Prime Minister Narendra Modi and BJP President Amit Shah at the party's parliamentary board meeting in New Delhi on Monday, after the party's win in Gujarat and Himachal Pradesh Assembly elections (Photo: PTI)
Jolted by the Bharatiya Janata Party’s (BJP’s) less-than-impressive performance in some parts of rural Gujarat in the recent Assembly elections, the Centre might tweak import and export duties to protect farmers’ interests as well as raise procurement of cash crops, such as oilseeds and pulses.
The government might also create demand for farm commodities by opening up more distribution channels, such as providing millets under the Food Security Act, and invest more in developing marketing infrastructure, senior government officials said. A farm debt waiver, however, was not being considered, as it was not the stated policy of the government, the officials added.
The results of the Gujarat Assembly elections were declared on Monday. Though the BJP retained power for the sixth consecutive time, its performance in the rural areas failed to impress.
Officials also acknowledged there was a limit to what the Centre could do to push up prices, but it would not hesitate to explore all options in hand.
In the past few months, to stem the trend of falling prices particularly that of pulses and oilseeds, the central government doubled the import duties on crude edible oils and raised then substantially for refined varieties, imposed a stiff import duty on pulses and opened up its exports for all varieties after almost a decade; raised the import tariff on wheat; and opened exports of other commodities.
“We have taken a series of measures to push up farm prices and are willing to do more if there is need,” an official said. Sources said farmers were looking for policy interventions to stem a drop in agricultural prices.
One option being considered was making pulses procurement open-ended — that would mean the cap of 2 million tonnes on purchases would go. The government is also considering replicating Madhya Pradesh’s Price Deficit Payment Scheme (Bhavantar Bhugtan Yojana) on a national level or taking part in such state initiatives in some way.
However, there are divergent views on this.
A section within the government feels participating in such programmes could be counter-productive, unless the results of the Madhya Pradesh pilot are clearly established. The government has set an ambitious target of doubling farmers’ income by 2022, but the basic growth in farming needed for this is not there, at least in the first three years of the National Democratic Alliance (NDA) government.
Experts say that first off the government should take stock of the problem in villages. “First and foremost, the government should at least recognise that there is a problem in the rural sector,” agriculture economist and former chairman of the Commission for Agriculture Costs and Prices, Ashok Gulati, told Business Standard.
He said climate- or weather-induced damages and losses to agriculture could be compensated through effective, timely and swift sorting of the crop insurance scheme (Pradhan Mantri Fasal Bima Yojana), but for the wider issue of price collapse, several things needed to be done.
Gulati said the government should stop exaggerating its production numbers and give a clear picture of the actual output. That would go a long way in helping policy formulation.
Secondly, there was a need to frame an agriculture trade policy that was dovetailed with minimum support price (MSP) policy so that farmers were not unduly troubled. “You can’t have an import policy, where a crop is available for Rs 3,000 per quintal in the international markets, while the MSP in India is higher. Else, undertake a proper buffer stocking of surplus produce,” he said.
The government could set up a kind of war room to give it information in advance on price movements, so that proper policy interventions could be taken on time and knee-jerk responses were avoided.
“To me, something which the government can immediately do is raising the MSP significantly or bringing something like a universal basic income programme. In the long term, proper marketing reforms are the only answer to give the right price to farmers,” former agriculture secretary Shiraz Hussain said.
On the marketing reforms front, he said the government should immediately call a meeting of all state representatives and direct them to reform their markets in a time-bound manner. “The biggest challenge for the government is raising prices of agricultural produce. According to our analysis, schemes such as the Bhavantar Bhugtan Yojana of Madhya Pradesh have not been very successful in stopping traders from forming cartels,” Hussain said.
Yoginder K Alagh, former Union minister and agriculture economist, said the government should fix a tariff policy for commercial crops to protect Indian farmers from imports, and also invest heavily in developing markets.
“Programmes such as Smart Cities should have a component for development of agriculture markets in the region,” Alagh said.
On tariff policies, he said something had been done on edible oils when the government doubled the import duties, but a lot more needed to be done.
A big takeaway from the Gujarat polls was the BJP’s inability to reclaim its rural seats in some parts of the state. Though this was not a uniform trend, general perception and ground reports indicated that rural voters haven’t been particularly kind to the party.
The critics of this theory argue that the BJP should have lost all rural seats in Gujarat if that was the case. It pointed to the fact, they claimed, that a particular community of farmers might have felt aggrieved.
Nonetheless, agriculture in Gujarat has not been doing particularly well in the past few years.
Data sourced from the NITI Aayog website shows that the gross state value added (GSVA) in agriculture, forestry and fishing dipped to a negative 0.48 per cent and 1.28 per cent in 2014-15 and 2015-16, respectively. The fall against the backdrop of over 26 per cent growth in 2013-14 and two back-to-back years of drought, indicated that the state's superlative performance in agriculture was showing signs of wearing off.
Additionally, a sharp fall in the prices of the main commercial crops in the just-concluded kharif harvest season, and even before that, aggravated the distress.
The prices of major commercial crops, mainly groundnut and cotton, have dropped below their state-fixed minimum support price (MSP) – the average mandi price of groundnut seed this month was around Rs 3,800 a quintal, against the MSP of Rs 4,450, while cottonseed prices were also below the MSP of long staple cotton at Rs 4,320 per quintal and also that of MSP of medium staple cotton at Rs 4,020.
Groundnut and cotton are the main commercial crops grown in Gujarat. More than 70 per cent of India’s annual groundnut production is accounted for by Gujarat alone. Plummeting prices, coming amid two drought years, meant that rural Gujarat was facing a crisis, something with a bearing on the results — even if the extent of the bearing is open to debate.
Overall, nationwide, data shows that between 2011-12 and 2014-15 — the years of the United Progressive Alliance in power during its second term — the budget of the agriculture ministry alone, without adding livestock and research and education, was around Rs 56,131 crore. This went up by almost 73 per cent to Rs 96,991 crore during the following three years of the NDA government.
Issues ailing the sector
• Prices of most kharif crops have fallen below MSP
• Rural distress has been aggravated by droughts in 2014 and 2015
• Farm sector has grown at a slower pace in the first three years of NDA against three years of last govt
• Import and export policy have been mainly to protect the consumers’ interest
• Public procurement of commodities has been limited to a few crops
• Markets haven’t been integrated fully and schemes like e-NaM still work in progress
• Govt looking at faster changes in import and export duties to protect growers
• More focused approach on creating additional demand for products through mid-day meal scheme and public distribution system
• A strict no-no to any nationwide loan waiver
• More investment in creating rural markets and sharper increases in MSP
• Monitoring price deficiency payment schemes on a wider scale