BJP states like MP and Chhattisgarh, and Punjab which is run by allies, need disciplining to fix agriculture
Prime Minister Narendra Modi said all the right things on Wednesday, when he spoke of the need for a second green revolution driven by technology—lab-to-farm, he called it. By giving farmers soil-testing certificates, he also highlighted the need to curtail excessive and distorted use of fertilisers—usually heavily subsidised as well—which, in the long-run only hurts farmers as it ruins soil quality. Given how he has earlier spoken of the need to get more food processing/storage in place, it is clear the prime minister is going to be very focussed on improving conditions in agriculture, which is where a sizeable proportion of Indians are employed.
Indeed, the association he made with the tricolour at a book release function last Sunday made much the same point—green for green revolution, white for white (milk) revolution, and the navy blue of the Ashoka Chakra, he said, symbolised the need to get India’s fishery revolution going. Saffron, for those wondering how he left that out, is a different kettle of fish. His talking of a saffron revolution, Modi said, tongue firmly in cheek, would get the antennae of lots of people up, but saffron was really the colour of energy, where a revolution was also required!
The problem with Modi’s agricultural revolution, and he also realised this, was that it has to be delivered in the states, not at the Centre where he is power. That is why the man who has touted the Gujarat model all these years said that the focal point of the Gujarat model was really just emulating the best practices in various states.
So, if Modi is to try and catalyse a second green revolution, he cannot do it by fiat. He needs to do this through market-based incentives, he has to do this with the use of imaginative policies. And, yes, this is where his talk of cooperative federalism comes in.
As is most cases, there is no better place to start than at home. Some of the states run by either his party, the BJP, or its allies are the worst culprits when it comes to holding back agricultural progress, so the test will be to see if he can rein them in. And if he can channelise the savings from these states to those like Bihar and West Bengal, that would be true federalism.
Let’s begin with the Food Corporation of India, the reform of which is a recurrent Modi theme. One of the reasons why BJP bastions like Madhya Pradesh (MP) or Chhattisgarh, as this newspaper pointed out more than a year ago (goo.gl/TamDAz and goo.gl/eQwqOd), never protested against the Food Security Act and FCI’s operations was that they were benefiting from it, beyond the benefit to farmers from a lot more FCI procurement.
Let’s assume the Central government, through FCI, pays R100 per quintal of rice—it is actually R1,310, but the idea is to keep the maths simple. States like MP and Chhattisgarh offer a “bonus” on top of this—MP offers 11% more for wheat and Chhattisgarh 22% for paddy. So, Chhattisgarh will pay R122 for rice, but get R100 from the Centre. But, and here’s the beauty, it is still not terribly out-of-pocket and it earns the gratitude of the farmer even though the Centre is footing 82% of the bill. The 9.7% mandi tax Chhattisgarh charges pays for most of the bonus—in effect, the UPA paid for the NDA’s election campaign in Chhattisgarh and MP (goo.gl/GxDllH)!
In the Akali Dal-ruled Punjab, the mandi tax is as high as 14.5%. While the mandi taxes hike FCI’s procurement costs—FCI paid Punjab R3,582 crore of mandi taxes in FY12—the high bonuses distort cropping patterns. While farmers—and the country’s citizens—would benefit from growing more fruits and vegetables given the higher inflation in these commodities, the high MSPs ensure they remain wedded to wheat and rice. What a Modi needs to do, then, is to call BJP governments as well as those of the allies, and get them to stop these distortions immediately.
There is another problem these policies cause, they destroy the water table. Growing rice in Punjab uses up double the water used in West Bengal. But the reason why you can’t move rice cultivation to West Bengal is that the yield is 31% lower. Moving rice to eastern India would halve the water requirement but lower output by 30%.
So you need a lot more high-yielding seeds, and fertiliser, to be distributed in West Bengal. How do you do that? Doing so will also ensure Mamata Banerjee aligns with Modi on critical issues. This is what cooperative federalism is all about. Another aspect of such federalism was outlined in this column just a few days ago (goo.gl/v6CAEB). You do this by reducing FCI’s operations in Punjab, you do this by giving more per-acre farm subsidies to farmers in West Bengal... For that, however, Modi’s writ needs to run at home.
In a federal set up, Modi can’t dictate that FCI reduce operations in Punjab. His only hope is that Punjab lower wheat/rice output on its own. The way to do that is to convince his allies to stop subsidising water and electricity, and simultaneously hike the MSP on, say, maize, which uses a sixth of the water rice does. As farmers reduce production of the wheat/rice, FCI’s purchases automatically slow down, and the money saved can be given to farmers in Bihar and West Bengal. If Madhya Pradesh and Chhattisgarh are made to give up their bonuses, production of wheat/rice will slow down—once again, the money saved can be used to give per acre subsidies to farmers.
The other issue that Modi would do well to have examined by a neutral set of experts—not the politicians in the BJP who are convinced they know it all—is that of reforming the PDS and the almost manic revulsion towards Aadhaar-based cash transfers shown by most BJP leaders.
NSS data shows, for instance, the BJP is absolutely right when it says PDS is working very well in states like Chhattisgarh or Tamil Nadu. While over 71% of the rice bought by the poor in 2011 was from ration shops in Tamil Nadu, it was an impressive 48% in Chhattisgarh— the figures were 50.6% and 18.2% in 2004 for the two states, respectively. What’s important, however, is the quantity bought. The poor reduced rice consumption from 11 kg to 9.8 kg in Chhattisgarh and from 8.9 kg to 7.7 kg in Tamil Nadu. So, if the 250 million poor in India were to be given a subsidy of R100 per month—@R20 per kg for 5 kg ofwheat/rice—that would add to R30,000 crore compared to the R1.2-1.5 lakh crore spent by FCI on procuring 60 million tonnes of foodgrain each year (goo.gl/3ka3m5). If Modi is convinced, and his writ runs, this is something he needs to look at closely.