Ten ways in which Budget can put more money in the hands of farmers

Second, the legal guarantee of MSP is another pressing issue that needs to be addressed immediately. Farmers have been agitating on this issue since February at the Punjab-Haryana borders. The MSP should be based on the comprehensive cost of production C2 plus 50 per cent, as recommended by the M S Swaminathan Commission. A legal status for the MSP will not place any additional burden on the government. The private sector has been exploiting the farmers by purchasing the crops below MSP. In an earlier piece, I had explained how legalising MSP can check this (‘The Minimum Support’, IE, February 21, 2024).

Third, the farmers are being given short-term crop loans under the Kisan Credit Card (KCC) scheme. They get interest subsidy on loans only up to Rs 3 lakh. They need to repay the loan once every year and are re-eligible for the loan the very next day. Many farmers generally borrow money for a day from private money lenders and pay a very handsome interest for using the money for only one day. The KCC should be like a running overdraft account in which the interest is paid on the amount of the money used. The KCC interest subsidy limit and loan amount limit should also be increased to at least Rs 10 lakh, as these are fully secured loans where the value of the mortgaged farmland is generally multiple times the amount of the loan. A flat interest rate of 4 per cent should be charged. There should be no restrictions on using the money. It’ll greatly boost capital expenses in the agriculture sector.

Fourth, there is no age-old social security for farmers. The government must pay an amount of at least Rs 3,000 per month as an absolute non-contributory pension to small and marginal farmers above 60 years of age who own land up to 2 hectares. Contributions of the state governments could augment that of the Centre.

Fifth, animal husbandry and dairy contribute more than 25 per cent to the agriculture GDP, but the frequently crashing milk prices and the politics around cattle rearing, trade, transport and disposal of unproductive cattle have adversely affected farmers’ incomes. Amul, a farmers’ cooperative, is the price leader in the milk market. Private dairies generally charge consumers the same price as Amul, but they purchase milk from the farmers at much lower rates. The private dairies should be legally bound not to purchase the same quality milk from the farmers below the rate being paid by Amul in the same market. Milk or eggs must be included in the midday meal scheme for school-going children, depending on their own preference. This will ensure remunerative prices to farmers and help mitigate malnutrition and stunting.

Sixth, the fertiliser subsidy is actually a consumer subsidy in the garb of farmers’ subsidy. While calculating MSP, the subsidy amount is deducted from the cost of production. Under the current formula, the final MSP is declared at 1.5 times the cost of production. If a farmer receives a fertiliser subsidy of Rs 200 per quintal on a particular crop, so Rs 300 per quintal is deducted from the final MSP. The MSP should be declared after taking the market price of fertilisers and other inputs into account, not the subsidised price.

Seventh, under the PM Fasal Bima Yojna, the premium is being paid by three stakeholders, but in case of crop damage, the farmers are not paid compensation by the companies if one or more stakeholders have not paid their share. The farmers pay 1.5 to 5 per cent of the premium amount; the rest is paid by the state and the central governments. When the central and the state governments together are anyway paying almost all of the premium amount, why burden the farmers with unnecessary paperwork? The scheme should be simplified, and the entire premium, including the state government’s share, should be initially paid by the central government. The Centre can adjust the states’ share of the money due to the states.

Eighth, the policy of food inflation targeting by frequently banning exports or imposing stock limits on the agri-produce, dumping wheat and rice in domestic markets by the Food Corporation of India (FCI) at prices much lower than actual costs are examples of government injustice against the farmers. These policies should be done away with.

Ninth, the budget for agriculture education, research and extension, storage and processing of crops, animal husbandry and dairying must be increased significantly. The total agriculture and allied sectors budget is just around 3 per cent of the Union Budget, which should be increased to at least 7.5 per cent. In the last five years, a large chunk of the agri-budget remained unspent. This seems inexplicable when a lot of avenues are available for expenditure. All unspent agri-budget should be carried forward.

Tenth, the government has written off loans amounting to around Rs 16 lakh crore in the last 10 years. Most beneficiaries are from the corporate world. Farmers are burdened with loans due to policies that are against them and the denial of remunerative prices for their produce. So, at least the small and marginal farmers deserve one-time loan waivers.

Farming is the backbone of the country, and the government needs to be sympathetic to their demands and let more money flow to the rural sector. It’s good economics and, of course, good politics.

The writer is President, Kisan Shakti Sangh