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Here's what Modi govt can do to avoid rural Gujarat-like drubbing in 2019

Going forward, the government has to rethink on a lot of issues -- the biggest perhaps is giving the right price to farmers

Sanjeeb Mukherjee  |  New Delhi 

PM Modi inaugrates 90th FICCI Annual General Meeting

A big takeaway from the 2017 Gujarat state polls has been the Bharatiya Janata Party's (BJP's) inability to reclaim its rural seats in some parts of the state -- this hasn't been a uniform trend everywhere, but general perception and ground reports do indicate that rural voters haven't been particularly kind to the party. The critics of this theory argue that BJP should have lost all rural seats in Gujarat if that was the case. It points to the fact, they claim, that a particular community of might have felt aggrieved. Nonetheless, agriculture in Gujarat hasn't been doing particularly well, particularly in the past few years. Data sourced from the website show that the Gross State Value Added (GSVA) in agriculture, forestry and fishing dipped to a negative 0.48 per cent and 1.28 per cent in 2014-15 and 2015-16, respectively. The fall against the backdrop of over 26 per cent growth in 2013-14 and two back-to-back years of drought, indicated that the state's superlative performance in agriculture was showing signs of wearing off. Additionally, a sharp fall in the prices of the main commercial crops in the just-concluded kharif harvest season, and even before that, aggravated the distress. The prices of major commercial crops, mainly groundnut and cotton, have dropped below their state-fixed minimum support price (MSP) – the average mandi price of groundnut seed this month was around Rs 3,800 a quintal, against the of Rs 4,450, while cottonseed prices were also below the of long staple cotton Rs 4,320 per quintal and also that of of medium staple cotton Rs 4,020. Groundnut and cotton are the main commercial crops grown in Gujarat. More than 70 per cent of India’s annual groundnut production is accounted for by Gujarat alone. Plummeting prices, coming amid two drought years, meant that rural Gujarat was facing a crisis, something with a bearing on the results -- even if the extent of the bearing is open to debate. Overall, nationwide, data show that between 2011-12 and 2014-15 -- the years of the United Progressive Alliance in power during its second term -- the budget of the agriculture ministry alone, without adding livestock and research & education, was around Rs 56,131 crore. This went up by almost 73 per cent to Rs 96,991 crore during the following three years of the National Democratic Alliance government. Though much of this increase in budgetary allocation was due to shifting of loan interest subvention from the finance ministry to the agriculture ministry, their was a rise in allocation. The three years of the NDA rule saw 1.7% growth in agriculture, compared with 3.5% in the last three years of the UPA rule. True that 2014 and 2015 were drought years, but clearly the funds allocated for agriculture did not show results on the ground. During the same period, Minimum Support Price (MSP) for wheat and common-grade rice was raised almost 19.6 per cent and 9.92 per cent, respectively, but much of this increase came in the last one-and-a-half years. But, raising MSPs significantly impacts less than 10 per cent of the farmers, as much of the growers are outside the formal procurement system. Going forward, the government has to rethink a lot of issues. The biggest among them perhaps is giving the right price to It has set an ambitious target of doubling farmers' income by 2022, but the basic growth in farming needed for this is simply not there, at least in the first three years of NDA. “First and foremost, the government should at least recognise that there is problem in the rural sector,” noted agriculture economist and former chairman of the Commission for Agriculture Costs and Prices (CACP) Ashok Gulati told Business Standard. He said climate- or weather-induced damages and losses to agriculture could be compensated through effective, timely and swift sorting of the insurance scheme (Pradhan Mantri Fasal Bima Yojana), but for the wider issue of price collapse, several things needed to be done. Gulati said the government should stop exaggerating its production numbers and give a clear picture of the actual output.

That would go a long way in helping policy formulation. And secondly, there is a need to frame an agriculture trade policy that is dovetailed with policy so that are not unduly troubled. “You can't have an import policy where a is available for Rs 3000 per quintal in the international markets, while the in India is higher. Else, undertake a proper buffer stocking of surplus produce,” he added. The government could set up a kind of war-room to give it information in advance on price movements, so that proper policy interventions could be taken on time and knee-jerk responses are avoided. On their part, sources said the the central government was looking at a lot of policy interventions to stem a drop in agricultural prices in rural sectors. One option being considered is that pulses procurement are made open-ended -- that would mean the cap on purchases fixed at 2 millon tonnes would go. Also, there is a thinking going on within the government to replicate Madhya Pradesh’s Price Deficiency Payment Scheme (Bhavaantar Bhugtaan Yojana) on a national level or participate in such state initiatives in some way. However, there are divergent views on this. A section within the government feels participating in such programmes could be counter-productive, unless the results of the Madhya Pradesh pilot is clearly established . “To me, something which the government can immediately do is raising the significantly or bringing something like a universal basic income programme. In the long term, proper marketing reforms are the only answer to give the right price to farmers,” former agriculture secretary Shiraz Hussain said. On the marketing reforms front, he said the government should immediately call a meeting of all state representatives and direct them to reform their markets in a time-bound manner. “The biggest challenge for the government is raising prices of agricultural produce. Accoring to our analysis, schemes like ‘Bhaavantar Bhugtaan Yojana’ of Madhya Pradesh hasn’t been very successful in stopping the traders from forming cartels,” Hussain said. Yogendra Alagh, former union minister and agriculture economist, said the government should first fix a tariff policy for commercial crops to protect Indian from imports, and secondly invest heavily in development of markets. “Programmes like Smart Cities should have a component for development of agriculture markets in the region,” Alagh said. On tariff policies, he said something had been done on edible oils when the government doubled the import duties, but a lot more needed to be done.

First Published: Tue, December 19 2017. 18:44 IST