India has a rich history of rural entrepreneurship in traditional industries such as coir, khadi, bamboo, cane, and more. Government bodies such as the MSME Ministry have been running various schemes to support and grow these industries.
These schemes range from providing collateral-free credit and access to incubation centres to better equipment and employment opportunities for entrepreneurs in various corners of India.
Most recently, Finance Minister Nirmala Sitharaman’s maiden Budget presented in Parliament on July 5, 2019 focussed on reviving traditional industries such as bamboo, khadi and honey, through a cluster-based approach.
“A hundred new clusters for traditional industries will be created in 2019-20, and this will allow 50,000 artisans to join the economic value chain,” she said.
This will be done under the Scheme of Fund for Regeneration of Traditional Industries (SFURTI), which aims to organise such industries and artisans into clusters to make them competitive and provide support for their long-term sustainability, sustained employment, and enhanced marketability of products.
Besides SFURTI, the government’s focus lies on schemes such as Prime Minister’s Employment Generation Programme (PMEGP), Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship (ASPIRE), Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE), and more.
Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
It is as a cluster-based scheme for development of khadi, village industries, and coir clusters by providing them with improved equipment, common facilities centres, business development services, training, capacity building and design, and marketing support, etc.
The scheme invites applicants from non-government organisations (NGOs), institutions of the Central and State governments and semi-government institutions, field functionaries of State and Central government, Panchayati Raj institutions (PRIs), private sector bodies by forming cluster-specific special purpose vehicles/entities (SPVs), corporates, and corporate scial responsibillity (CSR) foundations with expertise to undertake cluster development
A file picture of a solar irrigation system plant developed by Irrigation department of Assam Ritu Raj Konwar
Grid-connected solar irrigation offers farmers an additional income source, and if priced attractively, can reduce water drawals
The season of election promises is over, arguments have been won and lost on the hustings, but the problems are waiting to be solved.
Agrarian distress is real and persisting, water is growing into an ever bigger human crisis, state power sector has once again managed to bring itself on the edge of the precipice, and the human and fiscal cost of the downward-spiralling nexus between energy, water, and agriculture is staggering.
How do you double farm income without making the farmer dole and debt-waiver dependent? Impressive advancements and rapidly falling prices of solar technology and the recently announced KUSUM scheme of the Centre offer a promising solution.
The KUSUM scheme has three components: (a) private sector led large-scale solar at sub-station; (b) off-grid solar irrigation and (c) grid-connected solar irrigation. Component (a) and (b) either do not solve the real problems of perverse nexus or only improve power supply but cause further damage to groundwater.
Our analysis shows that Component (c) can potentially double the farm income, save groundwater, save subsidy for the State government, and generate jobs.
Political economy in a bind: More than 80 per cent of freshwater is used by agriculture, and more than 60 per cent of India’s irrigated agriculture is via groundwater. “Unmetered” and subsidised energy for agriculture has created a recurring fiscal pressure and burdened industry with cross-subsidy.
Repeated bailouts of the State power sector reflect the way the state power sector has been managed and governed. Sixty five per cent of India’s rural population depends on 15 per cent of its GDP contributed by agriculture, growing at an annual average of less than 2 per cent. Average income of agriculture household in India is less than ₹9,000 per month of which only about half is contributed by farm income (Nabard All India Financial Inclusion Survey 2017).
India cannot address its water and energy economy without addressing agrarian distress and finding non-agriculture income options. Connecting the solar irrigation pumps to the grid to sell surplus electricity provides an additional source of income for the farmer which has been amply demonstrated by International Water Management Institute (IWMI) through a pilot project in Dhundi (Solar Power as a Remunerative Crop- SPaRC) and NDDB’s solar cooperative in Majkuva (Gujarat).
In a recent pilot launched by Punjab (Pani Bachao, Paisa Kamao with which authors are closely associated) farmers have demonstrated a saving of about 30 per cent due to day time power supply and ability to optimise use of water.
Triple win
A recent analysis carried by the authors on a few 11kV electricity feeders of Rajasthan shows that with grid-connected solarisation of pumps: (i) farmers would get substantial increase in their income that is climate resilient and counter-cyclical to agriculture, and get daytime, reliable, free power supply which reduces their production risk; (ii) recurring power subsidy to agriculture would get replaced by one-time capital subsidy; and (iii) Discoms would get cheap decentralised distributed generation that would reduce their network losses.
