Finance Minister Arun Jaitley has achieved a remarkable feat by announcing a slew of measures for rural and agriculture sectors in the Union Budget 2018/19. One-third of his Budget speech covered just these two sectors. He also came up with the announcement that the government is planning to spend `14.35 lakh crore towards agriculture and other livelihood programmes in rural India.
It may seem that the Narendra Modi government is striving to achieve what has not been attempted till now. When compared to the central government's total annual budget of `24.42 lakh crore, the amount earmarked for these two sectors looks quite substantial. But there the promise ends.
Almost 84 per cent of the promised expenditure (see Flush With Funds) is to come from non-budgetary resources, including `11 lakh crore institutional credit from financial institutions. What the government has done is to club together the rural sector and agriculture-related programmes of 10 ministries to come out with a farm-rural package. "The biggest difference in approach is that it is a comprehensive, multidimensional package. Farmers' income depends on a whole lot of things. The package covers it all," says Rajiv Kumar, Vice Chairman of Niti Aayog.
He explains that the government is moving away from unidirectional programmes that merely aim to increase farm produce to those that cover the entire gamut of agriculture and rural economy - land, labour, seed, agricultural implements, irrigation, harvesting, storage, cold chain and food processing, road infrastructure and more. "We want them (the farmers) to move on from (agricultural) commodity to products and enhance their income in the process," adds Kumar.
In FY2016/17, India had seen record production of 275 million tonnes of foodgrain and around 300 million tonnes fruits and vegetables. But there was no sign of corresponding rise in farmers' income. In fact, rural distress had increased.
Of all the agri-related announcements grabbed our attention, the most populist and controversial is the promise to ensure that farmers get 50 per cent more than the cost of their produce. The government claims it is already providing the minimum support price (MSP) for the majority of rabi crops at a rate that is 1.5 times more than the cost and wants to replicate the pattern for the rest of the crops from the very next crop season. This has been contested. Punjab Chief Minister Captain Amarinder Singh, in an accompanying column in this issue of BT, terms it as "nothing but a propaganda tool, considering that there is no mention of any formula for the calculation of the production cost which, as anyone familiar with agricultural nuances could tell, does not end with cultivation of crops".
The decision to make 585 agricultural markets e-linked is another attempt to improve price realisation for farm produce. The government is also planning to develop and upgrade the existing 22,000 haats (rural markets) into Gramin Agricultural Markets (GrAMs). Plus, `2,000 crore has been allocated for an agri-market infrastructure fund. The GrAMs will be allowed to sell farm produce directly to bulk customers.
The Prime Minister Gram Sadak Yojana Phase III, which funds construction of village roads, will come up with link routes that connect habitations to GrAMs, higher secondary schools and hospitals.
To boost the Prime Minister Krishi Sampada Yojana, a programme to help investment in food processing, the allocation to the Ministry of Food Processing has been doubled from `715 crore in RE 2017/18 to `1,400 crore in BE 2018/19.
Corporates working in the agriculture sector are upbeat. Siraj Chaudhry, Chairman of Cargill India, says these "are steps in the right direction to support farmers and rural economy, and encourage the food processing industry". R.G. Agarwal, Chairman, Dhanuka Agritech, says, "The Budget will help agriculture and rural economy grow at a faster pace." The measures include tax exemptions to FPOs as well.
In the rural sector, the interventions include free cooking gas and LPG connections to eight crore poor women, free electricity, construction of two crore toilets and assurance to build more than one crore houses by the end of 2019. Allocation for the National Rural Livelihood Mission has also been increased to `5,750 crore. The government claims that apart from job creation due to farming activities and self-employment, the proposed expenditure will create jobs for 321 crore person-days. Also, 3.17 lakh km of rural roads, 51 lakh rural houses and 1.88 crore toilets will be built while 1.75 crore households will get electric connections.
The announcements are impressive, but there seems to be no matching budgetary support. The Economic Survey had warned about a possible decline of up to 25 per cent in farm yields due to climate change. "Agri budget was a mere 2.3 per cent of the total budget," says Yogendra Yadav of Swaraj India. However, the budgetary allocation for the ministry of agriculture and farmers' welfare was 12 per cent higher year over year - `57,600 crore BE for 2018/19 compared to the RE of `50,263 crore for 2017/18. The rural development ministry saw a 3 per cent increase - from a revised estimate of `1,09,042.45 crore for 2017/18 to Budget estimate of `1,12,403.92 crore for 2018/19.
But the sharpest criticism is aimed at the government's promise of MSP. "The crux of the battle on prices boils down to the government's definition of 'Cost of Production'. Like a schoolboy shifting goalposts and declaring victory, the government seems to have chosen a lower cost measure so that it can declare that it is already providing cost plus 50 per cent in this Rabi (season)," says Kiran Vissa of Rythu Swarajya Vedika.
According to the farmers' representative, the cost calculation covers actual paid-out costs plus an imputed value of unpaid family labour, which is far less than the actual cost incurred. "If that is the calculation, the UPA government was already providing greater than 50 per cent returns across most major crops, including paddy, wheat, cotton, soybean, tur, urad, chana, bajra, etc. The reality is that prices under the UPA were not providing sufficient income for farmers, and the prices under the NDA have become much worse. Farmers understand this reality. However, Mr Jaitley tries to window-dress it," adds Vissa.
The government must be aware of such criticism. The ruling party will have to bear the cost of any misadventure.