Only a radical shift in policy can lift Indian farmers from widespread distress

Union Budget 2024 slashes agriculture subsidies, farmers demand MSP implementation, loan waivers, and comprehensive crop insurance in 2025 Budget.

The last Union Budget presented in July 2024, had slashed food subsidy by ₹7,082 crore, and fertilizer subsidy by a whopping ₹24,894 crore. Allocations for the Centre’s flagship job guarantee scheme were allocated only ₹86,000 crore, which was less than the amount spent on the programme the previous year. Overall allocations for agriculture and allied sectors declined from 5.44% in 2019 to 3.15% in 2024.

Agriculture received this paltry treatment despite the National Crime Records Bureau’s (NCRB) data telling us that 1,00,474 farmers and agricultural workers committed suicide between 2015 and 2022. Similarly, the Global Hunger Index 2024 reveals that India ranks towards the bottom - 105th out of 127 countries. These figures are a stark and tragic indication of India’s agrarian crisis.

As an ominous curtain raiser to the 2025 budget, the Modi government on November 25, 2024 unveiled the Draft “National Policy Framework on Agricultural Marketing (NPFAM)”. The NPFAM aims to induct pro-corporate provisions of the three controversial farm laws, which the Central government was forced to repeal after a year-long farmers’ struggle led by the Samyukta Kisan Morcha (SKM) in 2020-21. There have already been countrywide farmers’ protests against the NPFAM in December. They are demanding that the NPFAM must not be implemented.

The most vital issue for farmers nationwide today is statutory minimum support price (MSP) at the rate of C2+50% - that is one-and-a-half times the comprehensive cost of production, as recommended by the M.S. Swaminathan Commission. The non-implementation of this recommendation is the principal reason for indebtedness, farm suicides and distressed land sales. Most farmers do not get any MSP at all and are at the mercy of private traders who fleece them. They cannot even recover their production costs. MSP was a promise made by Prime Minister Narendra Modi and the Bharatiya Janata Party manifesto in 2014. The Centre has not delivered on this promise. But unless Budgetary allocations are made to implement this, India’s agrarian distress cannot be resolved. The second point is the rising cost of production. The cost of all agricultural inputs are rising rapidly. Our expectation from this year’s Budget is that the government bring down the prices of fertilizers, seeds, insecticides, diesel, water and electricity. If farmers are to be given MSP at C2+50%, the cost of production must be substantially reduced.

The government can bring down these costs by imposing strict controls through the Budget on the corporates who are now the main producers of these inputs and support public sector companies in the production of fertilizers, seeds, and insecticides. This will also validate the government’s claim of self-reliance. The Budget must also sharply raise subsidies for inputs and outlays for agriculture and allied sectors.

The third expectation from this Budget is a comprehensive one-time loan waiver for farmers and agricultural workers nationwide. Unless this is done, farm suicides cannot be prevented. This government has written off loans worth ₹14.46 lakh crore of corporates in the past 10 years. They must have the monies to waive a fraction of that sum in farm loans. Loan waiver, bringing down the cost of production, and ensuring MSP at a rate of C2+50% must be done together. If this is done, 70% of the crisis in the farm sector can be dealt with.

The fourth point is relevant in the context of climate change. As droughts, floods, unseasonal rains and hailstorms, recur more frequently and with greater intensity, there must be a comprehensive crop insurance scheme, which is entirely different from the Pradhan Mantri Fasal Bima Yojana (PMFBY). Several States have opted out of it. Some States have begun their own scheme. This is because PMFBY is working in the interest of insurance companies, and not farmers. The fifth demand is on irrigation and power. Public sector investment in irrigation and power has been cut in the last decade. These sectors are being handed over to private firms and hence, the cost of water and power is rising. The private sector cannot invest the monies a government can, for example, in building dams. Large scale investments in irrigation, would therefore, invariably be in government hands. Many irrigation projects are incomplete nationwide. If they are completed, a large section of land will could be brought under irrigation that will also lead to higher yields for farmers and larger employment generation and overall agrarian rejuvenation.