Here’s what Modi govt can do to avoid rural Gujarat-like drubbing in 2019


A big takeaway of the 2017 Gujarat state polls has been BJP’s inability to hold on its rural seats in some parts of the state, though this hasn’t been a uniform trend everywhere, general perception and ground reports do indicate that rural voters haven’t been particularly kind to the party.

However, critics of this theory argue that if that was the case then BJP would have lost all the rural seats in the state, which also points to the fact that a particular community of farmers might have felt aggrieved with the party.

Nonetheless, agriculture in Gujarat hasn’t been doing particularly well, mainly in the last few years.

Data sourced from the NITI Aayog website shows that in 2014-15 and 2015-16, the Gross State Value Added of agriculture, forestry and fishing dipped to a negative 0.48 per cent and 1.28 per cent, respectively.

This fall, though against the backdrop of over 26 per cent growth in 2013-14 and also two back-to-back droughts, indicated that the state’s superlative performance in agriculture was showing signs of wearing off.

On top of that, the sharp fall in prices of main commercial crops in just concluded kharif harvest season and even before that aggravated the distress.

The prices of major commercial crops, particularly 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, as against the MSP of Rs 4,450, while cottonseed prices were also below the MSP of long staple cotton Rs 4,320 per quintal and also that of MSP of medium staple cotton Rs 4,020.

Groundnut and cotton are the main commercial crops grown in Gujarat and more than 70 per cent of India’s annual groundnut production is from Gujarat alone.

Plummeting prices which came against the backdrop of two drought years meant that rural Gujarat was facing a crisis, something which had a bearing on the results, though to what extent is open to debate.

Overall, nationwide, data shows that between 2011-12 and 2014-15, which was primarily UPA-2 years, the budget of ministry of agriculture alone without adding livestock and Research and Education was around Rs 56,131 crore, which went up by almost 73 per cent to Rs 96,991 crore during the following three years of the NDA government.

Though much of this increase in budgetary allocation was due to shifting of crop loan interest subvention from ministry of finance to ministry of agriculture, but nonetheless their was a rise in allocation.

In contrast, the same three years of the NDA produced 1.7% growth in agriculture, while in the last three years of the UPA, agriculture sector grew by 3.5%.

Of course, there was two back to back droughts in 2014 and 2015, but clearly the funds allocated for agriculture wasn’t showing results on ground.

During the same period, Minimum Support Price (MSP) of wheat was raised almost 19.6 per cent and 9.92 per cent for common grade rice, but much of this increase came in the last one and half years.

But, raising MSPs significantly impact less than 10 per cent of the farmers as much of the growers are outside the formal procurement system.

Going forward, the government has to rethink on a lot of issues, the biggest among them perhaps is to give right price to farmers.

It has set an ambitious target of doubling farmers’ income by 2022 but the basic growth in farming needed for this is simply not there, at least in the first three years of NDA.

“First and foremost, the government should at least recognise that there is problem in the rural sector, which is the bare minimum required to address the issue,” noted agriculture economist and former chairman of Commission for Agriculture Costs and Prices (CACP) Ashok Gulati told Business Standard.

He said that climate or weather-induced damages and losses to agriculture can be compensated through effective, timely and swift sorting of crop insurance scheme (Pradhan Mantri Fasal Bima Yojana), but for the wider issue of price collapse, several things need to be done.

Gulati said the government should stop exaggerating its production numbers and give a clear picture of the actual output which would go a long way in helping policy formulation and secondly, frame an agriculture trade policy which is dovetailed with MSP policy so that farmers are unduly put into problem.

“You can’t have an import policy where a crop is available at Rs 3000 per quintal in the international markets, while its MSP in India is higher. Or else, undertake proper buffer stocking of surplus produce,” he added.

The government can set up a war-room of sort to give it advance information on price movements so that proper policy interventions can be taken on time and knee-jerk responses can be avoided.

On its part, the Centre sources said is looking at lot of policy interventions to stem the drop in agriculture prices in rural sectors.

One option is being considered is making pulses procurement open-ended which would mean that the cap on purchases fixed at 2 millon tonnes would go, also there is thinking within the government whether to replicate Madhya Pradesh’s Price Deficiency Payment Scheme (Bhavaantar Bhugtaan Yojana) on a national level or participate in such state initiatives in some way.

However, there are divergent views on this, with a section within the government feeling that unless the results of the Madhya Pradesh pilot is clearly established participating in such programs could be counter-productive.

“To me, something which the government can immediately do is raise the MSPs significantly or bring something like a universal basic income programme and in the long-term proper marketing reforms is the only answer to give right price to farmers,” former agriculture secretary Shiraz Hussain said.

He said on marketing reforms front, 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 how to raise prices of agriculture produce because as per our analysis schemes like ‘Bhaavantar Bhugtaan Yojana’ of Madhya Pradesh hasn’t been very successful in stopping the traders from forming cartels,” Hussain said.

Yogendra Alagh, former union minister and agriculture economist said that government should first and foremost fix a tariff policy for commercial crops and otherwise which could protect the Indian farmers from imports and secondly invest heavily in development of markets.

“Programmes like Smart Cities should have a component for development of agriculture markets in the region,” Alagh said. On tariff policies, he said that something has been done on edible oils when government doubled the import duties, but lot more needs to be done.