Confident farm income will double in FY23 from 2015-16 levels: Ashok Dalwai

In a Q&A, Chairman of the Doubling Farmers Income panel claims the goal is achievable as there is huge potential to reduce food wastage and improve prices via an efficient market structure

After coming to power in 2014, one of the major promises of the Narendra Modi government to farmers was to double their incomes by 2022-23. A sharp fall in farm-gate prices the past few years has prompted critics to raise several doubts about the promise. Chairman of the high-powered panel on Doubling Farmers Income (DFI). Ashok Dalwai, tells Sanjeeb Mukherjee that the target is achievable, as there is huge potential to reduce wastage and create efficient markets. The panel has submitted its 14-volume report to the government. Edited Excerpts:

Q: A lot of critics have questioned the target, set by the committee on Doubling Farmers Income (DFI), of achieving a CAGR of 10.4 per cent in farm incomes from 2016-17 to 2022-23 to double them in real terms. Given that three of the six years have already passed, how realistic do you think is the target?

Ans:  When some people consider the estimated CAGR of 10.4 per cent for the nation as achievable, they are mostly seeing it from the perspective of historical growth rates of agricultural GDP. A rise in income is being forecast based on higher gross returns, better real prices of the output in the market and reduced cost of production.

The Committee is confident of achieving the targeted CAGR, because there is huge potential to reduce the current food loss estimated at more than 10 per cent, and to improve substantively market prices through an efficient market structure.

Q: How has the committee arrived at the figure of 10.4 per cent growth in incomes?

Ans: The Committee has mathematically computed the CAGR at the national level, and also for all the States and UTs.  The computation works out the income growth rates needed to double farmers’ income by 2022 by adopting state-specific strategies. 

The Committee has extrapolated farmers’ income for the year 2015-16, based on estimates of the National Sample Survey Organisation (NSSO) for agriculture year July 2012–June 2013.

Since the timeframe for translating the government’s vision of doubling farmers’ income is 2016-17 to 2022, the DFI Committee has held 2015-16 as the base year and all data points for this year will form the benchmark for measuring growth and change by 2022.

Q: How realistic is the target of 2022-23 given the existing circumstances?

Ans: The Committee began its work in April 2016 and was advised to submit recommendations parallel to its working on the final report. The Budgets 2016-17 and 2017-18 clearly reflect this alignment. One can, therefore, be confident that when the incomes are measured in 2023-24, the target would have been achieved.

Q: Farm-gate prices of most commodities have plummeted the past few years and growth of agriculture and allied activities has averaged less than three per cent, fanning farmer protests in several states. In such a situation, farmer groups are questioning the Committee's assessments and targets. What's your take? 

Ans: It is true that farm-gate prices in the past few years have been subdued. It may be appreciated that market prices are determined by demand-supply status of the commodities. As they say, success can be its own enemy, as manifest in surpluses in many of the agri-commodities causing mellowed market prices. The situation has been exacerbated unfortunately, by a weak global commodity market.

The Committee’s estimates of income growth rates are supported by appropriate strategies along the entire agricultural value system, comprising pre-production, production and post-production segments.

Transferring remunerative prices to farmers will always require an efficient market structure and farmer-friendly procurement system, considering that agriculture markets can never be prefect or near-prefect, and are subject to fluctuations.

Q:  A recent Nabard report says the average Indian farming household earned Rs 8,931 a month during 2015-16. This implies that between 2002-03 to 2015-16, real incomes have grown by just 3.7 per cent. In such a situation how realistic is expecting a growth rate thrice the average in just next three years?

Ans: Since farmers’ income wasn't the core concern until now, the Committee had to extrapolate NSSO Sample Survey-based estimates for agriculture year 2012-13. This was only to suggest the context in which farmers’ income grew at a slower pace, and much below its actual potential.

As we have not had a system of estimating farmers’ income at regular intervals, this measure is, in fact, one of the Committee’s recommendations. Now that the government is committed to doubling farmers’ income vis-à-vis 2015-16 status, it cannot be business as usual. We are now talking of a new strategy with focus on capturing the value of the produce at every single stage in the agricultural value system. Hence the growth rate of incomes will have to pace up in the total value captured by farmers, and it is possible to realise this. The DFI Committee’s strategy is woven around the income centric principles. The Committee also identified the sources of growth which include increase in crop productivity, increase in livestock productivity, resource use efficiency, increase in cropping intensity, diversification towards high value crops and improvement in real prices received by the farmers.

Q: The Committee also says that to achieve that kind of income growth, an investment over Rs 6.4 trillion is needed, of which almost 80 per cent will come from government's own resources. How does the government plan to mobilise such resources when the growth in investment has been 12.45 per cent between 2000 and 2013?

AD: The DFI Committee has actually assessed the investment as “IN” Agriculture and “FOR” Agriculture, based on Incremental Capital Output Ratios (ICOR). The additional investment “IN” agriculture is about Rs 78,000 crore and that “FOR” agriculture is Rs 2.3 trillion. Cumulatively, the new investment required is Rs 3.1 trillion, over the seven-year period from 2016-17 to 2022-23. The investment growth rate in case of ‘FOR’ agriculture is 16.8 per cent, and as you said, it was at 12.45 per cent till 2013. The incremental 4 per cent is easily achievable and the scaling up is already underway. This can be evidenced from the sharp rise in budgetary allocations of the Ministry of Agriculture, which has more than doubled from Rs 25,460 crore in 2015-16 to Rs 58,080 crore in 2018-19. In the recent year, the budget for Ministry of Food Processing was also doubled.

