Arun Jaitley overtures won't work with rural voters

By raising the minimum support price (MSP) to 1.5 times the input cost in agriculture and allocating Rs 14.34 lakh crores for rural livelihood creation and infrastructure in the Union Budget 2018-19, finance minister Arun Jaitley has signalled the government’s recognition of the agrarian distress in the country.

Whether this will attract rural voters or not, the fact is that the Narendra Modi government appears jittery.

Its nervousness is couched both in trying to hold simultaneous elections to state Assemblies and Parliament in the name of efficiency and in projecting the Budget as pro-farmer. The former means that the government is reluctant to go into the general election in early 2019 hobbled after possible setbacks in the state elections. And the latter, of course, indicates its eroding rural support.

In the Gujarat elections last year, the ruling BJP won less than 40 per cent of the rural constituencies. On February 1, in Rajasthan, the party lost three byelections — the Alwar and Ajmer Lok Sabha seats and the Mandalgarh Assembly seat. These results may point to the mood in the adjoining states as well — Alwar abuts Haryana and Mandalgarh is next to Madhya Pradesh.

Eight states — Nagaland, Tripura, Meghalaya, Mizoram, Madhya Pradesh, Chhattisgarh, Rajasthan and Karnataka — will go to the polls this year. In the first three, which go to the polls this month, the budgetary signals may have little electoral impact. More worrying are the polls ahead in Madhya Pradesh, Rajasthan and Chhattisgarh, where the BJP is incumbent, and Karnataka, which it wants to wrest from the Congress. The BJP had won 85 per cent of the parliamentary seats in these four states in 2014.

These states have also seen farmer suicides and widespread agrarian protests. High levels of debt and crop failure are the most common causes of farmer suicides. In Karnataka alone, an estimated 70 per cent of the farmer suicides were due to indebtedness. The agrarian crisis, therefore, can impact the BJP’s fortunes in not only these states but nationally as well.

The Economic Survey admits that the promise of doubling farm incomes by 2022 is a distant dream. In the last four years, real agricultural revenues have stagnated and the medium term prospects are also dim. The Survey predicts that climate change may reduce farm incomes by up to a quarter.

Mr Jaitley seems to have achieved two immediate outcomes though. He has given campaign talking points to his party. The party will now get a political opening in rural areas. He may have also succeeded in dividing the broadly homogeneous farmers’ movement. The big farmers may stay away from agitations — assuaged by the carrot of an enhanced MSP.

Others may not gain from the promised bounty. Mr Jaitley himself has noted that 86 per cent of Indian farmers are small or marginal. Clearly, the number of those who can effectively participate in the market remains small.

The government’s credibility on enhanced MSP is also not very high. The claim that the enhanced MSP which has been announced was already offered in the last rabi season seems false — it was less than even the production cost.

Calculating the cost of production remains a contentious issue. The agriculture ministry had appointed a panel to examine the calculation of MSP. It pointed out several lacunae in the process, ranging from the sampling of villages for collection of cost data, undervaluing the time of the farmer, valuing it as unskilled labour, not projecting fixed costs for the year for which the MSP is announced, to underestimating land rents. None of this has been corrected.

The other issue is of procurement. Under adverse market conditions, state agencies like Food Corporation of India and NAFED are supposed to buy the harvest to “support” the price. There are 24 crops, including cereals, sugarcane, cotton, pulses and oilseeds that have official MSPs, but the state procures only about six of them. In addition, small farmers are forced to make distress sales to aartiyas (local trader-cum-moneylenders) at rock bottom prices.

The procurement is also skewed. In the recent past, due to enhanced MSP year after year, the procurement of rice and wheat far exceeds the minimum buffer stocks needed. On the other hand, there are crops like pulses and oilseeds that are procured only inadequately — either due to insufficient production or inefficiency of the agencies. The budgetary provision of Rs 200 crores for the government’s “market-intervention-cum-price-support-scheme” also seems inadequate. At best then, the enhanced MSP announcement seems like a lollypop but with no lolly on it.

The infrastructure projects announced are also unlikely to have full impact by election time. Although the target for institutional credit has been increased by 10 per cent to Rs 11 lakh crores, the fact is that only one-third of small and marginal farmers access it. They lack the ability to either buy or lease more land or invest in irrigation, farm machinery and power to increase productivity.

Those small farmers who do take loans often cannot repay them. Their vulnerability to risk factors beyond prices is also increased by climate change and rising temperatures, weak or unpredictable rainfall, falling soil fertility, pests and crop diseases.

The cattle economy, which used to be the insurance of the small and marginal farmers against failed crops, has been ruined by the government with its cattle market rules to prevent cow slaughter. It is estimated that about 70 per cent of the livestock market in India is owned by 67 per cent of small and marginal farmers, and by the landless. They are scared stiff by cow vigilantes and afraid of buying or selling cattle. Once the mainstay of the rural poor against crop failure and inured against unpredictable climatic conditions, the cattle economy has become a risky business.

It seems unlikely, therefore, that in the run-up to the state Assembly elections, or even the Lok Sabha elections ahead, the political mood in the rural areas will change drastically because of the budgetary moves. What could change it, however, is the invocation of time-tested communal frenzy on the eve of the elections.