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Budget 2019: Indian agriculture will fly if Modi brings these reforms in agri-policy

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  • By Prof. Ashok Vishandass

Union Budget 2019: India s agriculture is akin to a huge aeroplane waiting to take off a long distance non-stop flight but without adequate fuel. Can it fly? The answer can be yes if agri-policy is reoriented to enable this. The contribution of agriculture to the country s Gross Value Added (GVA) at basic prices (2011-12 prices) is only 14% while nearly 47% of its population is engaged in the agriculture sector. Contrast this with non-agriculture which contributes 86% to GVA with 53% workforce. Implicit in this is agri-labour productivity is just 19% compared to that of non- agriculture which gets reflected in low levels of farm income compared to non-farm incomes. Though the country has moved from import-dependence to self-sufficiency and to a food exporting country, there has been no concomitant and equally commensurate impact on farmer s incomes. There is, therefore, a need to reorient agri-policy to transform farmers lives in the upcoming budget of 2019. The Union Government and the state governments together should adopt a seven-pronged strategy to enable farmers to board the aeroplane .

Firstly, Farmers Distress Index (FDI) be developed objectively, the need for which can be appreciated given the fact that agriculture is like an industry under the open sky and there is a preponderance of probability (floods or drought occur every 2 to 3 years on average) of crop damage. Based on FDI thus developed, a mechanism to assess the need of requisite intervention and sharing of financial burden by centre and states, as and when necessary, is put in place. When standard operating procedure (SOP) comes into force immediately, contingent upon crop damages, farmers will not be subjected to duress of inordinate delays in getting relief.

Secondly, transfer agriculture marketing from State to Concurrent list of the Constitution of India. This will enable the Centre to bring out market reforms to protect farmers from tyranny of intermediaries who continue to exert disproportionate power in markets for inputs and products. Crop procurement schemes are inefficient and also subject to intermediary capture. Marketing system helps to direct and crystallize demand, develop capacity to ensure operational and pricing efficiencies. Marketing efficiency is to be achieved by reducing farm gate price (FGP) dispersion with references to market price by creating better physical infrastructure and improved price dissemination.

Thirdly, Warehouse-based post-harvest loan system be strengthened to enable farmers to off load their produce in a judiciously staggered manner to realise better prices. Often, farmers suffer from distress sales at prices much below Minimum Support Price (MSP). India is the second largest producer of fruits and vegetables after China. However, due to gaps in the storage and marketing infrastructure, poor handling practices, lack of proper storage infrastructure and absence of post-harvest protocols, the country suffers huge post-harvest losses.

Fourthly, to improve productivity and income levels in agriculture, custom hiring centres through Uberisation of farm machinery be promoted. Farmer Producer Organizations (FPOs) be encouraged to promote custom hiring centres. Increase fund allocation to machinery adoption and also promote smaller equipment where feasible. Custom hiring center facility like machinery in agriculture need to be extended for (a) Operations like drone spraying, (b) Primary and Secondary processing, and (c) Packaging. This will ensure improved input-use efficiency, enhanced cropping intensity, reduced cost of production and less drudgery for agriculture works.

Fifthly, a cogent agricultural trade policy ought to be rooted in the long term food and nutritional security concerns of the country along with promoting farmers connection with the global markets. However, the instrument of international agri-trade is often used to control prices in the domestic market, in reaction to short term supply bottlenecks. This tends to negatively impact farmers incomes. International trade of agricultural produce in India tends to have an inadequate focus on the interest of farmers. Therefore, trade policy for agriculture should aim to facilitate and promote ease of doing business rather than be restrictive and disruptive to business planning. A steady and long-term trade policy be adopted rather than short term/ad-hoc. Trade Representatives in different embassies for export promotion and market intelligence be appointed. There exists a potential to ramp up agri-exports from the current level of US $ 39 billion to the US $ 100 billion by 2022. This will boost not only farmers income but would also ramp up on overall GDP growth.

Sixthly, agriculture insurance should be reoriented to attract non-loanee farmers as their share in the Pradhan Mantri Fasal Bima Yojana (PMFBY) remains abysmally low. The agriculture sector is like an industry under the open sky where the vagaries of the weather leave the farmers vulnerable and affect their incomes. Along with the perils of natural calamities such as floods and droughts, global warming and climate change are additional challenges being faced by the agriculture sector. The impact of climate change on Indian agriculture and related activities can be witnessed through the changing cropping patterns. The extreme heat waves and lowered water tables exacerbate the vulnerability. Apart from this, there are increasing incidences of wild animal attacks, natural fire on crops which need to be included as Add on under PMFBY. Land records be integrated with PMFBY portal to achieve deDuplication .

Seventhly, Registration of Landless Cultivators/ Tenant Farmers be undertaken on priority. A sizeable proportion of farmers are landless cultivators who face a variety of problems ranging from non-acceptance of their produce by public procurement agencies (FCI, NAFED) at MSP to getting crop loan. Since such farmers are not de-jure cultivators (though they are de-facto farmers as they cultivate land as informal tenants), FCI/NAFED turn them away. A way forward could be to maintain a credible database of such cultivators which will enable them to avail benefits of various schemes including MSP. The Government of Andhra Pradesh, for instance, had enacted the Land Licensed Cultivators Act, 2011 under which Loan Eligibility Card is issued to tenant cultivators. This Scheme needs to be replicated in other States on urgent basis which will enable even tenant farmers to sell their produce at MSP.

India s farm sector can surely move to a higher trajectory of growth if the foregoing measures are implemented as a package as an atomic whole.

  • Ashok Vishandass is Professor (Applied Economics), Indian Institute of Public Administration, New Delhi. Views are the author’s own.