There are no perfect solutions, there never were any. For the ministry, the big question is: What is the level of imperfection the Union minister is willing to settle for?
The tenure of the new Union Minister of Agriculture and Farmer Welfare, Shivraj Singh Chouhan, starts from a place of policy paralysis. He can neither shrug off the decisions taken by his predecessors or the legacy he inherits at Krishi Bhawan. His primary challenge is to regain the trust of the farmer. The manner in which the three farm laws were rolled out and how the establishment engaged with the agitators has left a bitter aftertaste. It will need sensitive handling that should begin with the scrapping of the infamous MSP committee formed in the aftermath of the farm laws.
India has not had an agriculture policy for decades unlike the US, the EU and China, who change their policy at frequent intervals. The commissioning of a new policy is in order and, during that process, the minister will gain time to get a grip on things. The policy will have to change tack on multiple fronts, beginning with pragmatically designing for “strategic autonomy” rather than targeting “self-sufficiency” in agricultural production. It must be appreciated that when it comes to Indian agriculture, what is true for the whole is rarely true for its parts. Some of this is attributed to the diverse agro-climatic regions in the country and the federal structure under which policy works.
The Union Minister will soon realise that central government policy is restricted by the fact that agriculture and land are in the domain of the states; animal husbandry and fisheries where real growth is visible are separate ministries; the budgetary allocations are controlled by the Ministry of Finance; and an outdated inflation policy is dictated by the RBI. The gods have been kind to the Narendra Modi government as India has not faced a major drought in the last 10 years, but the odds of one in the next five years cannot be ruled out. Chouhan’s task might not be easy.
The other big challenge for the minister is to convince the government and the RBI to change their methodology of targeting inflation. In developed countries, where central banks use the consumer price index to measure and control inflation, food constitutes a small portion of the expenditure basket, while wages impact it far more. But, in developing nations like India, food constitutes about 40 per cent of the basket. In trying to protect the consumer, RBI’s actions are constantly putting explicit and implicit pressure on the government to act on food prices, which leads to a spiral of lower farmgate prices.
How does this impact 42 per cent of India’s population, dependent on agriculture for its livelihoods? Consider government actions around non-essential commodities like onion, which expose its convoluted policies and why the idea of improving farmer livelihoods by doubling their incomes is difficult. A family of four consumes about 15 kg of onion a month. If the price spikes by Rs 20 per kg, the monthly budget of the family rises by only Rs 300 per month. While artificially subduing (through stock-holding limit, export restrictions etc.) farmgate prices by Rs 20 per kg leads to a loss of Rs 2,00,000 per acre for every farmer growing onions (assuming the yield to be 100 quintals/acre). Considering on an average an onion farmer cultivates about two acres of land, the order of magnitude is astounding.
It is neither the responsibility of the farmer to provide cheap food nor is it justified for the RBI to sacrifice farmers at the altar of inflation targeting. The government should roll out a mechanism to compensate farmers when its policies depress farmgate prices. Additionally, with the RBI, it can devise methods of softening the impact of rise in the price of food by direct benefit transfers (DBT) or coupons and other such for consumers. DBT has its share of issues, but is not uncommon.
The history of the ministries that impact farmer livelihoods is replete with a spate of unforced policy errors and missed opportunities. Policymakers baulk at documenting policy failures and fight back against changes that seek to improve regulation, enforcement, governance, transparency and accountability. Refusal to document failures means sowing the seeds of yet other policy missteps.
Policy makers should pay heed to the lessons learnt from the farm: There are no perfect solutions, there never were any. For the ministry, the big question is: What is the level of imperfection the Union Minister is willing to settle for?
The writer is chairman, Bharat Krishak Samaj