Revamping agriculture: Govt scores high on intent, patchy on implementation; litmus test will be persuading states to reform
FIRSTPOST
July 03,2018
Seetha
In an interview to Swarajya, Prime Minister Narendra Modi talked about his government’s four-pronged strategy to achieve the goal of doubling farmers’ incomes – decreasing input costs, ensuring proper price for produce, minimising post-harvest losses and creating more avenues for income generation.
Why then, his critics are quick to scoff, are farmers protesting across the country – taking out long marches or throwing their produce on the streets? Pertinent question, but the answer may not be palatable to them. Certainly not to the opposition parties that make this point.
There is certainly no denying that farmers across the country are facing acute stress, but the sins of omission and commission by successive governments are to blame for this. The laundry list of what needs to be done – and not done – is far too well known to bear repeating. Yet, all that should not be done has been done and what absolutely needs to be done has not.
Seen in this light, the Modi government has a better record; certainly on the initiatives he mentions in the interview – soil health cards, neem coating of urea, crop insurance and e-NAM (the electronic national agricultural market). Improving agricultural infrastructure has been a priority in the four budgets this government has presented. So this government certainly scores high on intention and policy direction.
But a directional shift will not mean much if it does not yield results on the ground. On that count, the Modi government’s score is on the lower side, disappointing agricultural economists who initially hailed many of the regime's initiatives.
A notable exception is the compulsory neem coating of urea, something the earlier government also attempted. The Modi government made 100 percent neem coating mandatory and this has stopped the diversion of urea for industrial use and improved productivity. But, success on other initiatives has been mixed.
Take e-NAM. On the face of it, it’s a path-breaking initiative in agri-marketing reform, that should have brought in competition and enabled farmers to secure better prices. But as Ramesh Chand, member, agriculture, in the NITI Aayog; Ashok Gulati, agricultural economist; and Pravesh Sharma, bureaucrat-turned-agri business entrepreneur, have pointed out in interviews to Firstpost, merely dictating online trading is not going to help.
A national agricultural market isn’t just about installing computers and internet at specific mandis. These mean little if farmers are limited to trading only within these mandis and laws and rules that prevent trading across mandis and across states are not done away with. E-NAM has done nothing to end the mandi monopoly. There are other issues that need to be addressed like the setting up of assaying and grading facilities, on which there has been little progress. Where also are the initiatives to enable better price discovery? That is what will free farmers from the cartels that operate in mandis and dictate prices.
The Pradhan Mantri Fasal Bima Yojana – the revamped crop insurance scheme that this government brought in – was widely welcomed as a huge improvement over existing schemes when it was announced. Three years down the line, only government ministers and bureaucrats talk about its success. An ICRIER working paper by Ashok Gulati, Siraj Hussain and Prerna Tiwary highlighted, among other things, low insurance coverage, delayed premium payments by the government and, later, delayed assessment and payment of claims in the case of crop losses.
The soil health cards scheme (which was actually re-launched by this government) is commendable, but merely distributing over 100 million such cards is not enough. The lack of testing laboratories and lack of facilities in these laboratories has meant that the scheme has not yielded the results it was meant to.
What is unfortunate is that the Modi government has not refrained from populist pandering to woo urban consumers. Knee-jerk invocations of stock limits, the Essential Commodities Act and export bans have been resorted to whenever prices of particular commodities – from onions to pulses - sky-rocketed. In the case of pulses, procurement prices were hiked, but when farmers responded to it by producing more, the procurement by state governments did not rise to the challenge, leaving farmers in the lurch.
Modi, in the interview, exhorted the private sector to increase investment in agriculture and mentioned food processing as one area. But the private sector would be hesitant to invest in processing and in storage infrastructure because of the Damocles sword of ad hoc application of stock limits and the Essential Commodities Act constantly hanging over it.
The announcement of minimum support prices (MSP) for the kharif season are still awaited, and indications are that these will be huge, given elections next year. In all likelihood, the hikes will be particularly large for wheat and rice and that highlights another skew in agriculture policy that the Modi government has not set right.
The high MSPs for these two crops has resulted in farmers preferring these over other much-needed commodities like pulses. The MSP policy has also resulted in an over-cultivation of water-intensive crops, in areas that they are not native to and even in areas facing water shortage.
Of course, how much high MSPs help is another question altogether. Without adequate mechanisms for procurement, farmers are known to be forced to sell at prices below the MSP.
Is the Modi government alone responsible for all these failings? No. Indeed, no central government is, considering agriculture is a state subject.
Earlier governments have tried to push Agriculture Produce Marketing Committee (APMC) reforms but failed because state governments have not carried out the required regulatory reforms. Merely enacting a model APMC law pushed by the Centre isn’t enough, other state-level laws need to be changed.
Land tenancy is illegal and this, as Sharma pointed out, stands in the way of tenant farmers getting institutional credit, subsidies, inputs and even MSP. But states have not moved to legally recognise tenancy.
Modi and Amit Shah often boast about how the BJP rules in all but a few states. They will, therefore, have to answer an inconvenient question: why have they not been able to persuade even their states to take the necessary steps to put the zing back in agriculture?
Clearly state governments are loath to take on local pressure groups with significant political clout that would get diminished with the much-needed reforms. If Modi is really serious about doing his bit for agriculture, he and Shah should push BJP governments to undertake the needed reforms, never mind that elections are due early next year. That will be the litmus test of his determination to help farmers.
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