Delayed actions deny benefits

As in the previous year, the Telangana state government has announced that a separate budget would be presented in the legislature this year for the agriculture sector. Quite naturally everyone, especially the followers of the ruling party, has welcomed this step as a progressive measure aimed it benefiting the farming community.

The step will not only go a long way in improving the health of the agriculture sector in the state of Telangana, but also impact positively upon the distress currently being felt by the farming community. Undoubtedly, such exclusive attention to the sector will also aid sustainable use of the natural resources of land and water of the state.

One hopes that this endeavor will not meet with a fate similar to that of many others well-intentioned moves by central and several state governments. Although the idea of a separate budget is quite novel, a large number of progressive measures have been instituted by the Government of India and several state governments in the past.

All of them were well-intentioned and planned to address the distress of the farming community on account of increasing investments and poor returns for their produce. It is a different matter that not many of these measures stand the light of day and, unfortunately, remained mostly on paper.

Take for instance, the Minimum Support Price (MSP) regime announced by the Government in the India this year. As has been the case on many occasions in the past, the announcement came too late. It now probably will only serve to benefit the middlemen, who have already bought the produce and stored it. With the actual producers not having benefited from the measure, it can only be termed as closing the stable door after the horse has bolted.

I would like to make it very clear that I most certainly welcome the idea of having a separate budget. The sector, after all, is the most important, and the longest neglected, in the country for over seven decades. India is rapidly transforming into a liberal, more efficient and progressive economy but this transition in agriculture has been painfully slow for majority of farmers, particularly the marginal and small ones who constitute about 85 per cent of the farming community.

The share of agriculture in the GDP in the country has been continuously declining over the years from 51.8% in 1950-51 to 48.3% in 1970-71 to reach 13.9% in 2013-14 with no significant reduction in the share of population dependent on agriculture which is around 70% even now. A large proportion of the population is dependent on agriculture for sustenance.

As against a target of 4% for agriculture and allied sectors in the Twelfth Plan (2012-17), the growth registered in the first year (at 2011-12 prices) was 1.2% in 2012-13, 3.7% in 2013-14, and 1.1% in 2014-15. Gross capital formation in agriculture as a percentage of GDP, which was 20.69% in 1993-94, fell to 4.99% in 2011-12 at constant (2004-05) prices. Even in a year of record growth (2006-07), the contribution of the sector actually fell. It is a matter of grave concern, especially, in the context of the size of the population and the ever increasing threat of looming food security.

The sector requires a holistic, dedicated, trans-disciplinary mechanism at the national, state and district levels to address regional, sectional and sectoral requirements, to identify threats and opportunities and disseminate value-added information to appropriate destinations, in order empower the farming community on a real-time and on-line basis at the local level.

I do not hesitate to say that a farmer taking his life in distress is the extreme manifestation of utter failures of government intentions as well as programmes for the welfare of agriculture sector over the decades. And the sector providing the largest employment in the country is being laid waste and the farmer is left to his fate wrought by both nature and man-made calamities.

The Government of India has a shelf of schemes evolved over a period of time to assist farmers in difficult times through supportive measures. Apart from the permanent, and statutory, minimum support price for food grains such as paddy and wheat, and pulses, it also has the Market Intervention Operation (MIO) in the Price Support Scheme (PSS).The Commission on Agricultural Costs and Prices (CACP) lays down, from time to time, the minimum support price to be paid to various commodities after taking into consideration the recommendations made by the state governments and the views of the central government thereupon. Some states, such as Maharashtra, also operate a monopoly purchase scheme for cotton.

Another arrangement is to go for the market yard to procure this produce at the prevailing market rate and store it on behalf of the farmer issuing a receipt for the transaction, which, in turn, can be used as a negotiable instrument for the farmer to raise a loan from a bank to meet his immediate commitments. The purchasing agency, usually a public one like National Agricultural Cooperative Marketing Federation of India Limited (NAFED), the market yard itself or a public sector corporation like the Cotton Corporation of India, disposes of the produce when the price is good, and then shares profit equally, with the farmer from whom it has bought it in the first instance. The move to introduce forward trading in agricultural commodities is also step of the same genre.

In the event there is a delay in the entry by the central government agencies into the market or in the announcement of the support prices, it would be useful if the state governments are empowered to announce a network price and commence the purchase operations subject to subsequent regularisation after the central government has taken a decision.

Every now and then we see instances of shortfalls and gluts of various agricultural products and commodities in the country. This is particularly so in respect of horticultural commodities such as onions and chillies which are perishable in nature. These guts and shortfalls are often ascribed to the well-known Cobweb Theorem which deals with alternative impulses and deficits caused by the fluctuation of prices from season to season.

Farmers, especially the poor among them, have great difficulty in holding on to produce after the harvest has been reaped. On account of this lack of holding capacity they are only too eager to dispose of the produce to middlemen for ready cash – even if it means a distress sale. They have financial commitments to keep, and often find it difficult to wait for the right price in the market before deciding to sell. No wonder delayed announcement of MSP only benefits middlemen.

Budgets of states ought to address this kind of issues of the genre to be of any real benefit to the agriculture sector or the farmers. They are, after all, significant instruments of the fiscal policy of the government and, in spite of the large population dependent on agriculture, have rarely been agriculture-oriented. The intended should also focus on a few areas such as seeds, technology, irrigation, market prices etc.

A "budget", in its real sense, will need to comprise a set of fiscal arrangements and not merely the provision of separate funds for the agriculture and allied sectors. The reform will also need to be followed up with a Plan of Action with appropriate administrative financial, legal and operational arrangements.