Budget 2020 arrives amidst official estimates that India’s overall economy will grow at an 11-year-low of 5% and its agriculture and allied sector at 2.8%, 0.1 percentage point less than last year. Agriculture sustains 600 million Indians, half the country’s population, but generates 18% of the gross domestic product.
Could the window be closing on the Bharatiya Janata Party-led government’s promise to double farmers’ income and revamp the agricultural economy by 2022? We examine some official announcements and policies that significantly affect farmer earnings to find an answer--the draft seeds bill, income transfer scheme, minimum support price (MSP), farmer producer organisations (FPOs) and zero-budget natural farming (ZBNF).
MSP revision still shortchanges farmers: Experts
Minimum support prices (MSP) are key to protecting farmers from distress sale of farm produce and providing implicit signals to encourage certain crops.
As the agriculture sector grappled with low productivity, the government announced an increase in the MSP of kharif (monsoon) and rabi (winter) crops for the 2019-20 season. The formula used brought the MSPs to “at least 1.5 times of the all-India weighted average Cost of production (CoP)” of the crops concerned.
The formula was criticised by agriculture experts for shortchanging farmers. The resultant prices fell below those arrived at using the formula recommended by the M S Swaminathan Committee, said R Ramakumar, NABARD chair professor at the School of Development Studies at the Tata Institute of Social Sciences, Mumbai. The Swaminathan panel had recommended an MSP 50% more on the actual cost of farming, including the price of seeds, fertilisers, hired labour, family workers’ own compensation, and land rent.
In the case of wheat, for instance, a Rs 85 increase in MSP was announced--a return over cost of 109%. This was an increase of 4.6% over the previous year’s MSP, the lowest since 2014-15 when the first BJP-led government came to power, Down to Earth reported in October 2019.
A fallout of low remunerative prices was seen when the country witnessed about a dozen major farm protests in 2018, with thousands of farmers travelling to Delhi, Kolkata and Mumbai in the last week of November 2018 alone.
Farmer collectives need time, room to evolve
The government hopes to form 10,000 new FPOs to ensure economies of scale for farmers over the next five years, finance minister Nirmala Sitharaman said in her July 2019 budget speech.
A collective gives farmers the muscle to negotiate better terms in the market. More FPOs will help farmers realise better incomes, manage market uncertainties and shortcomings of smallholding farms in the country, said Neelkamal Darbari, managing director, Small Farmers’ Agribusiness Consortium, a society promoted by the government, cited in a report in The Times of India.
But since FPOs involve people as stakeholders and members, they need time to evolve and become effective, cautioned Sukpal Singh, professor and chairperson, Centre for Management in Agriculture at Indian Institute of Management, Ahmedabad. Collectives need adequate working capital, storage facilities, processing facilities, value-addition supply chains and non-interference from governments to succeed, said Kavitha Kuruganti, social activist with Alliance for Sustainable & Holistic Agriculture (ASHA).
“In this latest move related to 10,000 FPOs, the government, as an equity holder, might end up interfering in the running of the FPO and then the same fate as had befallen our cooperatives awaits these FPOs,” Kuruganti told IndiaSpend. The working of cooperatives in India has been marred by lack of quality management and autonomy and dependence on government.
‘Draft seeds bill needs to be more pro-farmer’
The Draft Seeds Bill 2019, if approved by parliament, will replace the Seeds Act 1966, which will enhance the use of certified seeds as opposed to farm-saved seeds. It will also specify standards for the registration of seed varieties and make it mandatory for seed producers and retailers to register with the relevant authority.
But the draft bill requires more work, said ASHA’s Kuruganti, to clarify the conditions for price regulation. At present, these are based on “emergent situations”. Other factors that need to be considered, according to her, are compensation for losses caused by poor-quality seeds, limits on market access for foreign seed producers, and empowerment of state governments since agriculture is a state subject.
The new draft requires compulsory registration of all seed varieties which include those sold by private companies. More than 50% of India’s seed production is undertaken in the private sector. The size of the private hybrid seeds industry is estimated at about Rs 15,000 crore including cotton (Rs 4,000 crore), vegetables (Rs 3,500 crore), corn/maize (Rs 1,500 crore), paddy (Rs 1,000 crore), pearl millet/bajra (Rs 300 crore) and sorghum/jowar (Rs 200 crore), The Indian Express reported on December 10, 2019.
There is also a need to align existing legislations such as the Protection of Plant Varieties and Farmers’ Rights Act (PPVFR) that brings together India's obligation to the World Trade Organization and the Convention on Biodiversity. “However, the Bill does not mention the PPVFR Act which is leading to a lack of alignment. This must change,” said TISS’s Ramakumar.
Some of the draft bill’s clauses are biased against the farmer, he said, citing the example of the condition that if the seed is found to be poor, the farmer has to approach the consumer court for compensation. “But such a court may not exist in a rural, remote area,” he said. “Meanwhile the seed company will have a battery of lawyers to protect its interest. In fact, the PPVFR Act had an authority for such issues which is not there in this Bill.”
Farmer income likely to stagnate
In the 2019 interim budget before the general elections, the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme was announced by the then finance minister Piyush Goyal. It aimed to provide Rs 6,000 per year as income support to landowning small and marginal farmers.
The “ambit of the PM- KISAN scheme has been expanded to cover all farmers in the country irrespective of the size of their land holdings, subject to the other existing exclusion criteria”, a June 2019 government press release noted.
The Rs 75,000 crore ($10.5 billion) scheme is estimated to benefit 145 million farmer families. But it excludes landless farmers, and as the “survey of landless farmers has not been conducted, therefore, their exact numbers are not available”, the government noted.