Assuming replacement of one horsepower load by 1.5 kW, sale of surplus power at Discom’s average power purchase cost, conversion of 70 per cent farmers on a feeder to solar, and the financing structure of KUSUM-C i.e. 30 per cent subsidy by Central and State government each, 10% equity by farmer and a loan of 30 per cent for seven years at interest rate of 10 per cent, Table 1 shows the profits for the farmer, government, and the Discom. If we add the value of free solar power for irrigation, the farmers benefit would be even higher. Farm income of a typical farmer would increase by about 30 per cent during the 7-year period of loan repayment and by more than 100 per cent thereafter. During drought and crop failure, farmer can reduce the scale of agriculture and earn more money from sale of power. Government subsidy is not an expenditure but a very profitable investment which would save the Government a recurring subsidy of ₹56,000 per farmer- a return of about 30 per cent.
Drought premium: During droughts, the farmer can reduce the scale of agriculture and earn more money from the sale of power. The government would be well advised to pay a “drought premium” for sale of power thus encouraging the farmer to optimise the use of scarce water and adopt a de-minimis approach of using water only for drinking and to grow enough food and fodder for his family and his cattle. Drought premium also offers an instrument for direct delivery of drought relief into the bank accounts of farmers.
Why do we need an FPO/cooperative for this scheme? For grid-connected solar to work, the Discom must keep the feeder “on” during the day as against the current system of supply of four to six hours to contain subsidy. Yet, if a significant number of individual farmers are unable or unwilling to solarise, their power and water consumption would go up since power will be now available for almost 10 hours a day every day, and even subsidy burden on the government would increase. Illegal use and bypassing of meters could increase.
Therefore, the scheme should be made available only if at least 70 per farmers participate (as done by Gujarat) and establish a Farmer Producer Company (FPC) or cooperative. The FPC would sign the PPA, aggregate power from participating farmers, maintain the feeder, and carry out energy accounting based on net meters at the farm and at the sub-station. Formation of FPC would check theft since stolen power belongs to the neighbour and not the government.
Undoubtedly, formation of FPCs, mobilising farmers to participate, and finding debt and equity financing for farmers would be effort intensive but is the most sustainable model of doubling farm income with dignity, saving water, and eliminating anarchy in the agricultural power supply.
Costs of national scale-up
India has about 21 million electric pumps. Focusing initially only on some large States to solarise 20 per cent of farm connections, capital subsidy from Central and State governments would be ₹35,000 crore each, farm loans of ₹35,000 crore and farmer equity of ₹11,000 crore which could be financed by banks against collateral of solar assets.
Increasing the farm income of 4 to 5 million farmers by 30 per cent and putting them well on their way to doubling their farm income would be no mean achievement in five years. In addition, even excluding upstream manufacturing jobs in solar cells, this could generate about 50 million local job-days over five years.
Risks and challenges
Risk of delays and defaults in payment for purchase of power by financially distressed Discoms can undermine this huge opportunity. The government can help catalyse the market by getting the national renewable trader (NVVNL) to buy power from FPCs and sell it to NTPC which can pool it into its large (270 billion kWh) market. Any cost differential could be underwritten by the Centre for the first few years to create a market.
Due to pre-existing large stranded capacity, some Discoms may not be inclined to encourage additional generation. However, stranded-surplus could vanish in the next five to seven years before India reaches a disruptive scale of solarisation.
Mission to farmer dignity: The government should create a “KUSUM Mission” with adequately funded anchor organisation at the Centre and similar organisation in each participating State. These organisations should draw staff from agriculture, water, energy and financial sectors from the public, private, and civil society entities and should be led by a hand-picked leader with a clear target of achieving 20 per cent solar conversion within five years.
NDDB’s expertise in engaging farmers and creating cooperatives would be handy in training these anchor organisations. Dynamism of private sector should be tapped to create FPCs. The agriculture distress, water crisis, and fiscal distress caused by the power sector, has set a fertile ground to take advantage of affordable solar and achieve two grand objectives of doubling farm income and improving India’s water security.
