaminathan recommended.
Although the new improved price has been announced for all 22 crops for which MSP is announced but everywhere farmers were able to sell at a much lower price, often 25 to 40% less than the announced price. As a result economic losses continued to pile up.
As per the high-powered Shanta Kumar Committee, even though only 6% farmers get the benefit of MSP and the remaining 94% farmers are dependent on the vagaries of markets, MSP must be enhanced to the level Swaminathan recommended.
But I see a lot of pressure is being exerted by the industry (and their brand of economists) to dismantle the regulated markets. This will be rather unfortunate. The reason is simple. Once the APMC markets are disbanded, farmers will be ruthlessly exploited and price discovery will become an instrument for exploitation.
Take the case of Bihar. It abolished APMC markets in 2006. In the absence of APMC, farmers are able to sell wheat and paddy at prices which are much lower than that in Punjab and Haryana where farmers do receive MSP because there exists an elaborate network of APMC mandis. This year, huge stocks of paddy were illegally transported all the way from Bihar and have been apprehended in Punjab and Haryana.
The answer therefore lies in strengthening the APMC network rather than disbanding it. There exists roughly 7,600 APMC mandis so far and what India needs is a network of 42,000 mandis for every 5 km radius.
What in your opinion should the government do to pull agriculture out of the distress that prevails? Is there a sustainable solution that can bring back the smile on the face of farmers?
Yes, of course. Agriculture needs a holistic set of reforms, including credit policy, market reforms, trade policy, etc, which must begin with the premise that agriculture too is an economic activity. In fact, at a time of jobless growth, now job-loss growth, agriculture, being the largest employer, alone has the potential to reboot the economy. The three steps that the government should initiate immediately in addition to what I have said earlier, so as to ensure economic security must include:
1) Along with direct income support, the next step to augment farm incomes should be to set up a Farmers Income Commission. My suggestion is to rename the existing Commission for Agricultural Costs and Prices (CACP) as a Commission for Farmers Income and Welfare with the mandate to ensure that farmers are able to realise an assured monthly income of at least ₹18,000 for a household owning not less than an acre. At the state level, each state should set up a Farmers Income Commission.
2) Initiate a series of steps for ease of doing farming. This involves governance, and also removing obstacles that farmers face routinely. If industry can have 7,000 steps carved for ease of doing business, I see no reason why agriculture cannot get the same attention. This will need a separate monitoring wing with enough teeth, under the Ministry of Agriculture and Farmers Welfare. At the state level, Farmer Commission should be given more powers to regulate farming operations.
It is time to increase public sector investment in agriculture, which has been dwindling over the years. Between 2011-12 and 2016-17, public investment has remained between 0.3 and 0.4% of the GDP. Considering that nearly 50% population is engaged in agriculture, the total investment, both public and private, must increase every year. But this can happen only when agriculture is treated as an economic activity.