Expert Gyan: Is Budget 2018 Really Putting Farmers First?

Ambiguities and more talk than outlays mean that little is likely to change.

New Delhi: In his 2018 Budget speech, Union finance minister Arun Jaitley said, “My government is committed to the welfare of farmers… My prime minister gave the clarion call to double farmers’ incomes by 2022. We consider agriculture to be an enterprise and want farmers to produce more on the same land and also get better returns from their produce.” Jaitley said that the minimum support price (MSP) for kharif crops – crops cultivated during the monsoons – will be set at 50% more than the cost of production, launched ‘Operation Green’ with the aim to promote farmer producer organisations and agri-logistics associations, increased the agricultural credit target to Rs 11 lakh crore, allocated Rs 10,000 crore to boost fisheries, aquaculture and animal husbandry, and proposed a cluster-based approach for horticulture farming.

How significant is the government’s turn to the farm sector? The Wire spoke to three experts on what they think.

Raman Mann
Agricultural analyst

The first thing is this. The committee that they had recently formed to look into doubling farmers’ incomes – the Ashok Dalwai committee – had basically said that Rs 6.4 lakh crore investment is needed for this. But in this year’s Budget, the allocation has increased by Rs 4,845 crore. So this is a clear-cut indicator that incomes aren’t going to double anytime soon.

Then the other thing they have said is that they will increase MSPs for the kharif crop to 50% above costs. There is some ambiguity here, on what they will take as costs – A2 + FL (the costs of inputs paid plus the imputed cost of family labour) or C2 (inputs plus family labour plus working capital plus imputed rent of land).

As of now, MSP is below costs for some crops like wheat if you calculate on C2. For wheat, for example, the MSP was Rs 144 less than C2 per quintal. So do they really mean that they will now give 50% more than C2?

Even if we assume that yes, that is what they mean, we must remember that the Shanta Kumar committee had said that procurement for 94% of farmers doesn’t happen at MSP. So they won’t get anything even if there is an increase.

#Wheat
A2+FL=817; Acc to Swaminathan Report; A2+F.L+50%=1325/Qt
C2=1256/Qt; Acc to Swaminathan Report; C2+50%=1879/Qt
MSP set by #Modi Govt=Rs 1735/Qt
Hence, farmer is paid Rs 144/Qt less; but remember only 6% farmers benefit from MSP.@_YogendraYadav @mkvenu1 @rachitseth @acorn https://t.co/zJ0jXQxXzY

— RamanS Mann (@ramanmann1974) February 1, 2018

The other point is that if they really want to do something on the ground, they should have ensured some form of assured direct income. But there was no talk about that.

This is basically for the elections – the government is posturing through the Budget so that when they go to ask for votes, they can say they fulfilled the Swaminathan committee recommendation for MSP at 50% above cost. But again that’s only if they use C2 – we still aren’t clear on that. Of course 94% of farmers will still not get anything, but for elections they can say that what we promised you in 2014, we have done it. The common farmers, though, won’t see any difference.

Abhijit Sen
Retired professor of economics, Jawaharlal Nehru University, 
Former chairperson, Commission for Agricultural Costs and Prices

This is a Budget which is proposing a number of things that people had been crying about. The most important one of that is the MSP. Jaitley has said that he is going to have MSP at 50% above cost. Although this is over a period, it is not happening immediately. They are saying that since this is what you guys want, we will give it to you. But it is not budgeted. How much it’s going to cost – it’s going to cost quite a bit – is not budgeted. It’s ramifications for the rest of the system are also not spelt out. So the big thing on agriculture, on the MSP, is almost an afterthought.

He talked about Rs 11 lakh crore going to agriculture, but that’s not the number in the Budget document. Obviously what’s happening is that most of what he’s talking about are off-budget items, mainly through NABARD or other banking systems. So these are not costs being incurred by the government, but expected to be incurred by somebody else.

Overall, the agricultural and rural issues that Jaitley’s talked about are a whole set of promises most of which are off-budget, and many which are prospective, which means they are not even fully off-budget – there doesn’t seem to be an expenditure plan on these things. This is especially true of the things spent a lot of time on about which a lot of people are talking about – horticulture, fisheries and all of these things he’s adding by saying Rs 10,000 crore here, Rs 10,000 crore there. All of these are again NABARD windows – just opening up new NABARD windows.

So basically on agriculture it’s a lot of talk, backed up by very little money from the Budget, possibly more from institutions like NABARD. But much of it, even if the money comes from elsewhere, is prospective, like the MSP thing. It’s not very clear that it’s been thought out, because the implications of MSP at 50% above C2 cost would be huge. But they might turn around and say it’s some other cost. So what they’re promising, they haven’t really spelt it out. Because he can actually say he meant A2 cost, not C2 cost.

Ashok Gulati
Chair professor for agriculture at ICRIER

One needs clarity on whether promise of the MSP at 50% above cost is based on C2, comprehensive cost, or A2, the paid out cost. If they are talking of 50% increase over comprehensive cost, that would require, in paddy, an increase of about 45% in the MSP. Can they do that? In a single year? I don’t think so. And if they do it, what implications does it have in terms of food inflation, the food subsidy bill, distortions in cropping patterns, etc. If they announce and they want to do deficiency payments, what is likely to be the bill that will come? All these things will have to be carefully thought through. I hope they have done that, but the details are missing – it’s just a policy statement, and a very vague policy statement. I’m not sure whether they have the guts to increase MSP by 45-50% in a single year. They did not do it in four years, so how will they do it in one?

If they are talking about A2, then more then 50% of that is already in place. So then what are they talking about?

I welcome the other move, which is the fund created for fisheries and animal husbandry – Rs 10,000 crore. But this is for how many years? We don’t know if it’s for a single year, for five years, for two years. It’s not clear.

The other things are quite small. Rs 2,000 crore for agricultural marketing infrastructure, Rs 500 crore for Operation Green. Those are small.

I would say there’s nothing negative, but there’s nothing there that can double farmers’ incomes either.