Gulati is former Chief Operating Officer, United Nations Sustainable Energy for All, and Sampath is former Chief Election Commissioner of India
Telangana is set to spend Rs 32,000 crore on farm loan waiver this season — the highest-ever amount to be incurred on this count by any state in the country
Though Maharashtra, Karnataka and Uttar Pradesh have given much higher estimated costs on loan waiver, their actual allocation has always been less, whereas Telangana’s estimated and actual costs have remained the same through successive years.
Some 42 lakh farmers are eligible for the waiver scheme in the state.HYDERABAD: Telangana is set to spend Rs 32,000 crore on farm loan waiver this season — the highest-ever amount to be incurred on this count by any state in the country. Though Maharashtra, Karnataka and Uttar Pradesh have given much higher estimated costs on loan waiver, their actual allocation has always been less, whereas Telangana’s estimated and actual costs have remained the same through successive years. A recent report of the state-level bankers’ committee (SLBC) put Telangana’s estimated cost at Rs 32,000 crore, far above the 2014-2015 spending of Rs 17,000 crore on loan waivers.
Senior officials said the amount had shot up because more number of farmers had availed themselves of loans than last time as all political parties had announced loan-waiver schemes in their manifestos during the December 2018 Assembly elections in Telangana. “It’s a huge jump considering the last season spending of Rs 17,000 crore,” a senior official told TOI. After SLBC gave the estimated cost (with the cut-off date for eligibility being December 11, 2018), officials are now mulling over implementing the waiver for small and marginal farmers who took loans of less than Rs 50,000 in one stroke. According to a senior official, 42 lakh farmers are eligible for the waiver scheme in the state.
New Delhi: In one of its first decisions after taking office on 30 May, the National Democratic Alliance (NDA) government extended its income support scheme for all farmers, regardless of the size of their landholding. Fulfilling this election promise will cost an estimated ₹90,000 crore every year.
With the Union budget coming up on 5 July, attention has turned to another election promise: Short-term new agriculture loans of up to ₹1 lakh at 0% interest rate for one to five years. This is on the condition of prompt repayment of the principal amount.
The Pradhan Mantri Kisan Samman Nidhi income support scheme was first announced by the NDA government in the interim budget in February. It provisioned for the disbursement of ₹6,000 a year in three equal instalments to an estimated 125 million small and marginal farmers holding up to 2 hectares. The announcement came on the back of farmers’ protests in 2017 due to the collapse of wholesale crop prices. Rural distress was seen as the reason for a string of defeats faced by the Bharatiya Janata Party (BJP) in the November assembly elections. This is despite programmes like approval for 100% FDI in food processing, completion of pending irrigation projects, extension of a crop insurance scheme and the distribution of a soil health card in the NDA’s first term in office.
The income support scheme is seen as a major step to boost the agricultural sector, which has been stressed over the past many years. “This is a good beginning made to revive the rural economy. Recognizing that there is a problem is a start,” said Himanshu, associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi.
“The track record of this government on investment in the agriculture sector has not been good. Investment in real terms has declined. There has to be a commitment by the government to invest—either in research and development or in agricultural markets,” he said.
A boost to the agriculture sector is crucial to double farm incomes by 2022—a stated goal of the BJP—and catapult India into the $5 trillion economy bracket by 2024. “Only on the foundation of a strong rural economy, it is possible to build a strong national economy,” said President Ram Nath Kovind in his address to both Houses of Parliament on 20 June. “Our farmers are the pillars of the rural economy. All possible efforts are being made by the central government to provide adequate assistance to the states for agricultural development,” he said, adding the government plans to enhance agriculture productivity with an investment of ₹25 trillion in the coming years.
That many sections of the President’s speech were focused on the rural sector can be taken as a pointer that Union finance minister Nirmala Sitharaman’s budget would have a strong pro-rural accent.
New steps that have been planned include storage facilities to farmers near villages through the Gramin Bhandaran Yojana to ensure wastage is minimized. To conserve water and address irrigation-related problems—given that a majority of farmers in India are reliant on monsoon rains—the government has constituted a new Jal Shakti ministry. There are also plans to increase farmer incomes through marine and inland fisheries. A special fund has been created to develop a fishery industry-related infrastructure. To encourage self-employment in rural areas, opportunities are being made available to rural women with loans amounting to more than ₹2 trillion disbursed to 30 million women in rural areas.
