On his way to the prime ministership in 2014, Narendra Modi promised that, if his Bharatiya Janata Party won power, the government would raise the minimum support prices paid for crops such as rice and wheat to guarantee farmers a 50-percent profit on their production costs. The benchmark was first proposed by the Swaminathan Commission, formed in 2004 to address farmers’ economic plight, and Modi castigated the incumbent Congress-led administration for not implementing the commission’s recommendations. The BJP’s campaign manifesto repeated Modi’s pledge, and promised other measures “to enhance the profitability in agriculture,” such as lowering the cost of agriculture inputs and credit.
After Modi was elected, the gargantuan Food Corporation of India stopped procuring foodgrain from states that paid farmers bonuses on top of existing minimum prices. This led states to curb the practice, and so pushed farmers’ incomes down. By February 2015, the Modi government admitted before the Supreme Court that it had reneged on its pre-election promise. In response to a petition by a farmers’ organisation asking for measures to make agriculture more commercially sustainable, the government stated that minimum support prices, or MSPs, are set based on “objective criteria considering variety of relevant factors. Hence, prescribing an increase of at least 50 percent on cost may distort the market.”
In its first four years in power, the government kept MSPs so low that for seven major crops they did not even cover production costs. Farmers’ returns did not come anywhere close to 50 percent for any crop at all. MSPs offered lower net returns on almost all crops than they had under the previous government. Amid this, farmers had to deal with the disasters of consecutive nationwide droughts between 2014 and 2016, of Modi’s demonetisation experiment, and of falling global prices for agricultural commodities. The droughts were not the government’s doing, but its deplorable response to them was. Deflation in agricultural commodities was in great part beyond its control, but that was made up in large part by windfall gains for the treasury from a fall in the price of crude oil, which could have been passed on to farmers. Demonetisation, of course, was a catastrophe made by Modi. Added to this, many farmers faced determined efforts by the government to weaken their hold over their land, and often to take their land away completely.
The combination of these factors has left farmers desperate. They were not pampered earlier—tens of thousands of them committed suicide during the Congress years, just as tens of thousands had done earlier—but the decade before 2014 had seen a rise in agricultural growth rates and farmers’ incomes, and an increase in agricultural exports. The farming sector has been in a structural crisis for at least three decades, if not the entire duration of the Indian republic, but Modi inherited the most positive agricultural scenario there had been in a long time. From that relative high, Indian farming has plunged to a new low. Since last summer, what were earlier sporadic and localised farmers’ protests have coalesced into a movement. Late this November, tens of thousands of farmers from multiple states marched together in Delhi to demand redress. (Disclosure: I am a political activist, and as the founder of a national farmers’ movement, I helped organise the march. My interest in the agricultural economy dates back to my career as a social scientist.)
Farmers have not failed to connect the government’s policies to their plight. The last two years have seen a steady decline in the popularity of the ruling BJP in the countryside, and a survey at the start of this summer, by the Centre for the Study of Developing Societies, showed a 12-percent swing against the party among farmers.
The Modi government has responded, characteristically, with strenuous publicity and obfuscation. With a general election imminent, it is claiming to have taken historic steps for farmers, to have delivered all that it promised them and more. It is not hard to see through the bluster, but the promises and claims are worth scrutinising to see, behind them, the full extent of the government’s failures on agriculture.
The droughts that confronted this government were unusual in coming back-to-back—only twice before have there been consecutive droughts in the last century—but they were not the worst the country has experienced. They were, arguably, among the worst-managed in many decades. When official negligence on the issue was brought to the attention of the Supreme Court, in 2015, the central government responded that drought mitigation and relief was the responsibility of state governments, and that it had done everything it could. This was untrue. The central government has statutory obligations to anticipate and mitigate droughts as best as possible, to create guidelines for declaring and managing drought, to provide states with funds to cover the relief entitlements of drought victims, and to coordinate relief efforts. But the government did not effectively use the meteorological data at its disposal, or guide relief work. It delayed releasing assistance to the states that they needed to pay compensation for lost crops.
Though the court, in May 2016, directed the government to effect certain relief measures, it failed to implement many of them. None of the affected areas received universal access to foodgrain. Few farmers were given compensation, allowed to defer loan payments or receive fresh loans. Disbursements under the National Rural Employment Guarantee Scheme were delayed and below targets, especially hurting small and marginal farmers who depend on labour to supplement their incomes. The government later said that it had increased its budgetary commitment to the NREGS. This is true in nominal terms, but in proportion to the Gross Domestic Product the funds allocated shrank to 0.42 percent last year, from 0.53 percent at the start of the decade. The average number of days of employment provided to each eligible household has also dropped. Compensation for delayed payments has been held back for years. An independent study has found that only a third of NREGS payments reach workers within a fortnight, as required under law.
