The Hindu Business Line : Don’t cripple farmer minds with debt waivers

Another year has gone by with policy-makers promising ‘a new deal’ for the primary sector. Another year of heightened expectations, and unfulfilled promises. The story goes on with predictable repetition. And as February draws to a close, the last chills of a prolonged winter cast an almost palpable frost over the impact the Budget and its various proposals will have on the farm sector.

Productivity concerns are all-pervasive within the agricultural sector. Yields are abysmal and it is a shame that the vast pool of knowledge, skills and talent that India harvests at its agricultural universities and globally respected research institutions fail to help raise productivity from the land.

The cost of cultivation is on the rise and farmers are caught in a debt trap. Stagnation has plagued the sector, languishing with next to no growth the past few years. Land areas are shrinking as a result of increasing urbanisation everyday, and more farmers are moving away to remunerative professions. Will India be able to adequately feed itself in the future? The nation’s food security is indeed at risk, with long-term implications for every citizen.

What can the Budget do to help agriculture? Can policies be framed that look at the long term rather than aim at politically opportunistic quick-fix solutions?

Alternative to Debt Waivers

An almost certain expectation is that the Budget will aim to provide some assistance in the form of a debt relief package to the farming community. This would most certainly be applauded in Parliament and welcomed by debt-ridden farmers. However, in the long term, such quick-fix solutions are most detrimental. We throw fiscal responsibility out of the window and use the already ‘pressured’ Treasury to pay off farmer’s bad loans. Where will this end? How many more years will it take for the next debt relief package? Are we not subsidising the second rate and condoning poor agricultural practices?

Instead, it would make so much more sense to use the same money to increase the spread and effectiveness of agricultural extension services. This will have much more of a long-term impact. Experience has shown that a public-private partnership is the way forward to deliver extension services to the agriculturists.

Private companies and agricultural universities are sitting on enormous data on farming practices that can be adopted by farmers to raise productivity. Can the Budget use resources wisely to initiate a lab-to-land programme that works?

Knowledge is truly the only long-term, sustainable catalyst for growth in the primary sector. A great new policy measure that could be included in the Budget would be to motivate private companies by providing a tax-break on expenditure incurred for research, extension services and rural knowledge dissemination.

This will provide companies with an incentive to set up structured awareness-building programmes across the regions they operate in and increase tremendously the knowledge base in rural communities to raise the quality and quantity of agricultural output. This will energise rural wealth creation with fresh, world-class ideas and improve farm economics and enhance rural incomes.

Funds allocated to agricultural universities and research institutions must be enhanced, coupled with standards and clear guidelines for their utilisation. Funds must be channelled into areas of research that will positively contribute to improve India’s farm productivity.

Strengthen Programmes

Beyond awareness building, there is a need to support farmers by allocating funds to such Government programmes as the Integrated Nutrient Management programme, the National Oilseeds Development Programme, the National Horticulture Mission, National Spices Programme and Wasteland Development projects, among many others.

With shrinking cultivated areas, it is essential that farmers are assisted in the selection of the right kind of crops that can improve farm economics. However, a change in cropping patterns must be guided rather than a laissez faire activity. The Budget would do well to allocate funds for creating pockets of excellence for different crop types in different geographic regions. Like in the developed countries, India needs to lay down guidelines that stipulate how much land area must be cultivated for a specific crop. This would guide supply in the commodity markets and prevent sudden gluts and shortages, thus minimising volatility in crop prices.

Build Infrastructure

Massive infrastructure development is required in the sector and the Budget must most certainly address issues of strengthening the commodities exchanges and the Agriculture Produce Marketing Committee (APMC) across India. Transparent price discovery is crucial for farmers and eliminating information arbitrage that currently allows middlemen to exploit the farmers is critical. The Budget must go that extra mile to create a information technology-based platform that adds the required depth to the commodity market.

In addition, there is the need to put in place storage infrastructure and improve warehousing facilities. Existing budget allocations for subsidies and soft loans on micro irrigation, greenhouses, and similar modern agricultural systems must continue. These practices, though capital-intensive, could prove cost-effective, if managed appropriately.

The Budget must promote the farm sector by improving infrastructure, incentivising the creation and dissemination of knowledge, while ensuring fair output price discovery. Let us help farmers with the power of wisdom rather than cripple their minds with debt waivers that make them believe they cannot do any better.

(The author is Executive Director, Aries Agro Limited, Mumbai, and a visiting Faculty at IIM Ahmedabad.)