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Interviews | Ramesh Chand, member of NITI Aayog and eminent agriculture economist, speaks to Sanjeeb Mukherjee
Ramesh Chand, member of NITI Aayog and eminent agriculture economist, speaks to Sanjeeb Mukherjee

Ramesh Chand, member of NITI Aayog and eminent agriculture economist, speaks to Sanjeeb Mukherjee

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published Published on Sep 29, 2015   modified Modified on Sep 29, 2015
-Business Standard

India’s growth in agriculture and allied activities has struggled to reach the targeted four per cent average a year in the first three years of the 12th five-year Plan because of a host of factors. The below-average farm growth is widely expected to deepen the crisis in the farm sector. In an interview with Sanjeeb Mukherjee, newly-appointed member of NITI Aayog and eminent agriculture economist Ramesh Chand  said over-reliance on price incentives in the last few years has made agriculture growth fragile. Edited excerpts:

* India’s agricultural growth in 2014-15 is expected to be a meagre 0.2 per cent, down from an earlier estimate of 1.1 per cent, which would make it the third year of below-four per cent farm growth. What is the main reason for this?

One of the main reasons agricultural growth has faltered in recent years is bad weather and excessive reliance on price incentives. From 2005 to 2012, the agriculture growth was over 3.5 per cent, but it was mainly driven by prices. Any growth which is driven by prices tends to be fragile. In the short term, price incentives might yield results, but not in the medium and long term. We need to think how we can iron out the cyclical variations in agriculture growth; we need to put in measures, wherein the growth should not fall below 2.5 per cent in any year. Our goal should be to achieve four per cent annual farm growth over a period but that should not be done through spikes and troughs. It should be achieved through sustained and smooth year-on-year growth.

* You said in previous years, price was used extensively to achieve the farm growth target and it is not the correct way. Why do you say so?

Prices are quite important but not the best instrument to achieve agricultural growth in the long run. If growth is excessively dependent on prices, it cannot be maintained. Prices should aid in achieving growth but not dictate growth. Instead, agricultural growth should be driven by infrastructure, irrigation, private investment, competition and technology. The government is trying to harness the potential of non-price factors in agriculture, which is very important. We must  bring efficiency in production through  sprinkler and drip irrigation, ‘per drop more crop’, efficient use of fertiliser, cost-saving mechanisation, rationalising fertiliser subsidy, promoting judicious use of fertiliser through soil health cards, use of quality seed, adoption of sustainable practices. This government’s emphasis is on doing things which can sustain growth without raising the cost of production. Rather, increase farmers’ income on a sustained basis.

* Does it also mean the  minimum support price won’t be raised much by this government?

I am not saying we should not raise MSP of crops but there should not be any unreasonable hike as in the past. Instead, we would focus more on raising the income of farmers through other means like integrated markets, equipping farmers to benefit from post-harvest value addition, amending the Agricultural Produce Market Committee (APMC) Acts, creating infrastructure in rural areas, etc, bringing competition in farm markets.

* But, most of this is long-term measures, I mean those which won’t yield immediate results, what do you suggest to elevate the condition in the short-term?

To me one should not ignore long-term objectives for short-term gains and vice-versa. One should not be sacrificed for the other and both should go hand in hand. And there are ways to achieve this

* How do you plan to achieve the objective of ensuring that on the one hand, farmers get some return, while on the other, long-term problems of Indian agriculture are gradually addressed?

It has been seen that prices of many farm products go down during the harvest season, causing distress to farmers. MSPs have been found an effective method to mitigate this to a limited extent for a few crops and in a few areas. What I am suggesting is a method of deficiency price payment.That is, if a price realised by farmers in the market is lower than the assured price of a commodity, a mechanism should be developed to pay for the difference between market price and assured price to farmers, without any obligation of purchasing the crop. This is doable and involves much less cost compared to price assurance implemented through procurement of produce.

