Agrarian Distress and Mitigation
More than 35,000 farmers marched to Mumbai from Nashik last week demanding loan waivers as well as the implementation of the Forest Rights Act (FRA). The FRA allows for land up to four hectares to be granted to families who have traditionally cultivated those plots. Having the land in their names would make these families eligible for institutional credit from banks. Even farm loan waivers only apply to those who have taken credit from cooperative and nationalised banks. While the Maharashtra government accepted most of the demands of the protesting farmers, the larger underlying issues of the agitation—rural distress, debt burden farmer suicides and the efficacy of the FRA—need to be continually interrogated.
Across the country, farmers are furious—and rightfully so. conditions in agriculture have got worse. Earlier problems have worsened as farm incomes have been squeezed by slower output growth, higher costs and increased vulnerability to a changing climate. And there is a slew of new problems resulting directly from government policies.
Small and marginal farmers toil right through the day to eke out a living by selling whatever little they produce — their primary lifeline. Their second lifeline is livestock which they can count on as a dependable liquid asset. Two recent government steps have aggravated their sense of despondency. While demonetisation and its slow replacement have snapped their first lifeline, confusion and uncertainty surrounding the trade of livestock have rendered the second one unreliable.
This distress situation is not one of the farmers’ making alone. Along with the vagaries of the weather, governments — past and present — too must share the blame. The major share of the farming cost, mostly raised through loans, goes to the government much before the farmer earns a rupee. Therefore, the first thing a government can do – and without any corruption and discrimination – is to do away with all direct and indirect taxes on agricultural inputs such as fertilizers, pesticides, seeds, agricultural tools and implements, power and electricity, packing materials, and local taxes. Such a drastic but direct intervention will help the farmer grow his produce at a lower cost, reduce his need for borrowings and bring down rural indebtedness.
Exorbitantly high taxes on diesel have increased transportation costs, which constitute the single largest component of the end consumer price of many farm products. Therefore, to facilitate a remunerative price to the farmers and contain inflation, taxes on diesel, and on a whole set of vehicles primarily meant for transport of “peoples’ goods” need full exemption. Movement of “peoples’ goods” must be completely exempted from road tolls, and all direct and indirect Central, State and local taxes. Herein lies a long-term economic solution to the problem but it calls for strong political will to implement.
Even though the National Commission on Farmers, better known as the Swaminathan Commission, was set up by the UPA regime, there was no real effort to implement its recommendations, and the second UPA tenure did nothing to take these ideas forward. They may have been too politically contentious and economically demanding to be adopted within the neoliberal economic paradigm.
After all, the commission proposed extensive land reforms: including distributing ceiling surplus and waste lands, preventing diversion of prime agricultural land and forest to the corporate sector for non-agricultural purposes, and ensuring grazing rights and access to common property resources. It argued that higher productivity in agriculture could only be achieved with substantial increases in public investment, especially in irrigation, drainage, land development, water conservation, and promotion of conservation farming and biodiversity. It proposed comprehensive groundwater and surface-water management, to give all farmers sustained and equitable access.
The commission emphasized the expansion of formal credit outreach to the poor and needy in rural areas; reduction of interest rates on institutional loans to 4% simple interest (with government support), a moratorium on debt recovery, including loans from non-institutional sources, and the waiver of interest on loans in distress areas and during calamities. On the insurance front, it suggested that an integrated credit-cum-crop-livestock-human health insurance package should cover the entire country and all crops, with reduced premiums, along with an agriculture risk fund to provide relief to farmers after natural calamities.
There were specific recommendations for women farmers, not only for joint landholding pattas, but to recognize women as farmers for kisan credit cards and other programmes of the Central and state governments. To stabilize crop prices and make them remunerative, the commission proposed significant improvements in the implementation of minimum support prices (MSPs), and effective extension to other crops, including millets and other nutritious cereals. The recommendation that the MSP should be at least 50% more than the weighted average cost of production was made in this report.