“There has to be a holistic approach to stimulate the rural sector. Agriculture is not the primary driver of the economy in terms of GDP,” said Himanshu.
“The stimulus should contain elements that will stimulate the whole rural ecosystem—rural employment, rural construction of roads and houses. This is what will revive the rural economy and this is the direction the finance minister will hopefully take in the budget,” he said.
Haryana Agriculture and Farmers’ Welfare Minister, Om Prakash Dhankar on Friday launched Krishi Kiosk at Panchkula near here to start Digital Kisan Suvidha for facilitating the farmers.
Through this Kiosk, the farmers will not only be able to get information about the schemes of the Department, but the formalities related to claims to Pradhan Mantri Fasal Bima Yojana can also be completed, Dhankar said.
He said that this Kiosk has been connected with the Deputy Commissioners’ offices in all the 22 districts of the state and a telephone facility has also been made available in Kiosk so that the farmers could give information through telephone to the State Headquarters.The Agriculture Minister also flagged off the ‘Suchana Rath’ facility.
He said that through this Suchana Rath, farmers will be encouraged not to burn the crop residues rather sow it in the field through scientific method.
He called upon the farmers’ to clean the environment by not burning crop residue and adopt agricultural equipment being provided by the government at 50 per cent subsidy.
Dhankar said that the government has created the Kisan Haryana App to benefit the farmers under the Digital Plan. Farmers can get information of all schemes through this app. On this occasion, he also released book entitled Agri Scope.
He said that the students can play a role of the most effective messenger, so it has been decided to include students in this campaign. For this, painting competition will be organised for class level from class V to VIII and painting, slogan, poetry writing and speech competition for students from Class VIII to ten plus two. Students bagging first place will be given Rs 500 and Seed Pencil will be given to other children to encourage them in preserving the environment.
He said that the Department has put tulsi seed in this seed pencil.
The Minister further said that for publicity purposes, 22 vehicles will be run in all districts of the state from July onwards. Apart from this, one Suchana Rath each would be flagged off at the cluster level in Sirsa, Gurugram and Panchkula, through which farmers will be made aware about the schemes. These vehicles will move around the state throughout the year and will provide information about crop residual management along with information related to the Pradhan Mantri Fasal Bima Yojana, Bhawantar Bharpayee Yojana, Jal Jeevan Yojna and other schemes of the Department.
The Agriculture Minister also said that due to air pollution, we have to face double challenges. On one hand, most of the wild animals are dying with poisonous gas whereas on the other hand, farmers are also reducing the fertility of the land by burning crop residue in fields.
He added that at present, social media is also an effective medium of publicity and through Facebook and Instagram, the information of the schemes and the challenges of the agriculture sector will be available to the people of the region.
Ludhiana: To ensure that farmers do not pollute the environment by burning the paddy straw, the agriculture and farmers’ welfare department, Punjab, has started a scheme where subsidy will be given to farmers on farm machinery used for managing paddy straw. While providing information, Dr Baldev Singh, Chief Agriculture Officer (CAO), Ludhiana, said like last year, this year also, subsidy on farm machinery would be given to farmers of the Ludhiana district under the in-situ management of crop residue scheme.
He said: “The machinery will be used for managing the paddy straw so that farmers do not burn it, which leads to pollution.” He said under the scheme, farmers would be given 50 per cent subsidy for purchasing happy seeder, paddy straw chopper, multure, hydraulic reversible MB Plant, zero till drill, super SMS rotary slasher or shrub cutter. “Applications for subsidy on the machinery can be submitted at the block agriculture offices by June 30, 2019, and no application will be entertained after this date,” he said. Dr Baldev Singh clarified that if the applications received were more than the target, then the farm machinery would be distributed to farmers through draw of lots. He said subsidy would be given only on the machinery manufactured by the companies approved by the agriculture department of the Union government. He said under this scheme, there was a provision of 80 per cent subsidy for the registered farmers’ groups for opening custom hiring centres so that machinery could be used on rent. He said for more information on the scheme, people could visit the website www.agripb.gov.in or www.agrimachinery.nic.in or visit any agriculture offices in the block.
