MAY 03, 2017

By TIOL Edit Team

IT is heartening to see ideas flying thick and fast at the Centre on the bold objective of doubling farmers' income by 2022. It is, however, disheartening to see the Centre disliking and distancing itself from the mere mention of taxing farmers' income.

Both issues fall in the States' domain under the Indian Constitution. It mentions 'agriculture' and 'taxes on agricultural income' in the States List.

Appeasing farmers through promises is all-weather pet theme of votes-obsessed political parties. Whosoever rules at the Centre, the farmers are cynosure in all budget speeches and political discourse both within and outside Parliament.

It is another issue that parties often backtrack or deflect attention from promises made to farmers in their respective election manifestos over the decades.

BJP Government has thus preferred silence on the issue of honouring its 2014 LokSabha poll promise of taking "steps to enhance the profitability in agriculture, by ensuring a minimum of 50% profits over the cost of production." This initiative would perhaps require generous hikes in minimum support prices (MSP) for crops as well as bringing more under MSP ambit. This can turn out to be doubly inflationary – increase in retail prices and increase in food subsidy and fiscal deficit. The Government has thus preferred prudence over political bravado.

It has, however, rightly encouraged ideas revolution on the objective of doubling farmers' income by 2022, a target proposed by Prime Minister NarendraModi at a farmers' rally in UP during February 2016.

The objective figured prominently at NITI Aayog's 3rd meeting of the Governing Council held on 23 rd April 2017 under chairmanship of PM. Madhya Pradesh Chief Minister Shivraj Singh Chouhan made a presentation on doubling of farmers' income. NITI Aayog Member Agriculture Ramesh Chand elaborated on some of the steps needed for doubling farmers' income. NITI had last month released a policy paper on the subject, listing rationale, strategy and action plan.

Gujarat Government has released a book listing 101 success stories to double farmers' income. NABARD has sponsored seven studies on doubling farmers' income.

This challenging target was discussed extensively by farm experts at national conference on agriculture for Kharif Campaign organized by Agriculture Ministry on 24-25th April 2017.

An inter-ministerial Committee tasked with preparing blueprint for achieving the target has met five times so far. All such efforts are overwhelming indeed.

Time is thus now overripe to convert ideas into an action plan for doubling income of 138 million operational holdings with average farm size of 1.16 hectares that existed as on 31st March 2011 as per latest agricultural census. In fact, action plan should have been in the implementation mode by now.

The average annual income of agricultural households from both farming and non-farming was estimated at Rs 77,112 per year for period July 2012- June 2013 by National Sample Survey Office, according to Key Indicators of Situation of Agricultural Households in India (NSS 70th Round January-December 2013)

There is no fresh official estimate available at present. National Council for Applied Economic Research, in a presentation on the subject, however, last month estimated real average annual income of farmers at Rs96703 in 2015-16.

Doubling this to Rs 1,93,406 by March 2022 requires cooperation & unflagging zeal of all stakeholders.

As put by NITI's Policy Paper on the subject, "Doubling real income of farmers till 2022-23 over the base year of 2015-16 requires annual growth of 10.41 percent in farmers' income. This implies that the on-going and previously achieved rate of growth in farm income has to be sharply accelerated."

One can divide drivers of growth in farmers' income into two categories – policy interventions by the Centre and the States and operational initiatives such as agronomic practices which are aplenty. Mr. Modi himself has advocated 7-point strategy to achieve this goal. This includes special focus on irrigation with sufficient budget, with the aim of 'Per Drop More Crop.'

The improvement in strategies to increase agricultural productivity and efficiency is a continuous process. And strategies would obviously vary from region to region and farm to farm. We need not elaborate on this and should focus on central policy interventions.

The foremost intervention required is a robust policy for timely release of genetically engineered seeds of various crops. This has to be starting point of not only 2 nd green revolution but also the platform for doubling farmers' income from shrinking size of farms after every five years.

Second, the Centre should prod States to take requisite initiatives for consolidation of farm holdings to facilitate quantum jump in farm productivity.

Third, Modi Government should launch a 100-percent central scheme for five years to finance 10 pilot projects on doubling income in each district.

Fourth, it must take a call on revising crop pricing and terms of trade between agriculture and other sectors of economy.

The Government should not further delay release of two committee reports that were set up by UPA on computation of minimum support prices (MSP) for crops and terms of trade (ToT) between agriculture and rest of the economy.

While the latter's executive summary is available on an official website, the report of the former is not available in cyberspace.

Modi Government must disclose its decision on the recommendations of these two panels as well as the inter-ministerial committee on doubling farmers' income.

The Government should, in fact, go the whole hog to achieve its ambitious target. The attainment would not only improve the living standards of farming community but also increase their consumer spending. The doubling of farmers' income would catalyze the growth of manufacturing and services sectors. And this, in turn, would give boost to central and state tax receipts.

This should not, however, lead the Centre into not advising States to tax the income of small but significant minority of rich farmers. The Centre should at least set the ball rolling on acceptance and implementation of recommendation of Tax Administration Reform Commission (TARC).

TARC, in its third report stated: "Agricultural income of non-agriculturists is being increasingly used as a conduit to avoid tax and for laundering funds, resulting in leakage to the tune of crores in revenues annually. A solution could be to tax large farmers. Against a tax free limit of Rs.5 lakh on agricultural income, farmers having a high agricultural income threshold, such as Rs.50 lakhs, could be taxed. This will keep small farmers out of the purview of taxation and yet close one escape route for black money. States could pass a resolution under Article 252 of the Constitution, authorising the Centre to impose tax on agricultural income. All taxes collected by the Centre, net of collection costs, could be assigned to the states. This will broaden the taxpayer base and help mobilise additional revenue without affecting any but a very miniscule proportion of the very large farmers whose annual income exceeds the threshold limit."

We hope Modi Government would show requisite political finesse in not only doubling farmers' income but also in creating ecosystem for taxing rich farmers.