* But, how do you identify farmers? To pay the difference to every individual farmer, you need a system of identification.

Identification is not difficult. For farmers who sell their produce in mandis, APMC receipts have most details and for those who do not sell their produce in mandis, revenue records, etc, can be used for identification. As it is not possible for public agencies to buy each crop at every place, so price support cannot be given through procurement to a large number of crops. The advantage of this proposed system of “deficiency price payment” is more farmers and more crops can be covered and over a wider area.

* Have you identified any crop in which this experiment can be started?

Yes, we are suggesting cotton as a crop in which this system can be implemented, as cotton is a commercial crop where almost the entire production is meant for the market.

* Another contentious issue in agriculture is of subsidies and their targeting. What is your view on this?

There are basically two types of subsidies which the Centre gives: one is on fertilisers and the other is on credit i.e interest subvention. We are in the process of consulting the states on how to rationalise fertiliser subsidies. We need to draw a distinction between income support and input price subsidy. Subsidy on input is meant to promote use of particular input and thus should be linked to use of input and in turn level of production. Giving fertiliser subsidy to those farmers who don’t use fertiliser is not justified. It amounts to giving gas subsidy to those households who uses firewood. Giving any subsidy on a per-hectare basis, irrespective of use is not a promotional measure. To me all subsidies, be it fertiliser, diesel or electricity should be unit-linked or linked to usage of input.

* Now, coming to more contemporary issue, many experts are saying that sudden lull in the southwest monsoon after mid-August would impact rabi harvest, though lately there has been some revival, but it is not big enough to wipe off those concerns?

Rabi became a serious problem last year due to unseasonal and excessive rains and hailstorm. In the rabi season; wheat and mustard are the main crops. In wheat, more than 90 per cent area is irrigated, while in mustard more than 70 per cent area is irrigated. At this stage, I do not see any adverse sign for output of next rabi crops. In any case, even if the Met department’s prediction of 12 per cent shortfall comes true, rabi production in 2015-16 is not likely to be worse than 2014-15, unless there is any unforeseen weather change. If the rabi harvest is normal then farm growth in 2015-16 should be somewhere around 2.5 per cent.

* There has been some criticism of the government over its farm trade policy, where, in one hand, it stopped export of onions to protect consumers, while on the other, it raised the import duty on edible oils to save the farmers. How do you see this?

I feel the government is trying to balance the interest of consumers and farmers both through its agriculture trade policy. The export of onion was curbed at a time when farmers do not sell their produce, so those who were affected by this restriction were the traders and not farmers, who had already sold his crop. I feel, India should follow strategic liberalisation and not free-trade as far as agriculture products are concerned. It should continue to follow the secular trend in international prices and take measures against volatility.

* Coming to the  question of farmers’ suicides and a sudden rise in these in the past few months, what should the government do?

Agrarian distress results from two types of factors: (a) shock in production or prices; (b) cumulative effect of farm income remaining lower than family expenses over a period of time. We need to adequately compensate those farmers who commit suicide due to sudden shocks like crop failure, etc, so that his family is saved. But, it has been seen that most farm suicides happen not due to one factor but it is the cumulative effect of family expenditure exceeding the family income. We need to find ways to address expenditure incurred by farmers on health and education by extending and strengthening public health and education facilities. On the income side, efforts should be made to provide non-farm employment and income opportunities. I have done studies to show that if a farmer operates on less than 1.5 acres, he is bound to be below the poverty line. This also showed that more than 50 per cent of farmers can’t remain above the poverty line if they do not get some income from outside their farm. Thus, alternative sources of income are extremely important for farmers particularly with a low holding size.
 
Business Standard, 25 September, 2015, please click here to access
 
Image Courtesy: Business Standard

Business Standard, 25 September, 2015, http://www.business-standard.com/article/economy-policy/farm-sector-in-distress-due-to-excessive-reliance-on-price-incentives-to-boost-growth-ramesh-chand-115092


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