The budget, like farm laws, is marred by a gap between intentions and ground realities in Indian agriculture, with research and extension desperately lagging behind
The story of dwindling budget allocation for agriculture research and education is no secret. It has constantly declined from 0.31 per cent of the gross value added of agriculture and allied activities in 2011-12 to 0.24 per cent now. Yet agriculture R&D is one of the only means of achieving a turnaround in Indian agriculture. The other way would be to revisit the policy-making process and review its outcome. Both are conspicuous by their absence in India.
The agriculture insurance pipeline that drains precious government resources in the name of the farmer should have been turned off. Seven years of low crude prices, five years of above normal monsoon, topped by good agriculture production and everything looked positive for a strong economic performance. Yet, the year 2017 promises of doubling farmers’ income by 2022, for instance, seemed hollow.
After every crisis in the recent past, one thought that things could not get worse. Somehow they did. The Economic Survey makes it evident — the ministry of finance did not have much of an arsenal to combat the uncertainty. Considering the revenue shortfall due to the pandemic, many might describe the budget as a brave attempt by the Finance Minister, placed in an unenviable position.
It was heartening to hear the government validating its commitment to MSP procurement, which has expanded across regions with more farmers benefitting. Allowing the APMCs to tap into the Agriculture Infrastructure Fund is also commendable as the money borrowed to develop mandis will now be eligible for interest subvention. Extending the Operation Green scheme to all perishables is noteworthy and so is starting the Kisan Rail.
The budget appears to be more transparent than previous exercises and has projected a three to five-year vision. The problem is that policies in India and their implementation lack an active interface between those who frame them and the supposed beneficiaries. This is also evident in the way that the contentious farm laws have been drafted and enacted. To go by economists Anne Case and Angus Deaton, “The government needs to correct the process, not try to fix the outcomes”.
Farm processes are somewhat similar to the budget-making process: A crop is the outcome of innumerable causations; more policy induced than natural. While farmers take cue from market signals and government policies when they plant crops, the budget is seeded by big business and political considerations. In a market-driven economy, as envisioned by the budget, the income, wages and salaries of the masses need to rise first for the benefits to hopefully trickle down to farmers.
A budget is more than an allocation-making exercise — the timing of an announcement is equally important. Increasing import duties on cotton, when farmers have sold their crop to the Cotton Corporation of India, traders and textile companies, seems like robbing Peter to pay Paul. Farmers rightly feel that the terms of trade are steadily getting skewed against them. One example will suffice for the moment: Since 1973, the price of gold has increased more than 169 times, the price of diesel 91 times but the price of wheat has increased merely by 25 times. This dynamic does not appear to be self-correcting.
The agriculture insurance pipeline that drains precious government resources in the name of the farmer should have been turned off. The government owned Agriculture Insurance Company of India, for instance, has incurred losses of ₹10,000 crore, while the private insurance sector raked in profits of approximately ₹50,000 crore. Many states have stopped participating in the programme. Bihar, West Bengal and Jharkhand have stopped the scheme, while Maharashtra and Madhya Pradesh are also about to dump it.
In the 18 states where the programme is working, 20 districts account for about 80 per cent of the losses. One wonders if the department even told the PMO the harsh truth, before celebrating five years of revenue drain last month. Only a holistic approach developed in conjunction with practitioners for better utilisation of resources and redirecting them appropriately can work. The Bharat Krishak Samaj has always advocated a farmers’ commission to assess government programmes pertaining to rural India because it would be futile to expect the departments to self-assess.
How the bureaucracy explains a budget provision to the Finance Minister is quite different from how farmers would elucidate the subject. A peek from the farm can be quite disturbing. Growing kinnow is a personal experience and each acre can yield a truckload — the same for onions, carrots and potatoes. A one-way trip of a produce-laden truck from my village in Punjab to Bengaluru consumes 700 litres of diesel. The per trip fuel tax amounts to ₹30,000 and the road cess comes to ₹15,000. Therefore, each acre is yielding the government a revenue of ₹45,000.
This season the farmgate price for kinnow is about ₹8 per kg. For carrots it is ₹7 per kg. The fuel tax that the government is collecting in such cases amounts to an extra ₹3 per kg on the farmgate price. This is illogical because, ultimately, the consumers pick up the tab unknowingly. The unintended consequences of the diesel tax are pushing food inflation, compressing consumer demand and reducing their appetite for nutritious food. Taxes on fuel should be reduced as this leads to a vicious cycle where the government is compelled to suppress farmgate prices, which adds to farmers’ distress and leads to protests.
Investment in human capital, science and research remains the Achilles Heel of Indian policy. To realise its growth potential and for India to be in the big league with the developed nations, there is a need to match their R&E allocations of 2.5 per cent. In India, most agriculture-related works fall under the purview of the states or require proportionate funding from them. Almost invariably, there is failure in delivery as the states are financially strained to invest their share.
The central government also holds the states to ransom by withholding their share of GST funds. The centre has, in fact, often transferred revenue from the common shared pool to the central pool by imposing a cess, as in the case of the agriculture infrastructure fund in the current budget. Glimpses of the V-shaped recovery in the second quarter of this financial year, were, no doubt, accurate depictions of the moment. They do not, however, indicate what lies ahead.
Rising crude and international agriculture commodity prices along with a high probability of a failed monsoon loom over the horizon. They will adversely impact government finances. Certainly, the government is aware of this. Does it have the wherewithal to deal with the predicament?