Note for Pre-Budget (2014-15) Discussions for the
Agricultural Sector
Sharad Joshi
Introduction
The Finance Minister in the year 2014 is in a much happier position to dissertate financial decisions without any dictates from above about the policies that will procure votes for the party. There is no more compulsion to pursue the eleemosynary policies nor is there any compulsion to pursue the policies that will please the minority groups that proved to be essentially vote-catching in the elections. On the other hand, it has become important to pursue policies that will take care of the demands of the 'rurban' communities and the new young voter who comes on the voters' list for the first time. The middle class has also come on the scene as an important factor in the elections.
It does not mean that agriculture has lost all its importance. On the other hand, the measures taken by newly elected Prime Minister Shri. Narendra Modi for improving the agricultural production in his home state Gujarat give the new Finance Minister a parameter to go by. The gross rate of growth of Indian agriculture must be somewhere around 9% so that it becomes comparable with rates of growth in agriculture obtained in Gujarat and Naga Land.
The Indian agriculture has suffered from two spells of exploitation. One, the pre-1947 imperial exploitation which meant purchasing raw materials in India at cheapest possible price and selling the industrial produce from Great Britain at the highest possible price. The second phase of exploitation of Indian agriculture came after 1947 which can be called the socialist exploitation where, as a matter of deliberate policy, the prices of agricultural produce were kept suppressed in order to keep the prices of raw materials and prices of wage-goods for industry minimal. All the governments after 1947 have followed a policy of deliberately suppressing prices of agricultural produce. This was a policy of imposing a hefty negative subsidy for Indian agriculture as against hefty positive subsidies given to agriculture in most OECD countries, USA, Europe and Japan. This is sufficiently documented in the WTO documentation.
The poor in the country consists of landless labours as also farmers of the rain-fed area. As Mahatma Gandhi said, to obviate their poverty all that you need to do is to get off their backs which means to terminate all policies that actually result in their exploitation by deliberate suppression of the prices of their farm produce.
Progress of Indian agriculture will facilitate development of primary capital at the village level itself and, consequently, promotion of cottage industries as also small scale industries in the village itself. Later on, these industries may flourish into large scale industries. So much so, new jobs will be created, the drift of village population from villages to cities will reduce gradually and the present bifurcation between India and Bharat will be attenuated. Progress of Indian agriculture will also create purchasing power in the hands of rural population so that demand for industrial goods will increase largely.
As result of last 200 years colonial or socialist exploitation Bharat is no more able to face further exploitation and survive with dignity. Bharat is defeated badly in the ‘price war’ imposed by India. Now what it needs is a kind of a Marshall Plan that was used by the United States to support the war-devastated countries of Europe.
Awaiting such a Marshall Plan the Finance minister may consider to take measures on, at least, the following points to start with.
A. DRLW
Unfortunately, the long spell of over 200 years of exploitation of Indian agriculture was not taken into account sufficiently while drawing the Debt Relief and Loan Waivers Scheme (DRLW), 2008 Scheme. The DRLW scheme entirely ignored the fact that the major contribution to the food stocks of the country is made by the larger farmer while the small or marginal farmer makes very little contribution to the food stocks of the country. It also ignored the fact that electricity tariffs constitute the highest single item of agricultural inputs. The DRLW scheme was limited, with certain exceptions, to the small and marginal farmers and entirely ignored the electricity tariffs. This has resulted in a very disastrous situation.
The Finance minister may consider to announce one-time total waiver of all agricultural loans including electricity tariffs.
B. Electricity supply
The state governments are following policies of cutting off the electricity supply to agricultural farms. This combined with the increasing prices and shortage of petrol and Diesel is putting agriculture in a predicament. This combined with the rising wages, thanks to flagship programmes like MGNAREGA, extremely cheap food-grains in the name of Food Security etc. of UPA-II, of agricultural labour is making agriculture a non-feasible preposition. So much so that many farmers, according to a study by Planning Commission, are thinking of leaving agriculture as a vocation. Several other policies of UPA-II government are strengthening the strain.
The Finance minister may consider issuing an injunction against cutting off of electricity supply to any agricultural activity.
The new government must change the direction of agricultural policies.
1. It might consider taking up once again the river-linkage scheme so that the water supply becomes abundantly available in all parts of the country.
2. It must revise its policies regarding supply of crude oil and pursue a policy which will make the farm-oil (Ethanol and bio-Diesel) more abundantly available. If the Ethanol and bio-Diesel become more abundantly available and its rational distribution is ensured the country will benefit by reducing hefty charge on the balance of payment.
In brief, I would recommend that the new Finance Minister consider making adequate funds available for revival of river-linkage scheme and also development of village ponds in all villages. Further, he may provide adequate distribution system for the Ethanol as also bio-Diesel.
D. Edible Oil and Oil seeds
Another hefty charge on the balance of payment comes from the fact that we are dependant on import to the extent of more than 40% on edible oil. An improvement in the situation of irrigation, particularly in the Madhya Pradesh area which is the main supplier of edible oil seeds will take care of this problem.
E. Technology
One more field where UPA-II policies may have to be reversed is regarding the use of technology as a whole in agriculture and, particularly, bio-technology. UPA-II government was unduly influenced by the philosophies of NGOs, dominant at that stage and succeeded in blocking the progress of research in bio-technology as also research in GM foods.
Development of drought-resistant seeds and anti-salinity seeds can also help Indian agriculture in a great measure.
F. Futures markets as default marketing channel
Futures markets, despite their Indian origin, have suffered from a casteist prejudice. Those who stand for administered prices maintain a suspicion that is not based on any objective facts. The report of the Abhijit Sen Committee had clearly established that there was no link between inflation/volatility in prices and the working of the future markets.
All the same, the first reaction of the government, in a situation of shortages/hike in prices is to ban exports and futures markets, restrict domestic trade and promote imports in the nature of dumping.
Futures trading, permits the farmers to take informed decisions about crop patterns and obtain an assurance of prices at the time of the sowing itself. It obviates the need for the Commission for Agricultural Costs and Prices (CACP) whose recommendations have been proven to be dubious. It prepares the ground for a structural reorganization of agriculture by emphasizing the role of an aggregator and scientific warehousing. It further facilitates agricultural credit and finance and can go a long way in removing the paucity of investment and credit in the agricultural sector.
The Finance Minister may consider the possibility of making a statement declaring futures market the default channel of agricultural marketing, permitting scrapping of the CACP, FCI(Food Corporation of India) and reducing the dependence on the leaky Public Distribution System (PDS).
G. Weather Bureaus
The monsoons 2014 are about to begin. This time again all the forecasts of the Meteorological department have proved to be inaccurate. It is doubtful if Meteorological department, as it is constituted, gives any help to the farmers in planning their agricultural work.
The Finance Minister may consider reinforcing weather bureaus to make them more sophisticated or, alternatively, close them down altogether.
Sharad Joshi
Former M. P. (Rajya Sabha)
Founder, Shetkari Sanghatana
Angarmala, Vill. & Po: Ambethan
Tal. Khed, Dist. Pune - 410501
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