Farmer distress. For for decades, this has been a constant narrative in India. And given that our country is still primarily an agrarian economy, it’s strange and perhaps even disturbing. Over with the last one year, we have seen farmer agitations get more aggressive, as they hit the streets of Mumbai and Delhi.
Their demand - a respectable living for them and their family.
At some level, Finance Minister Piyush Goyal met this demand in the Interim Budget for 2019-20. He increased the allocation for the agriculture sector by a almost 150 percent from Rs 57,600 crore to Rs 1, 40, 763 crore and offered the small and marginal farmer, who has a land holding of less than 2 hectares, agrant of Rs 6,000 per year.
Now Rs 6,000 per annum might translate to Rs 17 per day, but, this is a start and even, at times, more than what the farmers earn during the peak harvest season.
The Pradhan Mantri Kisan Samman Nidhi or PM-KISAN, was, perhaps, the big budget announcement this year. And hopefully it will go a way in realising the Narendra Modi government’s aim of doubling farmers’ income by 2022.
PM-KISAN for the win
There have been multiple schemes announced in the past, including an increase in the Minimum Support Price for 22 crops, but the PM-KISAN scheme stands to become a game-changer for the agrarian community. This is because the income support will be transferred directly into farmers’ bank accounts. As small and marginal farmers are often the worst hit due to uncertainties of weather, this scheme marks a welcome relief.
Beyond loan waiver
The second - and in my opinion the best - announcement was the government NOT announcing a farm loan waiver. According to this budget announcement, farmers affected by natural calamities can get an interest rebate of 2 percent in the first year. There’s more, as prompt repayment of loans would give them a 3 percent interest rebate for the entire period of reschedulement of their loans.
As noted economists Shankkar Aiyar says, “Farm loan waiver is like a saline drip for a patient in critical condition. It is a prescription not for cure.”
Farm loan waivers are temporary solutions and provide relief to the farmer for just one season.
Studies World Bank highlight that loan waiver prove to be detriment to the farmer in the long term, as banks can get more selective in extending credit. Moreover, small and marginal farmers, who are affected maximum by crop failures due to absence of insurance or steady income, seldom get the benefit of loan waivers as they borrow money from money lenders or brokers, rather than formal banks.
Bountiful crop as resulted in strong supply of farm produce, leading to prices falling. Further, the agrarian community is legally not allowed to sell their crop to the consumer directly, and have to rely on state-controlled auction markets - Agricultural Produce Marketing Committees (APMC) or middlemen.
Right now, the government’s Minimum Support Price scheme is limited to only 22 crops, but should ideally extend to all produce so that farmers are not forced to sell their crops to middlemen at low prices.
And if not include all the crops within the MSP, the government needs to find a pricing mechanism such that middlemen don't end up exploiting the farmers.
In addition to Direct Benefit Transfer (DBT) and other measures to increase farmer income, agricultural inputs and machinery could also have been exempted from indirect taxes, bringing down costs. This would provide a structured income support to small and marginal farmers to procure inputs such as seeds, fertiliser, equipment, labour etc.
There should also have been, in the budget announcement, some schemes to bring together the farming community with the tech and startup community to create an environment of collaboration for the collective good. Startups, such as CropIn Technologies, SatSure, Gold Farm, and AgriBolo, can help resolve issues of capital and market reach and access to farm mechanisation equipment with rental facilities. They can also provide market linkages.
From understanding soil temperament, to data-driven weather stations to predicting climate patterns, loss adjustment calculations, risk assessment, and crop insurance data for farm management, technology can help mitigate the multiple challenges associated with the farming sector. It would thus, bode well for the government to invest in accessible technology, and even partner with Farmer Producer Organisations and startups to boost the harvest, and thereby, the income of the farmer.
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