Budgeting for peasants, planet – Opinion News

By Ashok Gulati and Ritika Juneja

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The pre-budget consultations are on. In the agri-space, what could be the possible suggestions for the FY26 Union Budget? We consider the premise that whatever policies and budgetary allocations the government makes, it must make agriculture more productive, competitive, and remunerative to peasants, and also benign to our planet’s natural resources.

We know that climate change is challenging our production system. In India, temperatures have risen by 0.7°C compared to 1951, and precipitation (July-September) has fallen by 6%. This is increasing the risk to India’s agri-production basket. Developing climate-resilient agriculture will need more resources for agri-R&D. It is currently less than 0.5% of agri-GDP, and needs to be doubled to at least 1% of agri-GDP.

It will also need to change farming practices to ensure soils have enough organic carbon and that they retain more moisture. While the recently launched National Mission on Natural Farming aims to promote sustainable agriculture, it cannot feed the growing population of India, which is likely to touch 1.67 billion by 2050. Nourishing soils through appropriate fertilisation, be it though bio-fertilisers or chemical fertilisers, is critical. But fertilisers have to be applied in right quantities and balances of macro nutrients like nitrogen (N), phosphate (P), and potash (K), and micronutrients like iron, zinc, boron, etc. 

The current fertiliser subsidy policy does not promote right usage of fertilisers. Urea is massively subsidised compared to other nutrients, leading to overuse of N and underuse of P, K, and other micronutrients. Technological innovations and products such as nano-urea and nano-diammonium phosphate, or single or triple superphosphates etc., have limited penetration against the backdrop of a highly skewed subsidy policy towards granular urea. If the Modi government can set this right, it would be a big service to our peasants and soils.

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There is ample data on fertiliser sales, soil health cards, PM-KISAN, etc. to collate and implement direct income transfer for the current chemical fertilisers subsidy on a per hectare basis. This would allow freeing fertiliser prices from controls, helping restore the N, P and K balance, as well as that of micronutrients. It will plug leakages of urea, improve nutrient use efficiency, and reduce environmental damage. It is a win-win situation, provided our political masters are able to communicate this with our farmers and earn their trust. And the time to do it is now.

But agriculture today is not just about the production basket. It has to be treated as a food system, from production to marketing to consumption. It should ensure food and nutritional security and also augment farmers’ incomes. Building value chains of agri-commodities on the lines of milk, where farmers get 75-80% of what the consumer pays, is the way to go. The starting point has to be fruits and vegetables, where typically farmers get only one-third of what the consumer pays.

Milk is our largest agri-commodity, the value of which exceeds the value of rice, wheat, pulses, and sugarcane put together. It is even more perishable than most of other agri-commodities, and produced by small holders with an average herd size of less than four cattle. 

If we have revolutionised our milk sector through cooperative as well as private sector dairies, making India stand tall in the world with 239 million tonnes of production, having a big lead over the second largest producer (the US at 103 million tonnes), why can’t we do the same for fruits and vegetables? Baby steps were taken in Operation Green by the government, but there was no committed caretaker to lead that. 

We need another Verghese Kurien to streamline our produce sector. Creating a separate board on the lines of the National Dairy Development Board, with a person like Kurien to head it, will help the government to bring about revolutionary changes for this sector. Else, we are afraid, we will keep jumping up and down to control vegetable inflation by banning exports of onions or wheat and sugar, and restricting the exports of rice, and then dumping wheat and rice in the domestic market at prices way below the economic cost of the Food Corporation of India (FCI). 

It must be noted that the economic cost of rice to the FCI is more than `39/kg and it is unloading in the open market at `29/kg. This is dumping by our own government. Wheat has a similar case. This must stop. It is anti-farmer, anti-markets, and against any rational policy. It only reflects a pro-consumer bias in India’s food policy.

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It is worth noting that it is such export controls and anti-market policies that inflict large “implicit tax” on our peasantry despite significant budgetary support through fertiliser and other subsidies including loan waivers. In this context, it is useful to look at the Organisation for Economic Co-operation and Development’s (OECD) producer support estimates (PSEs) generated for more than 50 major countries. They adopt a common methodological framework to estimate the impact of various agricultural policies — mainly for budgetary and market price support. 

The comparative results may shock some policymakers in India. For the triennium ending 2023, OECD countries supported their agriculture to the tune of about 14% of gross farm receipts (PSE 13.8%). Interestingly, China also supports its agriculture to the tune of 14% (PSE 14%), while India’s PSE is negative 15.5%. 

That happens due to negative market price support that results from export controls, dumping in the domestic market to push prices down, putting stocking limits on private trade, banning futures markets, and so on. Unless policies try to get the agri-markets right, Indian agriculture will keep limping and our farmers will keep agitating for higher prices.

It is time to wake up and put our agriculture, peasants, and planet’s concerns on high priority in the Budget.

The authors are respectively distinguished professor and research fellow, ICRIER.

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