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Issue No.: 573 | March 2015

Union Budget 2015-16 : Taking Care of Farmers’ Interests

Yalamanchili Sivaji
An industrialist can manufacture goods and sell them anywhere in the country and with virtually no price controls. In contrast, a farmer cannot sell his produce outside his state and even outside his district in some cases, leave alone having the freedom to export it outside the country.

Let me at the outset thank the Union Finance Minister Arun Jaitley for having invited me for this session for pre-Budget consultations. I humbly suggest that the Finance Ministry follow up the ideas that emerge in such a discussion, instead of treating it as an annual ritual.

The change of Government in New Delhi has engendered hopes of a new dawn in the entire country. Prime Minister Narendra Modi’s motto of ‘Minimum Government and Maximum Governance’ is something the country has been looking forward to for decades. I am glad that the Modi Government is taking forward economic reforms launched in the country since the 1990’s by successive Prime Ministers. The Governments over the years have unshackled business and industry so that the animal spirits of entrepreneurs can be unleashed. 

What is glaring, however, is that the Government has turned a blind eye to the agriculture sector, which provides livelihood to more than 70 per cent of the country’s population either directly or indirectly, and villages where most of them live.

An industrialist can manufacture goods and sell them anywhere in the country and with virtually no price controls. In contrast, a farmer cannot sell his produce outside his state and even outside his district in some cases, leave alone having the freedom to export it outside the country. The Government often does intervene only to hurt the interests of farmers. For instance, if onion prices shoot up in local markets, the Government chooses to ban exports. There is no consistent export policy for our agri-exports. While import of many of them are under OGL, or Open General Licence, exports are restricted. While liberalization is in existence for more than two decades, internal liberalization is conspicuously absent and restrictions still in vogue on transport, processing and storing of agro commodities. The Government should abandon such fire-fighting policies, come up with dependable, stable and credible export and import policies that safeguard farmers’ interests.

I suggest that the Government formulate a policy to liberate the agriculture sector from the Government’s stranglehold. As part of such a policy, food grain procurement should be decentralized, and the major responsibility shifted to the states. With the states now imposing various types of taxes and cesses on grain procured by the Food Corporation of India, the cost of food grains has been going up by about Rs. 2,500 per ton. 

Food grains are procured largely to meet the needs of the public distribution system and to serve as buffer stock. The Government has even enacted a law to provide food security to people, especially the poor. Should Governments view even food grains as a source of revenue for the exchequer? I can understand liquor and cigarettes being subjected to sin tax, but not essential items like wheat and rice.  

The cost of production of agricultural produce is area specific and with wide variation. Thereby the states are submitting their own figures of cost of production and are paying bonus too, since   they are nearer to the people. I suggest the union government to fix the Minimum Support Price (MSP) consolidating all these figures and the difference between the recommended prices of states and CACP may be met by state governments concerned. The MSPs can be linked to the index of inflation. 

While ten infrastructure Companies with sticky loans of Rs. 6,31,064 crore owed to public sector  banks are going for corporate debt restructuring, total outstanding direct finance to the whole  agriculture sector is only Rs. 5,31,701 crore spreading over 4,39,47000 accounts. Mention was made during the presentation of the last budget on 10th July of enhancing agriculture finance to Rs. 8 lakhs crore. But I am afraid in the absence of delivery system, it may be only a stock and not the flow.

I am amused when state and Central Governments incessantly talk of taking the fibre optic network to every household. Those who indulge in such fantasies are apparently unaware of the ground realities in Bharat that is India. Our rural areas are in a state of utter neglect. The physical infrastructure is in a state of mess with habitations having no roads, transport facilities, schools, health centres and power supply. If people die in a heat or cold wave for want of power, it amounts to State-sponsored homicide. 

With the Government abdicating its primary role of ensuring quality education and health care to all, people in rural areas especially are put to great hardship in accessing costly services being provided by the private sector. Unless the physical and social infrastructure in rural India is improved the exodus to urban areas will accelerate and make the life of even urban people more miserable. The Government should come up with a policy to decongest urban areas through suitable disincentives and improve rural infrastructure though suitable incentives.
I would like to conclude by raising a couple of fundamental questions. Should the Government of India continue to encroach upon states’ jurisdiction by dabbling in various sectors like education, health, agriculture and irrigation? I suggest that the Government of India take a U-turn and let the states function in their domain without any interference. They should be helped liberally with devolution of taxes and grants so that they can discharge their duties better.

The Government is struggling hard to meet the fiscal deficit and disinvesting its stake in public sector units. The state is discouraging smoking, but at the same time the government and their financial institutes are holding more than 1/3rd stake in I.T.C, the major cigarette manufacturing company. I advise the government to offload their shares which will help mop up about Rs.1,000 billion of the deficit. Through a policy of disinvestment of such shares, the Government can raise resources to accelerate investment in infrastructure and shed the odium of propping up the private sector.

DR. YALAMANCHILI SIVAJI, Former Member of Parliament, Guntur. 
This is the text of his Presentation at the pre-Budget meeting of farmers’ interest group on 16th Jan, 2015, convened by the Ministry of Finance, Government of India. 





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