In 2016, the Narendra Modi government set a highly ambitious target of doubling farm incomes by 2023 — in seven years. To put this in perspective, it took India 22 years (1993-1994 to 2015-16) to double farmers’ incomes in real terms. So achieving the same in one third of the time seemed improbable as it needed a real growth of 10 per cent when agriculture sector had grown on average at less than 3 per cent rate in the past two decades.
The scepticism was natural. Four years have passed and we are still stuck at 3 per cent, which means we forget about doubling farm incomes by 2023. We would be lucky if we get to this target by even 2033. To achieve it by 2023 the rate of agriculture growth has to increase to 15 per cent, a five-fold jump. What seemed improbable in 2016 appears impossible now.
But the government is still sticking with its goal as is evident from the Budget speech of Finance Minister Nirmala Sitharaman. She announced a 16-point agenda to achieve the target. These action points can be broadly classified into three categories.
First, cooperative federalism. The Centre intends to encourage state governments to pass its model acts on a) land leasing; b) agriculture produce and livestock marketing; and c) contract farming. Additionally, it will focus on 100 water stressed districts across the country and try to solve their problems. Here, the Centre-state cooperation is the key.
Second, reducing input costs and creating alternative methods for generating income. In this regard, Sitharaman announced plans to help lakhs of farmers to solarise their grid-connected pump sets as well as to set up solar power generation projects on their fallow/barren lands so that they can sell it to the grid and earn extra income.Additionally, this will help in reducing input costs for farmers as they move from running their pump sets on diesel/petrol to solar energy. Moreover, the government also intends to develop the blue economy (increase fish production, develop marine fishery resources) and double milk production to 108 million tonnes by 2025.
Third, marketing the produce and focusing on post harvest interventions. For this, the Finance Minister announced mapping warehousing capacity as well as expanding it to taluk level, establishing national cold supply chain for perishables including a kisan rail with refrigerated coaches and having a krishi udan scheme to transport produce quickly, and ‘one district, one product’ scheme for horticulture products.
All these elements fit perfectly into Prime Minister Narendra Modi’s agriculture strategy.
In an interview to Swarajya in 2018, Modi had said his government was “following a four-pronged strategy to achieve the goal of doubling farmers" income: decrease input costs, ensure proper prices for produce, ensure minimal harvest and post-harvest losses, and create more avenues for income generation.’
This is in line with NITI Aayog’s policy paper written by Ramesh Chand in 2017 where he identified six potential areas for intervention that can help double incomes: improvement in productivity, saving in cost of production, increase in cropping intensity, diversification of crops, shifting farmers to non-farm activities and improvement in price realisation.
Implementing this strategy, the Modi government in its first term implemented a slew of measures: new irrigation schemes, a national e-market for farmer produce, soil health card scheme to nudge farmers towards judicious use of fertilisers which can help improve productivity, Rs 5,300 crore for micro-irrigation in the 2015 budget, sharply increasing allocation for the farm sector (by 84 per cent) in 2016 to Rs 47,912 crore, Fasal Bima Yojana scheme, a model law on contract farming for states to adopt, increasing minimum support price of crops to 1.5 times the cost of production, and much more. The agriculture credit target has been doubled from Rs 8 lakh crore in 2014-15 to Rs 15 lakh crore in this budget.
But all these outlays have not translated into good outcomes. The growth in the agriculture sector is exactly where it was six years ago. Clearly, the Modi government cannot afford to keep doing the same things expecting different results if it is serious about doubling farm incomes.
It has got the strategy right but the schemes formulated by the government have not achieved much. A large part of the blame goes to the states which loath implementing any reforms. There are three ways to tackle this challenge.
One is for the Centre to completely abdicate its responsibility to states and devolve more than Rs 4 lakh crore it spends on agriculture and allied activities to the states. Second is to nationalise and centralise the agriculture sector and put it in the central list of subjects.
But both these will create more problems than they solve. There is no guarantee that states will start doing well with the agriculture sector simply because they have more money. Similarly, the centralisation is something that must be avoided in all areas especially in a sector like agriculture where challenges vary greatly from one region to another. While the Centre may get some big reforms right, the local problems will be made worse in the process.