Demonetisation, in November 2016, could not have come at a worse moment for the farmers. They were recovering from the droughts, had just sold their kharif harvest and were in the middle of a crucial seasonal window for sowing rabi. Their cash reserves thinned, loans went unpaid, and purchases of seeds, fertilisers, tools were delayed. Labourers did not receive wages. Networks for bringing perishable fruits and vegetables to market collapsed for want of transport.
Despite the hardship, farmers managed to deliver a series of good harvests after the droughts, but then prices crashed. With many crops, the crash was exacerbated by government policy. With pulses, for instance, the government had reacted to high prices in preceding years by sanctioning massive imports. These continued even as a bumper crop flooded the market, and prices spiralled lower as supply kept soaring—a pattern that has repeated itself with other commodities as well. The government tried to shore up the market with increased procurement in pulses, but this could only help so much. Procurement operations were limited mainly to paddy and wheat, and that too in only a few states, even as prices of potatoes, onions, vegetables, milk and other commodities outside the procurement regime also fell. The government had created a price-stabilisation fund in 2014, but this was used to control prices for consumers rather than support farmers through procurement. Other official schemes for intervening in the market were badly underfunded. One analysis of prices in November 2017, during the kharif-marketing season, showed buying prices at government-sanctioned mandis to be averaging well below MSPs for seven of the eight major agricultural commodities covered. Farmers lost R32,702 crore from being forced to sell below the MSP that season, according to one estimate. When I visited agricultural mandis in eight states during the latest rabi marketing season, I saw a similar scenario.
Amid these serial crises, the government played a cruel joke. In February 2016, at a public rally, Modi vowed to double farmers’ incomes. This was a new promise, an attempt at mid-term damage control. The finance minister, Arun Jaitley, repeated the pledge in his budget speech the next day, and a massive campaign to publicise it followed. But for almost a year, the government did not specify by when it planned to fulfil it—the deadline was later set for 2023, safely beyond the term of the present government—or whether it was speaking of nominal or real earnings. After that, all it did was set up the Committee on Doubling of Farmers’ Income. The committee has published some excellent analysis and data, and has calculated that meeting the target would require 10.4-percent compound annual growth in farmers’ incomes over seven years. The government has not released any figures on farmers’ incomes since its pledge. But a NITI Aayog paper has estimated that, in real terms, farmers’ incomes grew at just 0.44 percent per year between 2011 and 2016.
This fit into a pattern of broken promises. Among the government’s boasts is that it has doubled its expenditure in support of agriculture. Its claim is based on two statistical tricks. First, the government has used nominal figures for comparison, rather than real ones adjusted for inflation, so the natural increase in the agricultural budget since the change of governments to simply keep pace with inflation is passed off as an increase in commitment. Second, the government has shifted a part of its “interest subvention,” or subsidies on interest payments, from the books of the finance ministry to the books of the agriculture ministry, and is pretending that this is an increase in commitment as well. In reality, this government has dedicated as much of its spending to agriculture as the previous one did—around 1.75 percent of the union budget and 0.25 percent of the Gross Domestic Product.
Then there is the much-hyped Pradhan Mantri Fasal Bima Yojana, a crop-insurance scheme introduced in 2016. On paper, it is an improvement on earlier agriculture insurance schemes, with a wider range of risks covered, assessment and coverage at the level of individual villages rather than larger administrative units, and a reasonable cap on the share of the premium that farmers pay to insurers, with the government covering the rest. But the scheme still ignores some critical risks, such as damage by stray animals, and village-level coverage is limited only to the major crop in each district—so growers of all other crops, assessed and covered at the tehsil or district level, are left vulnerable unless their entire area suffers a calamity. Many of the farmers covered understand very little of how to make the insurance work for them; with this scheme, as with its predecessors, the large majority of the farmers covered are automatically signed up for insurance when they access formal agricultural credit. The insured do not even get a policy document. The scheme was meant to reach half of India’s farmers by next year, but ,by the latest numbers, it only covers around a quarter of them—roughly as many as previous schemes did.
The scheme has helped insurance companies far more than it has helped farmers. Private insurers have charged exorbitant premiums of as much as 40 percent of the value assured—in one case, tied to a groundnut crop in Rajkot district in Gujarat, that figure was 58 percent. In the scheme’s first year, payouts to farmers came to R15,337 crore, against a total of R22,550 crore received in premiums—making for 32-percent net profit for insurance companies. For the 2017 kharif crop, the profit margin stands at 51 percent by the latest figures, with some claims yet to be settled. The government has steadily increased its spending on the scheme, but the public money is just being funnelled to private insurers. Premiums are rising faster than the sums assured, and the total area and number of farmers covered has grown only marginally. With funds for other agricultural schemes, such as the Rashtriya Krishi Vikas Yojana, being redirected into the insurance scheme, the funds that actually reach famers are shrinking.
