Ashok Dalwai Committee: The protracted effort to increase farmer incomes continues

By Aasha Eapen

In last year’s Union Budget, the government made a bold claim to double farmer incomes by 2022. To ensure this, it appointed an eight-member inter-ministerial committee, headed by Mr Ashok Dalwai, a senior Indian Administrative Services (IAS) officer. The committee was charged with the task of formulating reforms in the agricultural sector and map out a clear transition of farm policies from being production-oriented to becoming income-oriented.

Last year, the committee released a draft report which suggested that:

  • Agricultural marketing should be moved to the Concurrent list. It is currently in the State List, and the shift would enable both the state and central governments to effectively manage demand and supply levels throughout the country. It focussed on the need for both the Centre and the States, constituting special purpose vehicles, to own and operate the National Agriculture Market.

Further, the committee also demanded greater participation from the private sector in agri-marketing and logistics. States are tasked with creating better physical infrastructure, improving awareness programs and changing the regulations that enable local monopolies to benefit at the expense of farmers.

FPOs and VPOs

Another recommendation, as per the draft report, was to increase the number of Farmer Producer and Village Producer Organisations (FPOs and VPOs). A Farmer Producer Organisation is a type of partnership between private limited companies and cooperative societies. It seeks to bring together farmers to increase their bargaining power, is owned by shareholder farmers and administered by professional managers. Each FPO/VPO can cover 1000 farmers and/or 1000 hectares of land under its operation. This could be an important move because FPOs and VPOs play a vital role in integrating small and marginal farmers.

Currently, the Agricultural Produce Market Committee (APMC) operates the primary markets. The State governments have been asked to convert these markets into independent markets. The rest of the needs will be met by promoting private markets under the proposed Agricultural Produce and Livestock Marketing, (Promotion and Facilitation) Act, 2017 (APLM). States can make this operational as soon as the Union Agriculture Ministry releases its model APLM rules. Given that small and marginal farmers could benefit from this model-marketing system only if they had the withholding capacity, the report also suggested offering pledge finance on post-harvest produce as collateral.

In 2017, the agriculture sector received a 2.38 percent share in the Union Budget. This year, its share dropped to a paltry 2.36 percent. This, however, was not the case for the department of animal husbandry, dairy and fisheries, which saw a slight increase in their budget allocation from Rs 2921 crores to Rs 3580 crore. Given the fact that more than half of the population is employed in these sectors, the allocated amount should also be proportionate to this. The number of funds should, ideally, rise in tandem with agricultural productivity. Increasing productivity levels would raise its contribution to the Gross Domestic Product (GDP) as well.

The elephant in the room

The government’s plan to double farmers’ incomes by 2022 is certainly ambitious. Yet, the important hurdle that needs to be crossed before achieving this milestone is reducing the incidents of farmer suicides and stabilising their flow of income. As per the National Crime Records Bureau’s (NCRB) 49th Annual Report on Accidental Death and Suicides in India (2015), the number of farmers who committed suicide rose by more than 41 percent in 2015, as compared to in 2014. Maharashtra, Karnataka, Telangana, Madhya Pradesh, Chhattisgarh, Andhra Pradesh and Tamil Nadu bag the top spots, accounting for 87.5 percent of the country’s farmer suicides.

It is difficult to pinpoint a single cause of these suicides, as it is a combination of factors associated with the risk-filled profession of farming. These causes include the increase in the price of agricultural inputs such as fertilisers, seeds, crop protection chemicals and agrarian machinery, along with a hike in the price of labour due to the increase in the minimum wages. The rise in wages could be attributed to an expansion in the National Rural Employment Guarantee Scheme (NREGS) and the construction sector.

Relief schemes: The short-term solution

The Pradhan Mantri Fasal Bima Yojana (PMFBY), launched in April 2016, like its predecessors such as the National Agriculture Insurance Scheme, sought to compensate farmers for any losses in crop yield. Under this scheme, the farmer would be paid the difference between the threshold value and actual yield in the event of crop loss. It also covers post-harvest losses of up to two weeks. Similarly, loan waivers serve as both, a quick-fix measure and an appeasement tool to remedy their woes. However, these are ‘risk-mitigation’ options in a sector which is in dire need of ‘risk-prevention’ options.

The root cause of the problem can be attributed to low levels of productivity. A more effective solution to tackle this would be to modify the NREGS so that farmers get labour wage subsidies instead of 100 days of guaranteed minimum wages. The wage subsidy would increase labour supply and consequentially, reduce labour shortages. In addition, the NREGS could also include agricultural tasks. If governments and the farmers share costs, the NREGS budget would be hugely reduced, thereby reducing the budgetary expenditure. These modifications would also mean that the scheme covers a larger part of the population. In this way, both the farm production and the NREGS could grow in tandem with each other.

Some other relief measures include an upward revision of the Minimum Support Price (MSP) to more than 50 percent of the cost of cultivation, in order to reduce crop losses and increase profits for cultivators, following the recommendations made by the National Commission on Farmers (2006) and the Working Group on Agriculture Production (2010).

Adopting a new approach

Changing the focus of farmer welfare schemes will also help. This would imply a shift from emancipation to empowerment. Towards that end, a district-wise list of indebted farmers should be formulated and regularly updated. These farmers could receive counselling and financial advice.The subsidies should focus on capital generation and entrepreneurial Custom Hiring Centres (CHCs).

Institutional financing should cater to all farmers and not just to an exclusive group. Excluded sections of the farming community like women farmers, ‘Adivasi’ farmers, sharecroppers and landless agricultural workers should be brought into the fold by increasing access to institutional credit, crop insurance and other support systems.

Most importantly, the opinions of farmers, their concerns and ambitions should be given their fair share of respect and acknowledgement. It is important to put the achievements and challenges into the right context. A  gradual shift towards farmer independence, by setting smaller targets and revising further targets based on reviews would greatly help in increasing farmer incomes along agricultural productivity.


Featured Image Source:  Well-Bred Kannan (WBK Photography)on Visual Hunt / CC BY-NC-ND