Doubling farmers’ income: Is Budget 2018 in the right direction?

Not provisioning for measures pertaining to social security / protection for the farmers points to a lack of concern for their livelihood and survival.

Nilachala Acharya | February 13, 2018


#social security   #Arun Jaitley   #doubling income   #farmers   #Union budget   #rainfall variability  


 Farmers need higher returns for their produce to experience increased farm income. The government has continuously promised farmers at least 50 percent higher returns than the cost of their produce. In the backdrop of these assurances, it is pertinent to see what the Union Budget 2018-19 offers to the sector for ensuring a secured income, if not doubling it by 2022 in line with its promises. 

 
While presenting the budget, the finance minister announced that Minimum Support Price (MSP) for a majority of rabi and kharif crops would be one-and-a-half times of the production cost, which is a welcome step. However it remains unclear whether the MSP would be declared ahead of harvesting time to prevent farmers from resorting to distress sale of their produce, and also the basis for computing cost of cultivation based on which the MSP will be offered for majority of produces. The finance minister in his budget speech also noted that increasing MSP was not enough to secure the income of farmers and, hence, some other mechanism would be devised by the NITI Aayog in consultation with the union and state governments. The mechanism would ensure one-and-a-half times the MSP to farmers, even if the amount paid is less than the market price of their produce. When and how this mechanism would take effect has not been mentioned. It is pertinent to note that more than 86 percent farmers are small and marginal and most of them do not benefit from MSP as they do not have marketable surpluses. To protect the interests of small and marginal farmers and prevent them from being forced to make distress sales, an Agri-Market Infrastructure Fund with a corpus of Rs.2,000 crore is to be set up for developing and upgrading agricultural marketing infrastructure. The fund would no doubt help the farmers realise the actual value of their produce by selling directly to buyer without interference of middlemen, who in turn are controlled by traders, but the question is about the government’s plan for rolling out such an elaborate process.
 
More than two-thirds of the country’s arable land is dry land or rain-fed agriculture. Given that rainfall variability induced by climate change has been adversely affecting agriculture, irrigation is the mainstay for agricultural productivity. The ground water irrigation scheme under Prime Minister Krishi Sinchai Yojna – Har Khet ko Pani received an allocation of Rs. 2,660 crore in the current budget, up from Rs. 1,450 crore in the previous year. Ninety-six irrigation-deprived districts with less than 30 percent land holdings under assured irrigation will benefit from this allocation. However, the cost of extracting ground water for irrigation would be much higher than proposed in the union budget. Further, creating irrigation potential of these irrigation deprived districts is heavily dependent on extraction of ground resources without much focus on recharging of ground water and effective use of surface water for irrigation purposes.
 
The 2018-19 budget added another Rs. 4,000 crore to the crop insurance scheme PM’s Fasal Bima Yojana (PMFBY) which led to increase in the total budget of Rs. 13,000 crore under the scheme. The aim of the scheme is to protect farmers against crop loss and pulling them from the loss of income through the model of insurance. But so far the insurance schemes have not been benefiting farmers and claims have not been processed on time. Also, the demand for holistic coverage, the quantum of premium to be paid by the Government is far from the amount that would be required to cover all farmers and all crops. For instance, the considerable increase in claims during kharif 2016 (estimated at Rs. 9837.49 crore, of which approved claims are Rs. 9546.55 crore and amount paid is only Rs. 8902.96 crore) and rabi 2016-17 (estimated at Rs. 5084.21 crore, approved Rs. 3701.63 crore and paid only Rs. 2733.67 crore). Moreover, the sum insured under the scheme more than doubled from Rs. 69,000 crore in kharif 2015 to Rs. 141,625 crore in kharif 2016, which was a welcome step, but, the amount proposed for PMFBY in the current budget seems quite inadequate to meet the premium requirement.
 
The finance minister claimed in his budget speech to have provided maximum livelihood opportunities in the rural areas by spending more on livelihood, agriculture and allied activities and construction of rural infrastructure. The claim of Rs. 14.34 lakh crore investments in the rural sector includes 11 lakh crore of institutional credit, which is a financial measure that does not directly help farmers reduce cost of cultivation or increase farm income. There has been a consistent growth of flow of credit to the sector through institutional sources. However, the allocation for interest subvention for providing short-term credit to farmers has not seen any increase from the previous budget of Rs. 15,000 crore. Also, to clear the interest subvention dues from the previous years, the amount provisioned for the purpose should have been close to Rs. 25000 crore. 
 
It was expected that the union budget 2018-19 would come up with a special package, along with constitution of a farmers’ income commission to realise a decent income security to make the profession viable. Not provisioning for measures pertaining to social security / protection for the farmers (pension to farmers) points to a lack of concern for their livelihood and survival. Expectations from union budget 2018-19 were high for the sector, particularly in providing a roadmap for relieving the stress of the farming community, but the farming community once again feels betrayed by lack of support.
 
Despite India achieving a record foodgrain production (275 million tonnes) in 2016-17, no one can deny the fact that farming crisis and rural unrest is at its peak at this point in time.  After all the hype about pro-farmer initiatives in the budget, government’s thrust on agri-insurance to protect loss of farm income in the wake of growing privitisation of public services and expected increase in MSP for majority of farm produce is too meagre to even cover the cost of cultivation in the coming years.  Without adequate budget support for the sector, the present looming crisis would further aggravate and food security of the nation will be under serious threat.
 
(Acharya is with the Centre for Budget and Governance Accountability. Views expressed here are personal. He can be reached at nilachala@cbgaindia.org )
 

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