The third way is an institutional mechanism for both Centre and states to work together with set deadlines. A body on lines of Goods and Services Tax council consisting of Union and state agriculture and water ministers can be instituted to work with NITI Aayog or other agricultural experts who are appointed by the Centre. The Centre will have to prod the states with financial incentives to push through key reforms.
The second focus area has to be infrastructure and sensible policies aimed at judicious use of water resources. Despite launching a number irrigation schemes worth thousands of crores, there is not much to show for in terms of outcomes. Out of 99 big irrigation projects which were on the verge of completion and identified by the government, farmers have received water in their fields in only six projects by the end of 2018 (data after this is not yet updated on the ministry’s website).
Talking about sensible policies, what has soil health card scheme achieved? The continuous rise in fertiliser subsidies indicate that it is a big failure. A major reason is less and less crop diversification thanks to a few select crops incentivised by the government through ever increasing minimum support prices (MSPs). Some states have taken steps to promote other crops besides paddy, sugarcane and wheat but the incentives have proved to be too little to change the behaviour on the ground.
The government has decided to focus on 100 water stressed districts but the effort-result ratio of this exercise is going to be very poor. Rather than tweaking at the sidelines, the government needs to crackdown on major areas of water wastage. It has to nudge farmers away from water-guzzling crops as well as come up with a policy to process wastewater for reuse. Israel reuses 80 per cent of wastewater (Spain is distant second with only 25 per cent).
How? The desalination plants along the seas. Despite having three major metros by the seaside, we are not able to implement such effective, time-tested solutions. (Of course, these plants will have to be run on nuclear energy to make economic sense — another area where the present government has dared not put any money). There is so much to learn from Israel’s drip irrigation revolution.
The Modi government is trying to implement this with its ‘per drop, more crop’ strategy and thanks to these efforts, the area covered under micro-irrigation through central sponsored schemes has almost trebled in last five years from around 4 lakh hectares to more than 11 lakh hectares. The government needs to accelerate this further.
The third focus area can be on raising productivity. How can that be achieved? By investing in breed improvement via technology, investing in technology not just for livestock but also for seeds, their varieties, practices et cetera can also go a long way in improving productivity and helping earn that extra money (provided exports are liberalised, otherwise, we will have excess supply and prices will crash as it happens all too often).
However, we only spend 0.7 per cent of agriculture gross domestic product (GDP) on research and development in this sector. So little wonder we are stuck.
Farm mechanisation in India is very low (40-45 per cent) compared to China (57 per cent), Brazil (75 per cent) and the US (95 per cent). Modi government via its ‘sub mission on agriculture mechanisation’ has taken steps to promote custom hiring centres (CHCs), agricultural machineries like laser leveller, happy seeder technology, combine harvesters, power weeders, etc. But the functioning of CHCs is terrible to say the least. If the government can get CHC model right down to the taluk level, it could be a huge boost to farm productivity.
The fourth area that needs major revamp is the Food Corporation of India (FCI). It is eating away over Rs 2 lakh crore (major chunk of it is food subsidy that also needs reform) — almost half of the budget spent on agriculture and allied activities. Shanta Kumar Committee report suggesting many reforms regarding restructuring of the operations of FCI, especially in procurement and plugging leakages was submitted in January 2015. But the report has been collecting dust for the past five years.
The Modi government has identified the problems that the farming sector faces but there are big gaps in the way schemes are designed as part of the strategy. Some schemes which the government has got right are failing on the implementation score. Then there is matter of scale too. Schemes related to micro-irrigation which have proved effective need to be scaled up massively.
But it can’t do much unless it can create an institutional mechanism bringing all the states on one platform as they have to do the heavy lifting. It is trying to do 100 small things but the trick to solve the headache in the farming sector is only about getting about 10 big ticket items right. The rest 90 will follow.
Otherwise, the growth will remain stuck at 3 per cent level and farm incomes will double only by 2038!
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