Finance minister Pranab Mukherjee skimmed lightly over the problems afflicting the agricultural sector – food inflation, inadequate agricultural production, declining soil fertility, massive food wastage – and made no mention of agrarian distress or debt-driven farmers’ suicides. Those expecting reforms in agriculture and the public distribution system were doomed to disappointment.

The increase in rural credit flow by Rs 1 lakh crore is presumably expected to benefit farmers and simultaneously boost agricultural production. But the experience of the last decade has shown that increased access to credit has not helped the farmer in the long term, due to rising input costs which nullify any gains from enhanced MSPs. Farming remains as unviable as ever.
Fertilizer costs went up following the introduction of the nutrient-based fertilizer policy last year, just as labour costs increased due to the NREGS – and will continue to do so. Capital and operating costs, too, have increased due to falling water tables, necessitating investment in submersibles, diesel pumps, etc. Default on electricity bills by farmers – sometimes whole villages – is a common problem faced by state electricity boards.

In order to facilitate delivery of fertilizers to BPL farmers, a direct cash subsidy is to be introduced. How exactly this will address black marketeering and hoarding of fertilizers – increasingly common in the last one year, when fertilizer (despite the government claims to the contrary) were in short supply – remains to be seen.

On the issue of credit, the FM’s contention that farm loans would be available at an effective rate of 4 percent, as opposed to 7 percent earlier, must be taken with a pinch of salt. If that is the case, why is micro-finance (sometimes at interest rates of 24 percent or more) still thriving? Clearly, delivery of institutional finance is lacking. While allocations for micro-finance are welcome, the fact that there is no cap on borrowing rates is a major lacuna.

Given the UPA’s commitment to the food security bill, the need to ensure adequate agricultural output is clearly exercising the FM. Hence his emphasis on the East India Green Revolution as a means of boosting production. At the same time, he referred to the problems created by the first Green Revolution (in Punjab and Haryana), like decline in soil fertility due to overuse of chemical inputs. The intent is clearly to broadbase procurement for the public distribution system by exporting the Green Revolution – with all the attendant problems – eastwards, where soil is still fertile and access to water easier. The current dependence on Punjab and Haryana for procurement is worrying, as per hectare productivity is falling – by as much as 22 percent.

A positive aspect of the budget is the FM’s allocation of Rs 300 crore each for promoting production of pulses, oilseeds, coarse cereals, fodder, organic farming, vegetables and meat and poultry. The funds may be paltry, more in the nature of pilot projects than full scale programmes, but it is a start.

Pulses and oilseeds production is way short of demand and along with the decline in coarse cereals, is seen as a leading cause of malnutrition in the country. However, the allocation for oilseeds is to go towards creating palm oil plantations, which are neither suitable nor desirable for the Indian constitution and climate. Promotion of mustard and sesame are far more viable and healthier alternatives.

As for fodder, the shortages have been exacerbated by the diversion of agricultural waste as fuel for industrial units and a policy decision to stop this practice may go a long way in addressing the gap.
Vegetable clusters near urban centres would cut down the need for transportation and storage by ensuring fresh produce for local consumption. Food policy activists have been promoting local production, storage and consumption of produce as opposed to massive public and private investments in storage and transportation infrastructure. However, the narrow procurement base and centralised structure of FCI leaves the FM with no choice but to effectively increase food storage capacity by a third.

Interestingly, while the FM talked of improving supply chain management, APMC (Agricultural Produce Marketing Committee) reforms and linking farmers directly with markets, he did not speak of introducing foreign direct investment in multi-brand retail – a blow to Wal-Mart and its ilk.
In terms of agriculture, the Karnataka government has proved far more innovative. This year, it tabled an ‘agriculture budget’, providing for credit at 1 percent, Rs 200 crore for organic farming, Rs 1,000 crore for development of farms, Rs 125 crore for bio-fuels, a soil enrichment programme, mobile agricultural extension units and rejuvenation of water sources.

Union agriculture minister Sharad Pawar dismissed the idea of a separate budget for agriculture but it may be less far-fetched than it seems, bringing diverse schemes for the rural sector under a single policy document.