How Seriously Should We Take Sitharaman’s Idea of Zero Budget Farming? 

India is still struggling with a holistic plan for doubling farmer income by 2022.

Around 38% of India’s households were self-employed in agriculture during 2017-18, according to the Periodic Labour Force Survey (PLFS) findings. In the same year, the PLFS notes, casual labour in agriculture was recorded at 12.1%.

Put together, this implies that as of 2017-18, nearly 50% of India’s total households were dependent on agriculture for their livelihood.  

Even though food grain production has increased by 33.4% over the last decade, there has not been much improvement in the well-being of India’s farmers in the same period. The current agrarian distress and news of agitations by farmer organisations in different parts of the country bears testimony to this fact. 

It was hoped that the recently elected government with a huge mandate would have some serious policy measures to assuage the hard condition of the farmers. Much was expected from Friday’s Budget, but it left much to be hoped for.

Zero budget or zero costs?

The Budget speech presented on Friday mentioned the word ‘agriculture’ only three times. And, that too without substantiating on the policies mentioned. Both this year’s budget document and the Economic Survey 2018-19 released on Thursday focus on adoption of ‘Zero Budget Natural Farming’ (ZBNF). 

This is a practice where farmers adopt traditional practices of farming, leading to a decline in the usage of chemicals and pesticides, promoting soil health and other environmental benefits. The argument goes that this may help in not only improving land productivity, but also contribute towards doubling of farmer income.

It is not clear from the budget document what is actually meant by ZBNF though. Going by the footnote in the Economic Survey ZBNF is “(farming) without using any credit, and without spending any money on purchased inputs‘’. 

According to this definition ‘zero budget’ would just imply zero costs. Inputs used in any production process has a price and as such a cost of using that input. Even if an input is found freely available in nature (say, rainwater used for irrigation), it will always have an opportunity cost (may be the water could have been used for some other productive purpose). 

Also Read: Nirmala Sitharaman’s Maiden Budget is an Exercise in Taming Policy Uncertainty

Thus, zero budgeting of agricultural production is not quite possible. The policy of ZBNF also does not mention whether ‘zero budget’ implies zero input. Simple microeconomic theory informs us that in any production function, for production to take place the inputs have to non-zero. A zero usage of input will lead to an outcome of zero production. Farmers may want to do better than that.

The Economic Survey informs us that this ZBNF programme is being implemented in around 972 villages in India. Though being claimed in the budget as an ‘innovative model’, its efficacy in improving agricultural production and enhancing farmers’ income is still unknown. It is debatable whether ZBNF can be adopted on a large scale. Modern agriculture demands the use of new technologies like better seeds, feeds, machineries, fertilizers, storage facilities, etc.

 It is highly unlikely that such modern technologies would be traditionally available for free.

PM Modi farmers, PM Kisan Scheme, Modi farmers

PM Narendra Modi during the launch of the PM Kisan Yojana in Gorakhpur in Uttar Pradesh on February 24, 2019. Credit: PIB_India/Twitter

For whom do the farmers toil?

Among many other suggestions, the government’s road map for achieving the target of doubling farmer income by 2022 emphasises on improving agricultural productivity. In her Budget speech, the finance minister mentioned that India has become self-sufficient in pulses and shall soon become self-sufficient in oilseeds production. Raising production and enhancing productivity is necessary for securing food sufficiency and consumer interest. 

However, increase in production, and hence supply, leads to a fall in prices. This in turn upsets the interests of the producers – the farmers. Thus, the government has to maintain a precarious balance by looking into the needs of both the producers and the consumers.

‘Nudging’ farmers to grow a particular crop (say, pulses) by raising the minimum support orice (MSP) and then ending up with a bumper production and prices crashing down may leave the farmers in huge distress. There are other aspects to be taken care of such as procurement facilities, storage, transport, etc. These supply side issues need to be taken care of. There was no mention about these aspects in today’s budget.

Beyond PM Kisan, no ideas?

The Economic Survey notes that for effective policy implementation it is necessary to have authentic data. However, the government needs to do much more in terms of agricultural data. The policy for doubling of farmer income by 2022 might become incalculable – and may meet with the same fate as the GDP data – as there are no recent assessments of agricultural households. The last all-India situation assessment survey of agricultural households was conducted by the National Sample Survey Office (NSSO) for the year 2012-13. 

This is perhaps enough time to assess the current agricultural scenario and farmers’ income. Most of the policy estimates of the government are based on this 2012-13 survey data. There is a need for real-time assessment of the condition of India’s farmers. 

The budget allocation for the department of agriculture, cooperation and farmers’ welfare has been increased substantially from Rs 67,800 crore during 2018-19 to around Rs. 1,30,485.21 crore. But, much of the expenditure is under revenue head rather than capital expenditure. 

One of the centrally sponsored schemes – Pradhan Mantri Kishan Samman Nidhi (PM-KISAN) – was implemented just before the tenure of the last government ended. The scheme ensured an annual direct transfer of Rs 6,000 to small and marginal farmers in three equal installments of Rs 2,000. The scheme was implemented with an annual outlay of Rs 75,000 crore. However, the new government extended it to all farmers irrespective of landholding size. But, the budget outlay for this scheme has remained at Rs 75,000 crore in Friday’s budget.

Varun Kumar Das is with the Indira Gandhi Institute of Development Research, Mumbai