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Last Updated : Apr 10, 2019 01:19 PM IST | Source: Moneycontrol.com

Opinion | The idea of universal basic income for farmers

The BJP’s manifesto promises to expand the reach of PM-Kisaan to all farm households.

Moneycontrol Contributor @moneycontrolcom
Representative Image
Representative Image

Siraj Hussain

An average voter may not read or be influenced by manifestos of political parties but such documents are carefully examined by investors having a stake in stock markets. Political party leaders themselves may not take their manifestos seriously but their possible impact on the Indian economy is a valid concern.

The Bharatiya Janata Party’s (BJP) manifesto for the 2019 parliament elections -- called Sankalp Patra -- was released on April 8, only three days before the first phase of polling. It is not easy for a ruling party to completely break away from its actions so the BJP has to be more circumspect about promises. This dilemma is clearly reflected in the party’s manifesto.

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The best part of the manifesto is the commitment to invest Rs 25 lakh crore to improve productivity in the farm sector. This is more important than loan waivers, direct income support (PM-Kisan) or minimum income guarantee (NYAY). This can change the face of Indian agriculture if infrastructure gaps are identified in each state and region, and resources are invested prudently. Only 6.8 million hectares of land were covered under micro irrigation by March 31, 2018, and most of it was in Andhra Pradesh, Telangana, Karnataka and Maharashtra. The manifesto promises to increase this to 10 million hectares. There is an urgent need for farmers in north India to use this technique to save water and increase productivity.

Similarly, higher investment in pack houses, reefer vehicles and cold chainswill not only reduce wastages but also deliver better prices to farmers.

The Narendra Modi government did spur investment in irrigation under thePradhan Mantri Krishi Sinchai Yojana (PMFBY), but due to inertia in several states, the progress did not match the intention. Sadly, the manifesto does not promise a specific target to increase irrigation coverage.

In 1986, the Centre launched the Technology Mission on Oilseeds but it lost traction over the years and India’s import bill for edible oils continued to balloon. The BJP’s promise to re-launch the oilseeds mission is a welcome step as the import bill for edible oils is approximately $11 billion. A diversion of land from wheat and paddy production to edible oil seeds can reduce the burden of procurement and save foreign exchange. Processing and refining can also create rural jobs.

The promise to make crop insurance voluntary under the Pradhan PMFBY shows that the government realises that there are challenges in the scheme. PMFBY is enormously better than UPA’s crop insurance scheme-(MNAIS), which primarily aimed to keep the premium subsidy of the Centre and states at a low level. The Modi government reduced farmers’ premium to just 2 percent for Kharif crops and 1.5 percent for Rabi crops and provided insurance for the entire cost of cultivation. If crop insurance becomes optional, only those farmers who are in regions hit by calamities will insure. This will result in adverse selection and actuarial premiums will shoot up across India to unmanageable levels. This may well lead to the end of crop insurance in India.

The manifesto promises to expand the reach of PM-Kisaan to all farm households. According to the Agriculture Census, 2015-16, there were 14.6 crore operational holdings out of which 12.6 crore are small and marginal holdings. The promise of Rs 6,000 per year to all 14.6 crore farmers is neither desirable nor logical but it shows that at least for farmers, the idea of universal basic income has been accepted.

The average income of farmers (who are not small or medium) was Rs 1,76,400 per year, according to Nabard’s All India Rural Financial Inclusion Survey 2015-16. For them, the assistance of Rs 6,000 per year is just 3.4 percent of their income. It would have been better to increase the assistance for small and marginal farmers from Rs 6,000 to Rs 8,000 per year.

The BJP’s promise of pension for farmers sounds too good to be true. It will perhaps be a contributory pension scheme but small and marginal farmers have hardly any surplus and they may find even small contributions to be unaffordable.

The manifesto promises to bring additional 20 lakh hectares of hilly, tribal and rain-fed areas under organic farming. Linking of goshalas to the promotion of organic farming may improve the viability of both. The real challenge for organic farmers is marketing. Unless they get an additional price for organic produce, they are unlikely to continue as organic farmers.

The chapter on agriculture in the manifesto is aptly named as doubling farmers’ income, which has been the dominant theme since its announcement by the Prime Minister at Bareilly on February 28, 2016. In the first four years, the growth of gross value added (GVA) at basic prices from the “agriculture, forestry and fishing” was 2.9 percent. If the income of agricultural households has to be doubled by 2022, it will have to grow by 15 percent in the remaining years up to 2022.

The manifesto seems to ignore the daunting task ahead in achieving such a high growth rate in the run-up to 2022. If Skymet’s forecast of deficient monsoon this year comes true, the income of farmers may, in fact, go down.

It seems that both the BJP and Congress have accepted that it is not possible to deliver MSP to farmers of all crops. The manifestos, therefore, promises to enable market avenues for the realisation of the MSP.

Hit by the downturn in global prices, drought in 2014-15 and 2015-16, deficient rainfall in large parts of India in 2018-19 and lingering effect of demonetisation, farmers’ incomes have taken a hit in the last three years. If the promise to invest Rs 25 lakh crore is actually kept, Indian agriculture would be less affected by external shocks.

Siraj Hussain is a Visiting Senior Fellow at ICRIER. He retired as Union Agriculture Secretary.

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First Published on Apr 10, 2019 01:15 pm
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