Modi Government: Priority in providing support to Farmersby Opinion Express May 21, 2018 0 comments
Farmers’ welfare, which was a daunting task and big challenge until 2014, is slowly and steadily gaining power and benefits under the Modi Government.
Rewind to 2014. Unseen in the last three decades, the BJP secured a thumping majority. Narendra Modi’s charisma culminated as he assumed the office of the Prime Minister. Pre-2014, farmers were bulldozed only to breed (produce more) while their welfare gone with the wind. Realising the need to pay undivided and unbounded attention to the farmers’ decades of distress, the Modi Government changed the name of the Ministry of Agriculture to Ministry of Agriculture and Farmers Welfare. But did the welfare confine itself to name changing op? Let’s sail to see.
Assistance through disaster response fund: Fast forward to 2015. As suggested by the 14th Finance Commission, the Modi Government amended the National Disaster Response Force (NDRF) and State Disaster Response Force (SDRF) norms and, hence, the threshold of crop loss has been reduced from 50 per cent to 33 percent. Just a number shake-up? A big no. The Centre’s Rs 3,049 crore drought relief package to Maharashtra in 2015 helped 25 percent of the farmers. Isn’t this an expression of deep concern towards the farmers? As an extension of compassion, compensation under input subsidy for agriculture, horticulture and annual plantation crops was raised by 50 per cent.
Similar is the case with animal husbandry and fishery. This is especially a great sigh of relief to farmers practising integrated farming system in rainfed areas. Remember, 55 per cent of the net-sown area and two-third of livestock are in rainfed areas. To make sure that the fund doesn’t exhaust soon in times of erratic climatic conditions, the size of the SDRF has approximately been doubled from Rs 33,580 crore in 2010-15 to Rs 61,219 crore for 2015-20. And this isn’t all. Insurance plans for the farmers in adverse situations too is in action.
Bancassurance through Pradhan Mantri Fasal Bima Yojana: Remember the drought periods of 2014-15 and 2015-16 and how it tore apart the farming community? The devil is in the detail. The pangs of previous insurance schemes like the National Agricultural Insurance Scheme (NAIS) and modified NAIS have not percolated to the practicalities of farming. The Modi Government mulled over it.
Replacing the aforesaid schemes, the Government introduced the Pradhan Mantri Fasal Bima Yojana (PMFBY) with effect from Kharif 2016, incorporating a host of farmer-friendly features. In comparison, premiums became a function of permeability and you guessed it right, they have become simple, uniform and heavily subsidised. This is the hallmark feature. PMFBY mandates that the sum insured must be equal to the scale of finance and, thus, cap on premium is removed, unlike in earlier schemes.
Further tilting the scale towards the farmers, service tax on premium has been exempted. Also, PMFBY promotes the usage of smart technology like phones, drones and remote sensing for quick estimation and early settlement of claims; the absence of these had been a greater concern. The Government, realising the urgency, had set a target to gradually increase the gross cropped area under insurance to 50 per cent by 2019 from a low of 23 per cent in 2016.
While meeting the 30 per cent target for Kharif 2016 and Rabi 2016-17 combined, PMFBY recorded impressive metrics. Most notable: Sum insured increased by 78.14 percent to Rs 2,04,779 crore and non-loanee coverage increased by 123.5 per cent to 1.35 crore farmers over the previous season. bringing protection to peasants and indemnity to India.
Confidence in commercial agriculture through free markets: Marketing reforms were miles away until Modi took the reins. Globalisation gutted sovereign boundaries across frontiers like trade and people movement. Ironically, the sovereign nation of India is split across States and notified areas for agriculture trade thus, imposing many barriers for the farmers to transact. If marketing act of States induced regulation from de-regulation, exploitation took the shape of cartelisation. Old wine in a new bottle.
Model Agricultural Produce Market Committee Act, 2003, was good in intent but the corresponding rules in 2007 did no good. History is replete with instances of farmers dumping or destroying their crop being disgruntled at deep dive in prices while in a different part of India, drought-like situation prevailed for the same commodity. As a part of the broader strategy of free markets, e-NAM was introduced in 2016 to bring transparency, direct transaction between parties and most importantly, higher realisation from the consumer rupee. Due to e-NAM’s guiding principle, ‘One Nation One Market’, produce will move from farm gates to federal gates. Slightly ahead of the schedule, 585 APMC’s interfaced with national electronic trading platform by March 2018, incorporating single point of levy, unified trading licence and modification of respective State APMC Acts.
