6:13 pm in News by Kavitha

In the immediate run, we demand an exemption from demonetization to all farm-related transactions. Demonetization impact on farming community has been very severe. This is the time of both kharif harvest and marketing, and rabi sowing and cultivation. Farmers are facing a serious hit on both fronts – with harvested crop piling up with the traders unable to pay in cash, inability to buy seed and other inputs for rabi sowing, inability to pay the agricultural workers for farm operations, problems in transporting grain, and so on. The government should immediately exempt all farm-related transactions – especially sale of harvested crops and purchase of inputs – from the demonetization. Appropriate safeguards and facilitation mechanisms can be put in place at market-yards/retailers. Cooperative Banks in rural areas should be allowed to exchange the old notes (Rs.500 and Rs.1000) with immediate supply of sufficient cash of lower denomination – easing the cash crunch in rural areas.

1. Farm Incomes: The Budget 2016-17 speech talked about ensuring “income security” and reorienting its interventions to double farmers’ incomes by 2022. Given the current distress condition and very low incomes of majority of the farmers, the target of doubling incomes in 6 years is highly insufficient. It will leave the distress completely unaddressed, and the real situation of the farming community unaltered. Furthermore, there was no mechanism put in place to ensure Income Security for farmers.

In Budget 2017-18, the Government should give an assurance of doubling the incomes in 3 years. It should establish a permanent, statutory Farmers’ Income Commission to ensure basic living incomes to all agricultural households. Especially in the light of 7th Pay Commission coming into force, the incomes of the employees in organized sector will see a substantive increase, whereas the incomes of farmers are either stagnant or declining (taking inflation into consideration). A Farmers’ Income Guarantee Act is being demanded by farmers’ organizations across the nation, and the government should announce this if it is serious about tackling the long-term crisis in agriculture. There should be budgetary allocations made for 2017-18 to set up the Farm Income Commission and get the institution up and running towards a full-fledged income security mechanism from 2018-19.

2. Overall increase in allocations for the farm sector: First and foremost requirement is for a major increase in allocations for Agriculture sector. In the Budget 2016-17, the government spoke about major increase in allocations for agriculture, but in reality, it was highly inadequate. The major reason for the jump to Rs.35,984 crores under Dept. of Agriculture, Cooperation and Farmers’ Welfare (DACFW) came from moving Rs.15,000 crore of interest subvention to this head (which was not the practice until Budget 2015-16). As shown in the table below, without including the interest subvention, the budget of DACFW was only Rs.20,984 crores which is lower than the allocations of 2013-14 and 2014-15!


2013-14 BE

2014-15 BE

2015-16 BE

2016-17 BE

Dept of Agriculture and Cooperation* (*not including interest subvention)





Dept of Agricultural Research & Education (DARE)





Dept of Animal Husbandry, Dairy & Fisheries





Sub-total Budget under MoA (not including interest subvention)





Interest Subvention





Total Budget under MoA including Interest Subvention





3. Adequate disaster relief outlays: Natural Disasters including drought and floods are a major cause of farm distress. Farmers reeling from two consecutive years of Drought got very little timely support from the government – as established in the Supreme Court too. A serious overhaul of the Disaster Relief system is urgently required, including the institutional machinery between Finance, Home and Agriculture Ministry streamlined and overhauled. Meanwhile, outlays for disaster relief to farmers should be increased to at least 25000 crore rupees, going by the drought experienced this year in various states (this is based on requests from states after their assessment of loss) for SDRF/NDRF to respond promptly to extreme weather events even as crop insurance system has to be improved drastically.  

4. Higher allocation for PMKSY with special focus on Rainfed Areas: Only 1660 crore rupees was allocated to Pradhan Mantri Krishi Sinchai Yojana (PMKSY), which combined several existing irrigation schemes. If the government is serious about expanding the area with irrigation access, this allocation should be at least doubled. Moreover, there should be a clear prioritization for Protective Irrigation projects and watershed development, with the aim of providing Protective Irrigation to dry crops in rainfed areas. The rainfed areas which constitute 60% of the cultivated area are most distress-prone and they are also the areas where there is a great potential for enhancing production and farm incomes. Watershed investments need full attention and cannot be scaled down in any way. This should be seen as a drought proofing effort in the context of climate change and in the context of India’s predominantly rainfed agriculture, and should be given dedicated support.