Ludhiana: To ensure that farmers do not pollute the environment by burning the paddy straw, the agriculture and farmers’ welfare department, Punjab, has started a scheme where subsidy will be given to farmers on farm machinery used for managing paddy straw. While providing information, Dr Baldev Singh, Chief Agriculture Officer (CAO), Ludhiana, said like last year, this year also, subsidy on farm machinery would be given to farmers of the Ludhiana district under the in-situ management of crop residue scheme.
He said: “The machinery will be used for managing the paddy straw so that farmers do not burn it, which leads to pollution.” He said under the scheme, farmers would be given 50 per cent subsidy for purchasing happy seeder, paddy straw chopper, multure, hydraulic reversible MB Plant, zero till drill, super SMS rotary slasher or shrub cutter. “Applications for subsidy on the machinery can be submitted at the block agriculture offices by June 30, 2019, and no application will be entertained after this date,” he said. Dr Baldev Singh clarified that if the applications received were more than the target, then the farm machinery would be distributed to farmers through draw of lots. He said subsidy would be given only on the machinery manufactured by the companies approved by the agriculture department of the Union government. He said under this scheme, there was a provision of 80 per cent subsidy for the registered farmers’ groups for opening custom hiring centres so that machinery could be used on rent. He said for more information on the scheme, people could visit the website www.agripb.gov.in or www.agrimachinery.nic.in or visit any agriculture offices in the block.
Odisha government has allocated an additional Rs 3,234 crore for covering more farmers under the Kalia scheme during 2019-20, officials said on Friday.
Under the Krushak Assistance for Livelihood and Income Augmentation (Kalia) scheme, farmers get Rs 5,000 financial assistance per crop. A farm household is entitled to get Rs 10,000 per year for two crops (Kharif and Rabi), they said.
According to a notification issued by the Agriculture and Farmers Empowerment department, in accordance with the state Cabinet’s decision on May 29 to include 32.34 lakh additional beneficiaries under the scheme, more funds is being made available to ensure that all eligible beneficiaries get benefit.
“It has been now been decided that a further additional 32.34 lakh small farmers/marginal farmers/actual cultivators (share croppers)/ landless agricultural households be included in the Kalia scheme during 2019-20, apart from the farm families already assisted in 2018-19, so that no one who is eligible will be left out,” the notification said.
Out of a total of 75 lakh farm families to be included in the Kalia scheme, 50 lakh will be small and marginal farmers and sharecroppers while the remaining 25 lakh will be landless agricultural households.
This can be modified between the categories by the state government subject to the overall target under these two components of 75 lakh farm families, it said adding that the funds required for 2019-20 is estimated to be Rs 3,234 crore excluding the administrative cost, for 32.34 lakh farmers/landless agricultural households.
Earlier, the state government has made provision of Rs 10,000 crore for implementation of the Kalia scheme. Now after inclusion of more farmers, the total funds requirement for the scheme would be around Rs 13,234 crore for the 2019-20 fiscal.
WTO scrutiny will prevent a big hike in farm subsidies by govt, but fixing markets is a far more efficient solution anyway.
If anyone thought the government could double farmers’ income by 2022—a Narendra Modi promise—by a sharp hike in farm subsidies or in PM Kisan-type income transfer schemes, they just need to look at the global reaction to the government’s plan to spend Rs 25 lakh crore on agriculture and rural development to know this is impossible. As FE reported a few days ago, after the government announced its Rs 25-lakh-cr plan, a host of countries have begun asking whether or not this will affect India’s WTO commitments that put a cap on how much farm support the government can give. Since the WTO principle is that government policy shouldn’t distort export markets, the US has, for instance, asked what step India is taking to ensure its large wheat stocks won’t distort global markets. Thanks to the high MSPs fixed by the government, FCI accumulates stocks far in excess of what is needed and, in order to clear them, FCI usually sells them at a discount later; to the extent the stock is bought by traders who export it, this gets counted as distorting export markets through subsidies. Right now, India has breached WTO norms of 10% subsidy/support in crops like wheat and rice. It is true, as Icrier professors Anwarul Hoda and Ashok Gulati point out, that the WTO is not taking into account inflation since the agreement was signed—once this is done, India’s support levels fall dramatically, from 26%, in the case of rice, to 2.9% (bit.ly/2XiVNgL), but till the WTO accepts India’s interpretation, the argument is moot.