Agricultural transformation is very slow in India. Therefore, the process of generating higher income from agriculture is also slow. Production increase was the main objective than raising incomes. It is welcoming that Prime Minister Narendra Modi proposes doubling the income of farmers by 2022—a paradigm shift. This will require several things: An aggressive push to improve technologies by strengthening the seed sector and knowledge dissemination system; agricultural diversification in favor of high value commodities and the development of value chains by linking production and marketing centers; and finally, developing mechanisms to ensure minimum support prices in the event of crash in farm harvest prices. Success will depend on how farmers are aggregated for production and marketing through promotion of contract farming, cluster farming, farmer producer organizations and self-help groups.
Generating employment opportunities.
The Situation Assessment of India reported that more than 40 percent of farmers would like to quit agriculture if alternative opportunities were available. Agriculture is becoming crowded and does not provide regular employment opportunities. In the absence of regular employment in rural areas, the rural population, especially youth, is migrating to urban areas to explore better opportunities and income. By 2020, people aged 15-34 will make up 34 percent of India’s population; currently, more than 70 percent of India’s youth lives in rural areas. Their energy and enthusiasm need to be tapped in ways that meet their aspirations and transform agriculture and rural economies. But agriculture per se will not be able absorb the growing number of youth in rural areas. Incentives should be provided in these areas: Aggregating raw and processed products (one example: Lijjat Papad, which employs more than 43,000 women); self-employment in agro-processing, agro-advisory, agriculture and rural transport, etc.; private sector engagement in custom-hire services, secondary and tertiary processing; location-specific non-farm employment in micro, small and medium enterprises, linked with the large manufacturing sector; and engagement in government programs, schools, and agriculture extension.
Reducing risks in agriculture
The risks farmers face have been increasing for years. Both production and price risks are creating ongoing agrarian distress. The incidences of droughts, floods, temperature fluctuations, and unseasonal rains and hailstorms are increasing and adversely affecting agricultural production. But even during normal years, farm harvest prices have fallen steeply, badly affecting farmer incomes. The prime minister’s National Agricultural Insurance Scheme is now in place to cover some production losses. Though this scheme is good, the compensation is insufficient and does not cover the risk of falling prices. The government should consider launching a “Prime Minister’s Climate Resilience Scheme” that covers both production and price risks. Such an approach could bundle promotion of climate-smart agriculture with value added weather advisory services and effective implementation of agricultural insurance, helping to ensure minimum support prices.
Agri-infrastructure—including agricultural markets, cold storage, warehouses, and agro-processing—has not developed in corresponding speed with rising agricultural production. The pace of agri-infrastructure is far behind what it is needed to improve the overall agri-food system. In the past, more focus was given to the production of agricultural commodities. In the absence of adequate agri-infrastructure, the supply chains of agri-food commodities are in the hands of an unorganized, fragmented, and inefficient sector. A better- organized private sector is emerging slowly due to the lack of commercial viability to develop agri-infrastructure. The role of public-private partnerships (PPP) is immense in developing agri-infrastructure for high economic and social gains. The government should form a commission to develop modalities and proposals for public-private partnerships in the agri-infrastructure sector. Many lessons can be learned from PPP’s excellent track record in the construction of national highways, the building and functioning of airports, the distribution of power, and other areas. These can be applied in developing rural agri-markets, cold storage, agro-processing, surface irrigation, and agricultural extension, and other elements of agri-infrastrucure. The central government should contribute to the efforts of individual states to develop such viable PPP projects.
Improving quality of rural life
Rural India is still missing basic amenities (including sanitation, hygiene, drinking water, drainage, schooling, and health centers). Three years ago, the prime minister encouraged each member of parliament and the state assemblies to adopt one village and work to transform it into a model village. The main objective was to provide all basic facilities to improve the quality of life in rural areas. The late former President A. P. J. Abdul Kalam originated a similar concept, Provision of Urban Amenities to Rural Areas (PURA), with the aim of providing urban infrastructure and services in rural hubs to create economic opportunities. The scheme should be revived to improve the quality of life in rural areas. In addition, the several programs and schemes that exist to build social and economic infrastructure should be united for larger impact.
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