The projected growth rates in both private and public investments for capital formation in agriculture are realistic and achievable.

Q: The Committee says farm investment in the case of individuals will come from providing them higher access to institutional credit (loans at concessional rates of interest) and inculcating in them the habit of savings and investment. A special drive needs to elicit higher participation by the private sector. What kind of policy instruments need to be taken for these?

Ans: In case of private investment ‘IN’ agriculture, the growth rate has been 9.15 per cent between 2002-2012 and looking ahead, a growth rate of 12.5 per cent is needed. Here, investments have mainly been by the farmers themselves, with very little participation from the private corporate sector. In the case of farmers, in the last few years disbursal of farm credit has outstripped targets and the volume of institutional credit has risen from Rs 8 trillion in 2014-15 to Rs 11 trillion in 2018-19. A higher outlay for credit can further enable the farmers with subvented credit. Another recommendation of the Committee was to extend such institutional credit beyond crops and the release of Kisan Credit Card to fishers as farmers is a result. In addition, easy access to post-harvest credit or loans against pledged produce is being promoted.

Importantly, increased investment by corporates in agriculture is desirable, as it is also expected to support much desired capital use efficiencies. As of now, it is only around 2 per cent. The classifying of post-harvest activities and cold-chain under agriculture for private sector lending, and the dispensing of the distinction between direct and indirect agriculture, are steps carried out by RBI towards this end.

Q: The committee says institutional mechanism is recommended for formulating a long-term Agricultural Trade Policy. The government recently came out with a farm export policy but keeps the option of curbing import and export of essential commodities. Doesn't this action go against the very grain of what the Committee has said?

Ans: The Committee views the recently released, the first ever, Agriculture Trade Policy, as a step in the right direction and it is expected that other suggestions of the DFI Committee in this regard will also be adopted in due course. The DFI Committee has suggested an institutional mechanism for recommending import-export duty structure keeping in mind the interests of farmers, while simultaneously taking care of the consumers’ interest. It is not necessary that the option of tweaking export-import duties or imposing quantitative restrictions is anti-thetical to a facilitative Export Policy. In any economy, the interest of both producers and consumers will need to be balanced, and no country can be wholly self-sufficient in respect of every commodity.

 Q: The Committee has suggested lot of structural changes in the farm sector, including putting 'agriculture marketing' in the concurrent list. But, states have strongly opposed the idea. What is the basic premise of the idea and how feasible is it given states' opposition? Has there been any progress on this recommendation?

Ans: Yes, to bring about a paradigm shift in farmers’ income, we need to change our approach to agriculture, and transit from the narrow prism of cultivation to a full-fledged enterprise, by building all associated supply chain linkages. This alone will make the farmer an entrepreneur in his own right. Further, allowing access to a one-India market is critical in this scheme. The DFI panel has worked in partnership with state governments, and at no stage have we found the states opposed to the idea of market expansion.

In fact, the trend suggests that more states are on-boarding on e-NAM, GST now networks across the country, inter-state traffic has improved and the concept of one-India, one-Market is gaining ground. The logic is simple. 

Q What steps is the government now taking to implement the Committee's recommendations? Has there been any forward movement on the reports?

Ans: Following the submission of the Committee's final report, the Government has set up an Empowered Body with representatives from official and non-official circles to supervise, guide and handhold the implementation across the country. The Empowered Body also has farmers’ leaders and a Member of Parliament as its members. The Body is also supported by National Institute of Agriculture Economics and Policy Research (NIAP) to provide technical support to carry out its work. Specific terms of reference have been assigned to this Body such as advocacy, orientation, drafting of required Acts, Rules and Guidelines, besides supervision and monitoring. Implementation is certainly on track, and moving at the right pace.

Q: Many experts suggest dovetailing Direct Benefit Transfer (DBT) with the reduction in subsidies, in order to sustain benefits for farmers? Is this a feasible idea?

It is no gainsaying that rights and entitlements available to farmers from governments and credit institutions can be better targeted by adopting the IT-based direct benefit transfer platform. This approach will bring in transparency, timely and accurate delivery, and cost effectiveness and contribute to realisation of the intended spirit. In fact, various initiatives at both national and state levels with DBT have demonstrated their efficiency, bringing gains to both the targeted beneficiaries and governments.

Q: Critics say recommendations made by the Committee like a model land leasing law, a new model APMC act and model contract low are within the state's domain. What is being done to ensure state governments take up these reforms in right earnest?

Ans: The truth is that agriculture is a state subject under the provisions of Constitution. The major responsibility for effecting change will hence rest with the state governments.

We have seen a lot of progress in case of the Model APLM Act, 2017. Many states have begun to discuss the Model Contract Farming & Services Act. There is positive response to promoting Gramin Agriculture Markets (GrAMs). Large number of states have also on-boarded the e-NAM platform. The participatory approach is encouraging.