More than 76 million beneficiaries have received income support and nearly Rs 35,883 crore ($5 billion) has been disbursed as on November 30, 2019, a December 10, 2019 government reply in parliament noted.
But the government promise of doubling farmers’ income by 2022-23 stands challenged. October-December 2018 marked the seventh successive quarter of single-digit agricultural gross value added (GVA) growth at current prices--a value of produce and services in the sector--since April-June 2017 when the rabi crop planted just after demonetisation was marketed, The Indian Express reported on March 3, 2019.
Further, India's growth in gross domestic product fell to 4.5% for the quarter ended September 30, 2019, down from 5% in the previous three months and 7% for the corresponding period in 2018.
It is thus likely that farm incomes will remain stagnant or fall due to a mix of reasons--demonetisation, the introduction of goods and services tax, production glut and increase in input prices, said Ramakumar of TISS.
“Limiting (the scheme) to landowners is a major limitation,” said Kuruganti. In several states, land title holders are not the cultivators and are pocketing the money that should rightfully go to the cultivator household and it is only appropriate that the PM-KISAN amount should go into the account of the woman in the farm household, she added. “Let there at least be a transfer into the joint accounts of land cultivator on record and spouse,” she suggested.
64% farmers don’t care for direct transfer of fertiliser subsidy
The government has implemented direct benefit transfer (DBT) system across all states and union territories (UT) in March 2018, noted a November 29, 2019 government press release. Under direct cash transfers, farmers buy at a non-subsidised market price and then receive cash in their bank accounts in lieu of the subsidy, while earlier they bought it a subsidised rate.
More than 64% of the farmers did not prefer direct cash transfer, as per an October 2019 evaluation survey commissioned by the Niti Aayog, the Centre’s policy think-tank. “Farmers felt that the system of cash transfer would increase their financial burden in the form of their input cost,” it noted. But the government rejected this finding, noting that it is a “sample study, which is not a comprehensive one covering adequate number of potential beneficiaries”, as per a November 19, 2019 government reply in the parliament.
One of the major challenges with fertiliser subsidy is that “even if you could identify the non-landholding tiller farmer, and if you promise to give him his subsidy through a DBT, he will refuse it”, economist Ajit Ranade wrote on December 19, 2019 in Mint.
The direct transfer of the fertiliser subsidy to cultivators with or without purchase of fertiliser is a welcome step and may result in farmers opting for local organic manures, leading to restoration of soil health, said Kuruganti. This might also put farmers using organic and chemical farmers on the same footing, she pointed out. Currently, organic farmers do not receive any subsidies whereas chemical farmers get at least Rs 5,000, on average, per hectare.
But transfer inefficiencies could affect these benefits while keeping the fertiliser industry afloat, said Kuruganti. Further, while cultivators, including tenant farmers, would be buying the fertilisers, the subsidy could end up in the bank accounts of landowners including absentee landlords, she added.
Why digital agri trade is slow to take off
“I want to place emphasis on eNAM [electronic National Agriculture Market],” Nirmala Sitharaman had declared in November 2019. “It is being pushed by the Centre and many states have agreed to join it. We are trying to get the states to scrap APMC [Agricultural Produce Market Committee], which has not been found to be efficient in helping farmers get better prices for their produce.”
The eNAM, introduced in 2016, is an online trading platform meant to create an online agriculture market for buyers and sellers without having to share the same geographic location. Each state has its own APMC Act, and this makes agricultural trade between states a challenge and results in the exploitation of farmers by traders and middlemen. The eNAM portal, aimed to provide a single-window service for all APMC-related information and services including commodity arrivals and prices, noted a February 2018 report of the expert committee on integration of commodity spot and derivatives markets.
Of 2,500 APMCs, 585 APMCs have been linked to the eNAM network from 16 states and two UTs, The Hindu reported on November 12, 2019.
But eNAM “is more on paper than on the ground in many cases and even today only a small percentage of APMCs have implemented eNAM system”, said IIM’s Sukhpal Singh. There is resistance from traders and commission agents and limited competition for farm produce, all of which impact the portal’s ability to help the farmer, he said.
Zero-budget natural farming finding few takers
The 2019 budget speech also delved into the idea of ZBNF to help farmers double their income.
ZBNF is a chemical-free natural farming system using low cost inputs (cow dung/ urine and plant extract based) coupled with recommended agronomic practices such as mulching and intercropping. It is seen as an alternative to Green Revolution methods that relied heavily on fertilisers and seeks to end a reliance on loans and slash production costs, ending the debt cycle for farmers.
In June 2018, Andhra Pradesh rolled out a plan to become India’s first state to practise 100% natural farming by 2024 and phase out chemical farming over 8 million hectares of land, converting its 6 million farmers to ZBNF methods, The Hindu reported on July 28, 2019.
Agriculture needs to deliver on at least four fronts: Viability for farmers; nutrition security and food safety for all consumers; regeneration of environmental resources that are fast degrading/depleting, and climate change, according to Kuruganti, and ZBNF offers an agro ecology paradigm.
If the Centre invests adequate funds, then an approach similar to the one in Andhra Pradesh will be useful for other governments too. They can take up “agro-ecology on a mission mode [and] need not have to run around looking for funds”, noted Kuruganti.
But Ramakumar believes that it is a “bogus idea”. “ZBNF does not look at the requirement of Indian soil and suggest remedies,” he said. “It is a valorisation of cow urine and dung.”
Nearly Rs 678 crore have been allocated by four states--Kerala, Karnataka, Himachal Pradesh and Andhra Pradesh--practising ZBNF between 2018-19 and 2019-20, noted a November 29, 2019 government reply in parliament.
Paliath is an analyst with IndiaSpend.