Several commitments in the manifesto can alter the terms of trade in favour of farmers.
The Congress party's manifesto for the Lok Sabha elections is attracting a lot of attention due to a clear enunciation of its economic policies. However, political parties often ignore the promises made in their manifestos when they are voted to power. Their decisions are based on the need to win the next election to state assemblies or Parliament, rather than what was committed by them or what is prudent for the economy.
None of the three major decisions of the Narendra Modi government — demonetisation, reservation for economically weaker sections and transfer of Rs 6,000 to farmers under PM Kisan — were part of BJP’s 2014 manifesto.
'Congress will deliver' seeks to address the discourse on agricultural distress and employment in a rather ambitious way with some far-reaching promises. Several commitments in the manifesto can alter the terms of trade in favour of farmers.
The most important promise is to replace the Essential Commodities (EC) Act, 1955, by a law that can be invoked only in emergencies. In the last four years, the Modi government has successfully tamed food inflation and substantially raised minimum support prices of pulses, food grains, oilseeds, cotton etc. While domestic production of these crops rose to record levels, the market prices continued to rule low. The farmers growing pulses did not gain due to the build-up of stock caused by imports of pulses in previous years.
Declining exports and reluctance of traders to stock major commodities also contributed to low prices in markets. Even in the Agricultural Export Policy announced in December 2018, the government promised to exempt only processed and organic products from export restrictions and retained the right to identify crops which are essential for food security.
Thus, the EC Act could be invoked at any time to restrict the export of these commodities. Fear of EC Act has prevented large investment in the supply chain by the private sector. Such investment is badly needed for integration of broken agricultural markets. In 2017-18, Indian export of rice and buffalo meat was $7.73 billion and $4.04 billion, respectively. Entire investment in the supply chain has been made by the private sector.
The promise to repeal the Agricultural Produce Marketing Committees Act (APMC Act) can be transformative, provided it ushers competition for farm produce. Bihar abolished APMCs in 2006, but farmers have not really benefited as small and marginal producers are unlikely to find large organised players, purchasing small quantities from them. A central legislation to provide competition in mandis may be a better idea.
The idea of a separate ‘Kisan Budget’ has been tried in several states and it has not really changed the situation. Under PM Krishi Sinchai Yojana, the Modi government also tried to integrate schemes across ministries by making the Ministry of Agriculture the nodal point.
It did not succeed because departments of water resources, land resources, rural development etc retained various schemes relating to water. In fact, the government abolished the separate budget for Railways. A separate budget for agriculture can, however, focus attention on the investment being funded by the Centre. It can be good optics, but it is not a game changer.
The promise to waive farm loans has large and unquantified implication for the Union Budget. Since April 2014, farm loans have been waived in Andhra Pradesh, Assam, Chhatisgarh, Karnataka, Madhya Pradesh, Maharashtra, Punjab, Telangana, Tamil Nadu, Rajasthan and Uttar Pradesh. Telangana has waived the loans twice — in 2014 and 2018.
Andhra Pradesh is expected to follow suit. The Centre did not bear any part of the Rs 2.17 lakh crore expenditure on loan waivers since 2014. If elected, the Congress government may have to provide Rs 3 lakh crore spread over two years, if this promise is to be fulfilled. In the absence of detailed data on loan waivers since 2014, it is not possible to make a detailed assessment of its impact on credit culture.
The Congress promise to set-up a National Commission on Agricultural Development and Planning in place of the Commission for Agriculture Cost and Prices is a good idea provided it is manned by experts and covers MSP, trade policy and other policy related issues. Due to the dissonance between import-export and domestic policies, the farmers have suffered for years.
Failure of the Modi government’s PM-AASHA has also proved that it is not possible for any government to deliver MSP for all commodities in all states. So, Congress has done well to keep its promise muted and vague. CACP proved to be rather lame in preventing the government from announcing MSP on the basis of a formula (50 percent return on paid costs), without any reference to domestic demand and global prices.
Congress’s commitment to double funding for R&D can provide the required fillip to development of new techniques and seed varieties, which can transform Indian agriculture. The success of new varieties of cotton (Bt), rice (Pusa 1121 and 1509) and sugarcane (Co0238) have immensely benefited farmers. Institutions under Indian Council of Agricultural Research can provide new direction to agriculture provided they are professionally manned by regular directors and are well funded.
Even though Nyuntam Aay Yojana (NYAY) is not only for farmers and rural areas, most of its beneficiaries will be related to the agriculture sector. Properly implemented, it has the potential to take a large chunk of India’s population out of poverty.
By implementing Rythu Bandhu, Telangana created a model which has been copied by several other states. The Modi government also found a good model in it and announced PM Kisan in the run-up to Lok Sabha elections. NYAY may also become a template for states as we move from one election to another.
If this Congress manifesto can set the election narrative on policies rather than on communal issues, it would have largely served its purpose.(The author retired as Union Agriculture Secretary. At present, he is a Visiting Senior Fellow at ICRIER.)Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.