New Institutional and Financial Arrangements required to bring the Farmers out of the present morass
Opaque System, Obscure Farmers
- suresh kumar*
Opaque System, Obscure Farmers

DESPITE their substantial contribution to the national GDP, India’s farmers, even in agriculturally advanced states, are hostage to government policies and programmes, as well to the machinations of informal players, moneylenders, aarhtias and even dealers selling fertilizers and agro-chemicals. Undoubtedly, the government is spending a lot on subsidies on irrigation, fertilizers, seeds, interest subvention and energy for the farmers, but these are neither transparent not fairly targeted. Rather, these are inequitable and skewed. Unfortunately, the premier of a state and the pauperised marginal farmer get the subsidy at the same rate. The vicious impact is further aggravated by the supply of poor quality seeds, spurious agro-chemicals and fertilizers. The market imperfections, too,add to the farmers’ misfortune, thus completing a doomed scenario.

The plight of ‘cultivating farmers’ is much worse as the system does not recognize farmers who cultivate land taken on lease. All subsidy programmes provide for the landowners. The lease or mortgage of land for cultivation is not registered. The market of faith through oral leases or patta system works well even in the absence of any adequate regulatory mechanism, so long as there is no dispute or a calamity. Else they suffer irretrievable losses.

The vagaries of weather add to the smorgasbord of volatile factors that farmers are doomed to deal with. The experience shows that in a cycle of three years, the farmers suffer either a drought or a deluge. The country has not been able to find a durable solution to this, despite evolution of fairly advanced technologies. The existing calamity relief at a rate of Rs.13,500 per hectare is grossly inadequate. Such a relief does not offset even the input costs. Besides, the affected farmers need some money for their living. Since borrowings from informal sources remain the only hope, the debt mounts, becoming a persistent problem.
The government has tried various forms of crop insurance, including weather and income based crop insurance schemes, but most of these have turned out to be a failure. Even the latest PMFBY is not expected to go too far. None of these schemes are farmer or plot based. These do not address the multifarious perils faced by the farmers. Even the sum insured is not sufficient to cover the full risk that the farmers have to contend with. Ironically, these schemes expect most farmers in a village, or the village as whole, to suffer from a calamity, which happens very rarely. So the loss to some is the loss to none – clearly an error in thinking.

It is of course true that all across the world, the agriculture is subsidized and dependent on weather. However, elsewhere, the farmers do not suffer knowledge and infrastructure deficit. They are facilitated by the system for better living with some, if not full, occupational freedom. In our country, the financial and institutional arrangements need to be re-worked towards this end.

Universal Basic Income (UBI) for farmers can be a good innovation and the crop insurance should be made plot/farm based. Land leasing should be regulated through an appropriate legislation, protecting the rights of owners and cultivators in an equal measure. The cultivators should not be denied benefits for their investment and efforts on farm. They should not, however, be able to retain the land for a day more than what is mandated under the lease agreement. ‘Kurki’ or sale of land in favour of a leaseholder should be barred. 

The subsidy on fertilizers seems unavoidable because the country is still not self-sufficient and is dependent on imports. Thus, intermediate support is required to provide timely supplies of the required fertilizers at affordable prices. The farmers do not have resources and information to negotiate and access the quality materials. They cannot even deal with the importers or the dealers. However, a better system than what we have today is required to check the pilferage. 

The remaining subsidies comprising free power, water, cheaper seeds, interest subvention and cheaper implements etc. may be reformulated and the money used to fund a Universal Basic Income (UBI) scheme for the farmers. The present system is causing severe damage to the natural resources. Each farmer may be paid a basic amount as income every month for his day-to-day spending and he should defray his own expenses even for purchase of inputs. Surely, the amount of basic income will vary for different cropping zones as also for different geographical regions. Uniformity in income may be a political necessity, but it is not justified. The basic income should be commensurate with the minimum level of livelihood that we aspire for our citizens. It should also be linked to the present levels of family income – those with higher family incomes should be paid less, or nothing. The UBI should certainly include some amount for input costs so that production efforts yield enough for the recipients, minimizing their dependence on intermediaries. The idea was discussed in the Economic Survey 2017, but did not catch the imagination of those who formulated the Union Budget.

Crop insurance should be restructured and made farm based. It is not a cogent argument that in such a situation, the farmers will not devote themselves fully to the growth and protection of their crops. It is also not logical to say today that the calamitous loss cannot be assessed at individual farms. While better technologies are available, though with some extra investments, the age-old annewari (girdawari) system is also trustworthy. With appropriate techno-legal safeguards, and an affordable premium, the farm-based insurance can help in alleviating the farmers’ miseries in the long run. It may also save substantial valuable resources. 
The marketing reforms have not been discernible. There has, in fact, been no major new initiative after the introduction of MSP during the green revolution era. Even in states like MP and Chhattisgarh, the same old formulations are being re-fixed. While the MSP is essential for assured marketing of food grains and pulses, for other crops, free play of market should be encouraged. MSP for other crops should be prescribed to determine deficiency in prices, which the farmers realize in the market. The deficiency price support should be given directly to the farmers who realize a price less than the MSP. The apprehensions of misuse can perhaps be catered through amendments in the existing APMC Acts, for effective regulation of sale/purchase transactions and promotion of public-private partnership in agri-marketing. The amended laws should also encourage e-marketing.

The agriculture reforms should thus focus on knowledge economy and systemic alterations with new institutional and financial arrangements to manage and supervise the production and related risks, reformulating the subsidies, payable directly to the deserving farmers as basic income.
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*Suresh Kumar is a retired IAS officer who served as Additional Chief Secretary (Development) in the Punjab Govt. He can be reached at 


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