Will Budget help double farmers’ income?

Most of the earnings of the average farm household were spent in meeting consumption expenditures.

February 06, 2017 09:43 pm | Updated February 07, 2017 12:33 pm IST

For cultivation-related expenses, farmers depend on loans as earnings go towards consumption expenses

For cultivation-related expenses, farmers depend on loans as earnings go towards consumption expenses

Finance Minister Arun Jaitley announced a slew of measures in the Union Budget 2017 to boost the agriculture sector. Higher agricultural credit, higher allocation for irrigation projects, a crop insurance scheme and increased allocations for MGNREGA to dig farm ponds were among the measures announced on February 1. But will these help attain the goal of doubling the farmer’s income by 2022, as Prime Minister Narendra Modi had first suggested last year?

The average monthly income of the Indian farm household was estimated to be about ₹6,426 by the Situation Assessment Survey of Agricultural Households in its NSS 70th round. This included net receipts from cultivation, farming of animals, non-farm business and income from wages. During the same period, the average monthly consumption expenditure per agricultural household was ₹6223. What this shows is that most of the earnings of the average farm household were spent in meeting consumption expenditures. For cultivation-related expenses, the farmer is mostly dependent on loans and the NSSO survey revealed that half of the farm households were neck-deep in debt.

‘Commodity pricing’

For any real increase in income, farmers require higher returns for their produce. In a statement issued on the Budget, Professor M. S. Swaminathan, founder of the M.S. Swaminathan Research Foundation noted that it was high time that the recommendations of the National Commission on Farmers - to provide the minimum price of the total cost of production plus 50% - are implemented. Speaking to The Hindu , the agriculture expert said that in the case of rubber, for instance, a price stabilisation fund was established which helped farmers get better prices for their produce. He suggested that similar measures be introduced for other farm produce as well.

“As far as the farm loans are concerned, the agricultural credit is mostly netted by large companies. Also nearly 50% of farmers are women, who often do not benefit from credit policies as they do not have land titles in their name. Unless land titling recognises female ownership of land for cultivation, half of India’s farmers cannot claim institutional credit,” he said.

Professor R. Ramakumar, Dean of School of Development Studies at Tata Institute of Social Sciences, Mumbai, said chasing the goal of doubling incomes lacks clarity as to whether it is nominal incomes or real incomes that are being chased. It is also unclear whether it is income from agriculture or that of agricultural households being targeted.

“Agriculture will have to grow at 12 or 14% to realise such rise in earnings,” he said. At present, the growth rates stand at a poor 1.2%, according to World Bank data.

“The problem of economic viability of farming is one of rising input prices such as for fertilisers, pesticides and seeds and stagnating output prices as MSP is not rising. Further, protectionist barriers for Indian farmers are much lower now and there is little increase in expenditure for agriculture.”

Drought-proofing farming

Tackling climate change and its potential impact also requires a budget to safeguard farmers. Given the drought and errant rainfall affecting farmers, the government’s step to create five lakh more farm ponds that will work as a drought-proofing measure in gram panchayats is welcome, but everything depends on how well the schemes are executed on the ground.

While the crop insurance scheme aims to rightly protect farmers from the vagaries of the weather, allocations for which have been increased in the 2017 Budget, the terms of the Pradhan Mantri Krishi Bima Yojana spell out that the amount of insurance cover depends on the premium paid and extent of cover, so a farmer may not necessarily recover all losses sustained from crop damage in case of an eventuality.

Harjeet Singh, Global Lead on Climate Change, Action Aid International told The Hindu that the National Adaptation Fund for Climate Change with the cost of ₹350 crore for 2015-16 and 2016-17, the government made only a paltry allocation of ₹130 crore to this Fund in the 2017-18 budget.

“This is disturbing in the wake of the fact that the country faced unprecedented drought affecting 330 million people last year,” he said.

P.R. Pandian, President of Coordination Committee of All Farmers Associations, said that farmers in Tamil Nadu were disappointed that their demand to write-off farm debts for households witnessing suicides in the aftermath of cyclone and drought in the State had not been addressed in the Union budget.

Who benefits?

The credit ratings agency ICRA welcomed the expansion in coverage of National Agriculture Markets (e-NAM), an online agriculture market, from 250 to 585 APMCs in the Budget, as it will “help fertilisers companies in the medium term through higher demand”, according to an analysis report it released on the Union budget 2017. The subsidy hike of 6% for the phosphatic and potassic segment was also seen as a positive thrust for the manufacturers and traders of these fertilisers.

However, Mr. Pandian said that farmers needed an incentive to go organic as high input costs of fertilisers had raised farm debts. Organic farming did not get any attention in the Budget.

NABARD welcomed the hike in the corpus of the long-term irrigation fund by another ₹20,000 crore, taking the total fund size to ₹40,000 crore. The setting up of a dairy processing and infrastructure development fund at NABARD, with a corpus of ₹8,000 crore over three years, was also appreciated by them. However, Mr. Pandian pointed out that focussing on drip irrigation will not be sufficient, and though more funds were allocated for irrigation, no expansion of specific projects for irrigation were made during the Budget.

Indian farmers do not constitute a homogenous community. There are rich, land-owning farmers and then there are poor, landless farmers. Hannan Mollah, General Secretary of the All India Kisan Sabha observed that a new nexus was now emerging comprising farm contractors and big traders combined with rich landowners in rural India, which was replacing the feudal landowning structures of the past.

“It is this new class of rural landlords that will largely benefit from the Budget announcements of higher loan allocation and online trading of farm produce,” he said.

Also, in spite of food price inflation in recent times, farmers’ gross income will not increase automatically. Being both producers and consumers of food, farmers do not stand to gain from inflation either.

As Mr. Mollah points out, “The farmer sells his produce for a fixed MSP, but when he tries to buy the same from the market, he has to shell out a higher price for it...”

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