|Demand of the question
Introduction. Contextual Introduction.
Body. Need of making cash transfers in agriculture. How cash transfers will lead to agriculture on a sustainable growth path? Measures to make agriculture more sustainable and productive.
Conclusion. Way forward.
Agriculture is the most important sector of Indian economy. Indian agriculture sector accounts for 18% of India’s GDP and provides employment to 50% of the country’s workforce. The Indian government has, since independence, subsidised the agricultural sector. These subsidies are targeted to benefit Indian agriculture sector and farmers. But these subsidies have limited impact in terms of outreach and there still remains certain concerns regarding the nature of subsidies and their effectiveness to the developmental process.
Need of making cash transfers in agriculture:
- Fiscal burden: The economic survey, 2017 points out that despite spending as high as 3.77 lakh crore rupees annually on subsidies, there is no ‘transformational impact’ on standard of living of masses. India spends roughly 2% of the GDP in indirect subsidies, which put excessive burden on fiscal purse with lesser impact than desired.
- Wastage: India subsidises the cost of energy to pump water for agriculture, which encourages producers to pump more water than they need. This has made Indian producers among the world’s least efficient water users. Given that food and water are in short supply, a more effective way to run the system would be direct cash transfers which would help in reducing water wastage.
- Subsidies do not reach the marginalized farmers: The marginalised farmers, the main target audience for the government to come up with subsidies in the first place are not receiving it. It was observed that the better off farmers end up taking more than their fair share. Many landless labourers, agricultural workers and marginal farmers suffer from multidimensional Welfare schemes have also failed to bring them out of poverty.
- Prevent overuse: Agricultural subsidies also lead farmers to overuse fertilisers or pesticides, which result in soil degradation, groundwater depletion and other negative environmental impacts. Instead of giving subsidies, the government must move to direct cash transfer as it would ensure less use of fertilisers.
- Corruption: Providing subsidies doesn’t ensure it reaches the hands of the needy. Leakages, corruption are common malaise that reduce the effectiveness of subsidies. At the all-India level according to parliamentary standing committee it is observed that leakages were around 40% for food grains in India.
- Distortion: Agricultural subsidies distort the cropping pattern which leads to environmental degradation and pollution. Overuse and inefficient use of scarce resources such as water and financial losses to the government because of power subsidies.
How cash transfers will lead to agriculture on a sustainable growth path?
- Optimising inputs: Direct income transfer will enable farmers to use the money to decide their production and help in optimising the use of inputs especially of fertilisers. Direct cash transfer will also ensure better crop choices with minimal input. For example, a farmer who is using more fertiliser would not spend excessive on fertilisers and would try to use alternatives like organic manure.
- Government savings: With less spending on subsidies false beneficiaries will be removed. The move towards direct cash transfers will provide the governmentwith a minimum saving of Rs 50,000 crore annually which isevident in direct benefit transfer scheme, as per government figures. These savings can then be invested in better water management, especially drip irrigation (more crop per drop), for better infrastructure for Agri-markets, which will help farmers get better prices for their produce.
- Help negate money lender issue: With direct income transfer farmers can buy and use the necessary inputs in time without being in debt to the moneylenders and traders. This will also help reduce the total cost of cultivation and also stop exploitation of farmers by money lenders.
- Raising living standards of farmers: Direct cash transfer to farmers would help raise their living standards, reduce poverty and mitigate farm distress.
- Commercial production: Cash transfer would help smallholder farmers to move from subsistence production to more high value, commercial production by investing more in land and crops. Cash transfers would help farmers to increase productivity overcoming production constraints.
- Increased productivity: Cash transfer would help farmers to make best decisions for themselves. Productivity will increase as farmers would use cash for increasing revenue through horticulture, less inputs etc. Further farmers would be able to buy high yield variety that would help them to raise production.
Measures to make agriculture more sustainable and productive:
- Adopting appropriate technology: Farm practices must be sustainable and need to be technically as well as economically efficient. Intermediate technological solutions and affordable tools can encourage small-scale farmers to use them. New tools can help in increased productivity with minimal cost and labour.
- Adopting agroforestry practices:By mixing trees or shrubs into their operations, farmers can provide shelter to protect plants, animals, and water resources, while also potentially offering additional income.
- Rotating crops and embracing diversity. Planting a variety of crops can have many benefits, including healthier soil and improved pest control. Crop diversity practices like intercropping (growing a mix of crops in the same area) and complex multi-year crop rotations can increase productivity.
- Use of renewable energy sources: Use of solar, hydro-power or wind-farms is ecology friendly. Farmers can use solar panels to store solar energy and use it for electrical fencing and running of pumps and heaters. Running river water can be a source of hydroelectric power and can be used to run various machines on farms. This will also save money.
- Crop Diversity:Farmers can grow varieties of the same crop yielding small but substantial differences among the plants. This eases financial burdening.
NITI Aayog is exploring the various aspects of initiating a direct transfer of benefits to farmers on fertilisers and other inputs like seeds, electricity, and irrigation, on which a subsidy could be available. A proposal on Direct Investment Support (DIS) scheme, in line with the schemes that are already offered to landed farmers in states like Telangana and Odisha. Government has already been able to save around Rs.60,000 crore in schemes like Pahal through direct transfer of cash. The cash transfer with fundamental reforms in food and fertiliser subsidy, can help in tackling agriculture crisis.