Another of the government’s claims is that, in line with the promise in the BJP’s manifesto, it has expanded agricultural credit. True, banks have given more agricultural credit to farmers every year, in excess of the government’s annually increasing targets. But bank credit is not a budgetary expenditure, and its only demand on government spending is a small amount of interest subvention. More importantly, much “agricultural credit” goes to agri-business and industry, not to farmers. Banks have failed to meet targets on lending to non-corporate, small and marginal farmers. Tenant farmers and farm labourers remain largely shut out from institutional credit, and must borrow from extortionate moneylenders. And while the Modi government has readily written off or restructured massive amounts of bad loans to corporations, it has been very reluctant to do the same for farmers.
On agricultural inputs, this government has hurt farmers in three ways. First, while Modi claims his government has ensured a sufficient supply of urea, he forgets that one of the worst recent shortages came in his first year of rule, when the government inexplicably slashed urea imports. Second, fertiliser prices have risen in the last two years due to higher global prices and a weakening rupee. Third, just like other consumers, farmers have been asked to bear increased fuel prices now that global crude rates are going up, though they saw no decrease in prices while the global trend was in the opposite direction earlier in Modi’s tenure.
The list of failed pledges stretches on and on. On irrigation, Modi has spoken many times of the urgent need to complete unfinished projects. He has also claimed, without any basis, that his government has actually done so. Completion rates are far behind target, and actual budgets have never matched promised allocations. E-Nam, an electronic trading platform for agricultural produce, has seen some uptake, but it is hampered by the lack of internet connectivity, computers and phones, as well as suitable sorting and shipping facilities. The platform is far from achieving its stated aim of unshackling farmers from adhatis—the profiteering dealers they are officially compelled to sell to—and letting them sell to whoever offers them the best price. The BJP manifesto committed to reforming the Agricultural Produce Market Committee Act, the law that dictates how and to whom farmers can sell their produce, but there has been no move towards change.
The government has done almost nothing to fulfil its promises of a boost to organic farming; specific welfare measures for farm labourers, or aged, small and marginal farmers; new farm technologies, high-yield seeds, “agro food processing clusters” and mobile soil-testing labs; and so much more. Sharecroppers, landless cultivators, as well as tenant, women and Adivasi farmers continue to be excluded from all support systems. The crackdown on cattle slaughter, motivated by communal politics and paying no heed to the agricultural economy, has left many farmers unable to sell unproductive animals for slaughter. This costs them a source of income—income often re-invested in productive young animals—and burdens them with caring for unremunerative beasts. In many cases, abandoned cattle are now destroying standing crops. Added to this, the government has had no response to a supply glut that has sent milk prices crashing, or to rising milk production costs in the aftermath of the prolonged droughts.
These betrayals have been aggravated in many areas by the Modi government’s predatory efforts to take land and resources away from farming communities. The new land-acquisition law, enacted in 2013, requires that all acquisitions have the consent of landowners, include fair compensation and humane resettlement, and pass assessments of their environmental, social and food-security impact. In just over a year after Modi came to power, the government promulgated and then repeatedly re-promulgated an ordinance that exempted projects involving defence, industrial corridors, affordable housing, rural infrastructure and social infrastructure. The exemptions were so broad that they largely nullified the law. The ordinance was finally allowed to lapse after opposition by farmers’ organisations and in the Rajya Sabha, but the government has since stalled on implementing the law, and numerous states have passed their own amendments to undermine it. Many of the land acquisitions by government agencies since 2014 have skirted the law’s provisions. The government has similarly diluted Adivasi farmers’ rights over traditional forest lands and resources under the Forest Rights Act. The BJP manifesto promised a new national policy and agency to regulate land use and keep fertile land under cultivation, but that promise, like all the others, has remained unrealised.
Foreign earnings could have helped farmers in their current predicament, but government measures such as minimum export prices—guided by “inflation targeting,” and biased towards consumers and traders over farmers—have choked exports off. In the decade before Modi’s rule, the value of India’s agricultural exports quintupled, and the surplus from them hit a historic peak of $27 billion. After three years under the present government, that surplus was down to just $7.8 billion.
Last year, the government suddenly remembered Modi’s campaign promise to raise MSPs to 50 percent above production costs. It introduced new minimum prices in July 2018, and claimed that these honoured the pledge. But, typically, there was more trickery to this than truth. The prices only applied to the upcoming kharif, practically the last planting season under this government’s tenure. And, to calculate the new prices, the government used a restricted measure of the cost of production—described in official language as A2+FL, for “paid-out cost” plus the imputed value for family labour—rather than the comprehensive one that farmers demanded. The difference between using one baseline over the other is not small. From crop to crop, it amounts to anything between R500 and R1500 per quintal. Since the government did not allocate additional funds to account for the new prices or specify new guidelines for procurement, it is yet to be seen whether the revised prices will actually raise incomes.
A more telling verdict on the new prices, and on the government’s performance on agriculture, will come at the ballot box. Over and over again, the Modi government has assumed that it can get away with not doing very much for farmers. They might yet show that this belief is misplaced.