5. Access to Credit for real cultivators: Ensuring that tenant farmers or lessee farmers get access to bank loans should be a high priority, given that their numbers are increasing and they form a high-distress category. In view of the Bhoomiheen Kisan Credit scheme and NITI Ayog report highlighting the need to support lessee farmers, we propose that a Credit Guarantee Fund be set up to increase the bankers’ confidence in lending to non-land owning “licensed” cultivators, both as individual farmers and in Joint Liability Groups. Such a Fund needs to be established and can have around 5000 crore rupees set aside for the purpose in 2017-18.

6. Farmer Producer Organizations (FPOs) should be the focus of a really meaningful Startup India mission. All the incentives being provided under Startup India mission should be extended to FPOs, including tax exemptions, provision of capital and infrastructure. Though agricultural income of farmers is exempt from income tax, the income of FPOs is taxable at 30% from the very first year – this is a major disincentive for farmers to come together to establish collective business entities. With proper support systems, FPOs would lead to better profitability for small farmers. Government should provide investments into working capital, decentralized storage infrastructure, processing and value addition facilities for farmer collectives, for more direct and branded marketing by producer collectives etc. Allocation should be taken up to 3000 crore rupees.

7. Scaling up investments on risk-reducing, profitable ecological agriculture: The Paramparagat Krishi Vikas Yojana (PKVY) is the first national level scheme of its kind which seeks to promote organic farming and thereby, resilient farming to reduce riskiness in agriculture (whether of risk related to complete crop loss that afflicts monocropped, intensive agriculture systems, by introducing biodiverse cropping systems based approach, or by way of reducing out of pocket investments and thereby indebtedness of farmers). Such is the demand for agro-ecological approaches to be scaled up and mainstreamed that PKVY targets have been exceeded in the first year of implementation. This investment is also to be seen as both a mitigation as well as adaptation effort in the context of climate change, given that this approach reduces GHG emissions, as well as captures more carbon in the soil. From 421 crores in 2016-17, the outlays may be increased to at least 1000 crore rupees. Within this, a specific component of reviving traditional crop diversity in all farms of India may be introduced, to complement the efforts of revival of traditional cattle breed and agro-ecological farming.

8. Market Support: For existing as well as new price support and marketing schemes, including Price Deficiency Payments (new proposal to make MSP effective and meaningful beyond procurement by government of a few commodities in some locations), Market Intervention Scheme (for perishables and those products not covered under price support schemes) or Price Stabilisation Fund (for plantation crops), we seek enhanced outlays. This is one of the most crucial aspects to farm profitability. In fact, the Market Intervention Scheme should be expanded to cover more crops, and should also have more investments from the Centre. The Public Distribution System should be used to procure pulses and millets too, to increase the food basket for poor consumers and to encourage farmers to diversify through assured markets. Right now, a scheme like Price Stabilisation Fund has only 436 crore rupees infused under the scheme. This aspect of Indian agriculture needs serious attention, and at least 5000 crore rupees have to be set aside for this.

9. Incentivising Pulses and Oilseeds Production: Cultivation incentive should be announced for pulses and oilseeds on the basis of extent cultivated. Minimum Support Prices should be effectively implemented for pulses and oilseeds, operationalizing the new MSP concept articulated in Economic Survey 2016-17 (social and environmental rationalization of MSP) so that these various measures incentivize the higher production of pulses and oilseeds in the country.


For more information, contact: Kiran Vissa at 9701705743 / kiranvissa@gmail.com

This is a note put out by ASHA on the eve of the Finance Minister’s pre-budget consultation on agriculture, on 18th November 2016