Wednesday, March 16, 2011

Farming without funds

Is this year’s Budget pro-agriculture and farmer-friendly? The answer is both yes and no. It seems pro-agriculture because Finance Minister Pranab Mukherjee has diagnosed several weaknesses of the farm sector truthfully and has made all the right noises about them in his Budget speech. It seems farmer-friendly since it has proposed some measures that can benefit farmers, in theory.

The downside is that the action proposed in some of the areas identified by the finance minister has not been matched by the fiscal allocations required to produce positive results. So the net impact of the budgetary proposals on agriculture may not be noteworthy. The paucity of public investment in agriculture and allied sectors is also reflected in the total central plan outlay, which has been pitched at Rs 14,744 crore for 2011-12. This is just Rs 382 crore, or 2.65 per cent, higher than the revised estimates of 2010-11. If inflation is taken into account, the provision would work out lower than the last year’s actual spend.

The focus areas include extending the Green Revolution to the eastern region, integrating the development of 60,000 pulse villages in rainfed areas, promoting oil palm, developing vegetable clusters around urban centres, popularising the production and consumption of nutri-cereals (millet and coarse grain), accelerating fodder development, promoting sustainable agriculture and supplementing people’s diet with proteins through livestock development including dairy farming, piggery, goat rearing and fisheries.

Although these are well-conceived and need-based programmes, regrettably, the amount earmarked for at least six of them is a paltry Rs 300 crore each, which is nothing given the magnitude of the task. The scheme for developing 60,000 pulse villages is a case in point. Allocating Rs 300 crore means each village gets Rs 50,000 which may not even cover administrative expenses, let alone worthwhile measures to incentivise farmers to produce more pulses. No different is the case of the much- needed plan to revolutionise agriculture in the east the way it happened in the north-west in the late 1960s and 1970s. This is an idea whose time came long ago but it is still not too late to implement it. Compared to the north-west, the eastern region is agriculturally far better endowed since it has deep and fertile soils, plenty of sweet water and copious sunshine. However, only Rs 400 crore have been set aside to work the miracle of ushering in the Green Revolution in as many as seven states — Assam, West Bengal, Orissa, Bihar, Jharkhand, eastern Uttar Pradesh and Chhattisgarh. One can well imagine how much funding each state will get and what this can achieve.

Also, Mr Mukherjee did not forget to talk about sustainable agriculture to maintain land productivity. He also listed distorted pricing resulting in indiscriminate use of chemical fertilisers among the reasons for deteriorating soil health. Besides, he rightly prescribed the promotion of organic farming practices, such as biological control of pests and weeds and green manuring, to restore soil health. But he kept mum about allocating funds for this purpose.

This apart, the finance minister has, in a significant move, opted to raise the subsidy on interest charged by banks on agricultural loans to those farmers who repay their dues on time. This will reduce the effective rate of interest chargeable to such farmers to just 4 per cent — the level suggested by the National Commission on Farmers headed by noted agricultural expert Dr M S Swaminathan.

However, the worry is that this will prompt banks to lend more and more money to the same set of farmers who repay their loans regularly (generally large farmers). Small and marginal farmers, who actually deserve cheaper finance, may be left out since they are, at times, forced to default on repayment because of natural disasters and other factors beyond their control.

On agricultural marketing, the Budget speech has merely spelt out the weaknesses that denied the producers remunerative prices even when the consumers paid high prices. But it fell short of stipulating concrete action to remove these problems. This being the reality of Budget 2011-12, its impact on the vast agricultural sector is not too difficult to foresee.

Surinder Sud for Business Standard

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