Fortunately, increasing subsidies—such as those on MSP-based procurement—is not the only way to boost farmer income, and that is why Modi’s Rs 25 lakh crore plan can coexist with India’s WTO commitments. Public capital formation in agriculture fell from 3.9% of agri-GDP in 1980-81 to 2.2% in 2014-15, before recovering a bit to 2.6% in 2015-16 while, at the same time, input subsidies rose from 2.8% to 8%. So, if Modi were to switch expenditure from subsidies towards investment, that would help raise farmer incomes while not affecting the WTO equation. According to Gulati, every rupee spent on agricultural R&D adds Rs 11.2 to agriculture GDP while the same amount spent on roads adds a much smaller Rs 1.1; and just 88 paise gets added if the money is spent on fertiliser subsidy. That means if the government spends on R&D and on roads instead of on various input subsidies, doubling farmers’ income while staying WTO-compliant will not prove difficult since such spending is in the ‘GreenBox’. And while India hardly has much of a government R&D budget, a friendly policy towards seedtech firms like Monsanto, as opposed to today’s outright hostility, would boost productivity without any extra government investment.RELATED NEWS
And, according to an ICRIER-OECD study on agricultural policies in India, by not allowing farmers to get global prices, India taxed its farmers by 14% (of gross farm receipts) for the years 2000-01 to 2016-17. For the entire period, that means farmers lost Rs 45 lakh crore (at 2017-18 prices), or around Rs 2.6 lakh crore per year. While this is why Modi has been trying to push the pan-India electronic or eNAM market, it has not been successful; but were a successful attempt to be made, farmers can get 10-14% more income right away. The other advantage of supporting farmers the smart way is that if, for instance, subsidies aren’t given on water and electricity—and MSP not used to dictate what farmers grow—this will also ensure farmers don’t grow the wrong crop; as a result, with less damage to the soil, overall productivity will rise. Agriculture reform is a big agenda item for the government, and, if is done right, the impact on farmers and the economy will be huge.
Full attendance: President Ram Nath Kovind, Prime Minister Narendra Modi, Vice-President Venkaiah Naidu, Lok Sabha Speaker Om Birla and others on their way to the central hall of Parliament for the joint sitting. | Photo Credit: Sandeep Saxena
Addressing the joint sitting of both Houses of Parliament, the President said that a committee of Chief Ministers was being set up to look into structural reforms in the field of agriculture.
The Centre plans to invest ₹25 lakh crore in the farm sector in the coming years to boost agricultural productivity, President Ram Nath Kovind said on Thursday.
Addressing the joint sitting of both Houses of Parliament, the President said that a committee of Chief Ministers was being set up to look into structural reforms in the field of agriculture. With regards to drought-hit areas, Mr. Kovind said the government was aware of the crisis and was assisting farmers and tackling drinking water shortages with the support of State governments and village sarpanchs.ALSO READPresident Ram Nath Kovind terms simultaneous polls ‘development oriented’
Listing the BJP-led government’s decisions in its first 21 days, the President began by highlighting the expansion of the Pradhan Mantri Kisan Samman Nidhi, an income support scheme, to all landowning farm families. Earlier, the scheme was only open to small and marginal farm families owning less than two hectares of land. The expansion of the scheme in keeping with a BJP poll promise would increase its annual budget to ₹90,000 crore (from the previous ₹72,000 crore estimate), said Mr. Kovind, adding that ₹12,000 crore had already been disbursed in the past three months.
Other initiatives include the contributory pension scheme for farmers above the age of 60, a ₹13,000-crore scheme to fund treatment of common diseases in cattle, the Grameen Bhandaran Yojana to provide village-level storage facilities for farm produce and the plan to create 10,000 new farmer producer organisations. A new department for fisheries development is expected to usher in a new blue revolution, the President said.
With regard to higher education, the President said the government was “striving to increase the number of seats in the country’s Higher Education System by one-and-a-half times by 2024.” This would create two crore additional seats, he said.
