India File

To say that farmers suffered because of note ban is not correct: Shaktikanta Das

Richa Mishra | Updated on January 08, 2018

Shaktikanta Das



Who would know better than Shaktikanta Das, the former secretary of the Department of Economic Affairs, the ‘Good, Bad, and Ugly’ side of demonetisation and GST, the two factors that disrupted the balance sheets of not only the government and corporates but also that of the common man. Das would like to call it “positive disruption” as he believes that the turbulence caused was short-term, and that once stability sets in, things will improve.

As the Narendra Modi-led government prepares to present probably its last Budget before the general elections, BusinessLine caught up with Das to know the challenges remaining; it is time to further push the agriculture reforms and strengthen the subsidy mechanism, as the government contends with the issue of fiscal deficit.

Two critical decisions of the government – demonetisation and GST – have impacted the entire economic structure. The after-effects were also seen in the agriculture sector, particularly for small farmers…

I will not agree that small farmers are facing distress due to demonetisation; they got their agriculture inputs either in the form of plant nutrients or fertilisers. Instructions were given to fertiliser companies to provide nutrients or fertilisers on credit. Even cooperatives were provided with sufficient cash. Small farmers take agriculture credit from the cooperatives, so the cooperatives were provided with substantial cash. In fact, NABARD provided an additional accommodation of ₹20,000 crore to give agriculture credit/crop loans to small farmers, and cooperatives provided them with cash. To say small farmers suffered because of demonetisation, I think, is not correct.

What is the main challenge, then, for the sector?

The main challenges of this sector are on the marketing and procurement side. You still have restrictions under the APMC Act. The ball is in the court of the States. States will have to amend the Act – some have done it. There is a strong necessity to either repeal or amend this Act to allow more markets to come up, so that the procurement mechanism for farmers is robust.

You cannot entirely depend on government procurement. The economy requires private procurement, small shops and kirana stores to sell products. The government cannot do all.

As as far as the government is concerned, it has to see which are the shadow areas where private procurement cannot be reached, and then go there. I think focus is now being given on this aspect.

In the last few years, not only have more remunerative MSPs been announced, there has also been an assurance and effort to back it with good procurement arrangements.

The focus of the government has been to plug leakages. While fertiliser subsidy is continuing, leakages must be plugged. And this is being done through neem-coated urea, DBT etc. In the present system there are lot of leakages.

You said subsidy will continue for the sector. Does it mean free electricity should also continue, or is it time to correct the tariff structure?

As regards agriculture tariff – wherever agriculture power is provided at a concessional rate – metering has to be done first. It should be at the receiving point, but some States do it at the sub-station level. Metering at the farmers’ level will ensure that farmers draw as much power as they require. Now, a lot of people draw electricity in an unauthorised way in the name of the farmer, and it gets camouflaged as free power. There is a need to have 100 per cent metering. The farmer must be convinced that the intention is not to restrict supply, but to plug diversion of concessional power.

Is the use of DBT working here?

At the present juncture you cannot do away with subsidy. Besides, in India, farm holdings are very small. Nearly 90 per cent of the holdings are small or marginal, so till it changes or is reformed, you cannot do away with subsidies. But you have to ensure that the benefit goes to the right people, and this is where DBT works.

Debates keep taking place about taxing the farm sector. Do you think the time is right to tax this segment?

Let us be clear...taxing farmers with bigger holding requires wider political consensus. It cannot be done without political will.

Anyway, rich farmers have to pay taxes on their income. For example, for the money in the bank, there is an interest tax.

For GST do you think many issues remain unanswered, particularly input credit…

Let me restate what is obvious and stated earlier. This is a new taxation which is replacing a 70-year-old indirect taxation framework. There will be initial challenges. What is critical and important is how you are dealing with these.

GSTN is also going through a process of evolution because tax rates are being changed; other aspects that require changes in programming have also evolved. Here it is not only the Central government department but also interface with the State GST department that is involved. Technology will take time to stabilise.

As far as the input tax credit is concerned, I think the government has made some assessment. But once the GSTN is fully streamlined, I think input tax credit will flow automatically. It is currently in a settling-down process. It is not that somebody is running away with the money. Initially, industry and traders faced difficulties , but as we go forward, things will stabilise and smoothen out.

Published on January 01, 2018

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