In a bid to rationalise marketing and, thus, replace the APMC Act, the Union Government is nudging States to adopt model Agricultural Produce and Livestock Marketing Act, 2017 (APLM). Some States don’t have livestock as a notified commodity in their APMC Act. APLM Act facilitates selling the agricultural produce and livestock in the same premises. This is particularly a boon for farmers taking up integrated farming system. This Act permits treating rural warehouses as market sub-yards. How does it help? This will reduce transportation to nearest APMC and, thus, transaction cost for small and marginal farmers whose consumption expenditure is more than total income from all sources as per NSSO 2012-13 report.
If current market prices are not lucrative, farmers with Kisan Credit Cards have the option to store in warehouse until six months with interest subvention of two per cent. This facilitates selling when markets are buoyant. Government mulled over the possibility of crashing market prices and, thus, an assurance asserted in 2019 Budget to procure 25 notified crops at MSP (150 per cent of the cost) beginning Kharif Marketing Season 2018 if market prices trade below MSP. An estimate of 100-150 billion rupee is required for this income assurance.
If e-NAM, warehouse storage and MSP were addressing depressed farm prices, the Union Government floated a Model Contract Farming Act, 2017, which addresses multiple dimensions — lack of fair price, transfer of technological knowhow and quality inputs. Farmer Producer Organisations (FPO) which received tax exemption in 2018-19 Budget for five years upto Rs 100 crore turnover is addressing overlooked and neglected dimensions of economies of scale, value addition, processing and export promotion apart from the previous ones. Fair prices, lucrative prices and higher prices is the central theme of Modi government’s marketing initiatives as depressed farm incomes have been one of the principal reasons for farmers treading the extreme path.
Diligence on credit diffusion through interest subvention and PSL guidelines: A fertile soil alone does not carry agriculture to perfection and there comes the credit. After assuming office, the Modi Government has approved interest subvention scheme and thus Ground level credit (GLC) flow to agriculture increased from Rs 8.45 lakh crore to Rs 10.65 lakh crore between 2015 and 2017 surpassing the targets in each of the financial years. This year is no exception. All good. But what about during natural calamities? From 2014-15, interest subvention of two per cent is provided on the restructured loan for the first year and normal rate of interest thereafter.
Share of investment credit to total agriculture credit declined to 19 per cent from 42 per cent between 2006-14. With renewed emphasis on agricultural term loans by the Union Government, it gradually increased to 35.3 per cent by 2017. Interestingly, total agricultural credit offtake and share of investment credit gradually increased between 2015 and 2017 notwithstanding the drought years of 2014-15 and 2015-16. Agriculture was made trivial calls for a rethink.
Any deliberation on credit diffusion without delving into small and marginal farmers is dampening. The share of small and marginal farmers by value in GLC to agriculture has increased from 44.1 to 50.14 per cent between 2014 and 2017. This has been aided primarily by interest subvention and RBI PSL guidelines in 2015 to small and marginal farmers.
Interest subvention scheme and consequential increased credit diffusion will be much appreciated in the context of Modi Government acquiring — in 2014 — a legacy of dilapidated economy and banking sector burdened by huge non-performing assets. Nevertheless, farmers took centre stage in the decision making.
Lastly, Agriculture Budget was not left out either — allocation for 2014-19 increased by 74.5 per cent over 2009-14 to Rs 2.12 lakh crore. The ultimate goal of farming is not growing crops, but the cultivation and perfection of human beings. Farmers welfare — what seemed as a big challenge and daunting task in 2014 is slowly but steadily translating into a big cheer dwelling on farmer’s face. Aren’t we all happy if peasants are happy?
(The writer is State Co-Convener, Election Commission cell, BJP Telangana and Masters in Finance from Cass Business School, London)
Writer: Sandeep Vempati