Budget 2021: Farm sector needs urgent support

The most important issue facing farmers is higher input costs

It is apparent that the crisis in Indian agriculture has manifested itself in the present opposition to the farm laws. It is probably for the first time in recent decades that the Union Budget will be presented under the shadow of one of the largest protests of its kind in the country. Irrespective of the outcome of the protests, it is clear that the Budget would have to take forceful measures to ameliorate the conditions of farmers, especially small, marginal and tenant farmers.

Over the past few years, the rising cost of cultivation is largely due to higher input prices including diesel, labour and other inputs like fertilisers. To this long list of problems is added the issue of market access.

Last Budget to present Budget

In last year’s Budget, a useful, albeit insufficient, measure to meet problems was the proposal to make a cash transfer of Rs 6,000 as Direct Benefit Transfer (DBT) through the PM-Kisan programme. The other promises, such as investing in rural logistics, encouraging states to implement central model laws and ‘Kisan Rail’, have witnessed slow or marginal investments. Undoubtedly, the impact of Covid is one of the causes. Hence, in the context of the inability of Public Private Partnership (PPP) projects to garner momentum, it is necessary for the government to change course.

While the promise of better infrastructure is always welcome, the fact that such activity materialises at a snail’s pace means that often the infrastructure is too late to help rural households in crisis. Hence, it is imperative that the government deals with immediate issues on a mission mode basis. The most important problem that agricultural households have to grapple with is the sharp increase in costs. Expanding DBT through PM-Kisan will invariably be a welcome move.

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Direct support needed

Efforts like Kisan Rail are insufficient to deal with the size of the problem at hand. One alternative that the government may have to consider is to include a more robust system of subsidies for agricultural storage and logistics on the supply side and demand side – at least for a limited period. On the supply, the past government promises to provide viability gap funding needs to be implemented quickly and expanded keeping in view the regional needs of the country.

The reality of Indian agriculture is that about 86 per cent of agricultural producers are small, marginal and tenant farmers who do not have economic resources to store their produce and wait for better prices. Hence, it may be useful if the government considers designing a limited time period scheme where small and marginal farmers, who may be willing to take a risk, are offered 100 per cent upfront subsidy for storage payable to the service provider and a highly subsidised credit line for the duration of storage so that the subsidised credit can be used for consumption and other needs. Needless to say this will not solve the problem but at least may be a good beginning to increase the possibility of farmers who may be willing to store their produce for a longer period.

Another important support that is needed is for the government to consider a market stabilisation fund for vegetable crops. These perishable crops tend to be the most volatile and are often the cause for large losses among farmers. This means that instead of concentrating only on rice and wheat, the government may have to seriously apply its mind to the problems of other crops.

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Moreover, the problem of volatile vegetable prices is an issue across regions and is a recurrent one, which means that the government may have to look beyond one season and find a way to support farmers for at least two to three seasons. That way, it will enable the farmers to look beyond the immediate prices – which are often the only motivating factors for the crop decision.

Investing in R&D and supporting mechanisation

An important long-term issue in Indian agriculture is the problem with yields. Government data indicates that except for a few crops, yields have stagnated over a 10-year period. Hence, there is an urgent need for the Central and State governments to start investing in research and development (R&D) on a priority basis. Restarting large-scale funding for R&D in public institutions may be a good beginning. Concurrently, there is a need for the government to invest more in agricultural extension activities. Since these are State subjects, it may be useful for the Centre to design a scheme that supports such services in the states for the initial years.

Lastly, there is a need to support rapid mechanisation of agriculture, which has been embraced in pockets. Since the governments tend to boast about their reskilling initiatives, it will be useful if the present government either supports unemployed or under-employed rural youth (of whom there are plenty now due to reverse migration) and either help form Joint Liability Groups or Self Help Groups that will be given agricultural machinery and training so that they can offer these services to farmers at a low cost.

This may serve both the industry which manufactures farm machines and local youth who may find some semi-skilled employment in rural areas till the economy improves. Such an intervention will benefit farmers who are reeling from the increased cost of production and ever-rising labour costs.

(S Ananth is an independent researcher and advocate based in Andhra Pradesh. Views are strictly personal)

Disclaimer: The views expressed above are the author’s own. They do not necessarily reflect the views of DH.