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Mainstream, VOL LI, No 15, March 30, 2013

Tax Residency Certificate eclipses Agriculture in Post-Budget 2013-14 Reactions

Sunday 7 April 2013, by J. George

The post-Budget reactions to apprehensions on the tax residency certificate (TRC) expected from the foreign institutional investment (FII) or the foreign direct investment (FDI) proposals completely eclipsed the Finance Minister’s 22 per cent hike in the Central Plan outlays for agriculture and allied activities over the truncated 2012-13 revised estimates (RE). This is grossly unfair. There are, in fact, global concerns on the apparent business practices that erode the business base in certain jurisdictions to shift profits (BEPS) to gain more benefits through loopholes in the investment agreements, parti-cularly in tax havens.

Food security concerns, nevertheless, are significant and Chidambaram’s 2013-14 Budget estimates (BE) must be weighed in terms of what these would do to the livelihoods of millions of marginal and small farmers—the bottom of the suffering pyramid (BoSP).

The speciality in his 2013-14 BE servings has a distinct bio-label. Is the FM scripting a market nurturing a new farm fundamentalism? Would it or would it not promote attainment of the 12th Plan goal of four per cent per annum average escalation rate to ensure a “more inclusive and sustainable economic growth”? The answer depends solely on the agricultural scientists. The Budget 2013-14 could serve as the best catalyst.

Agriculture and Biodiversity

Agriculture and biodiversity do enjoy a complementary relationship in the traditional knowledge domain (TKD). The bio-positives in the Central Plan outlays (2013-14) are broadly in the synthetic knowledge realm, though it was ‘work in progress’ since 2011-12 BE. The announcement for locating two national level institutions—the National Institute of Biotic Stress Management in Raichur, Chhattisgarh and the Indian Institute of Agricultural Bio-technology in Ranchi, Jharkhand—should rightly stimulate agricultural scientists and adminis-trators to act decisively and not use it to merely justify the vacuous and capricious affidavit of the Agriculture Ministry to the Supreme Court. The Budget gives them yet another opportunity to put the biodiversity concerns into a sustainable perspective where farmers in the country are indeed facilitated to attain food sovereignty. The Biodiversity Act thus could have benefited the BoSP as well.

Similarly the pilot project on NutriFarms with Rs 200 crores to encourage coarse cereals and other millets known to serve the poor man’s nutritional security under the TKD needs highlighting in the ‘better-late-than-never’ genre. The Rs 75 crore outlay for replantation and rejuvenation of the coconut plantations in Kerala is a sound investment signal that will restore confidence amongst the young as well as part-time farmers in Kerala and also other Sates that have shown a sharp fall in the average holding size and area under plantation crops.

Although many white elephant institutions and bodies exist at the apex level nibbling at the non-Plan expenditure cakes (for example, the National Rainfed Authority, CACP, many Central institutes, etc.) each under the Ministry of Agriculture—the Department of Agriculture and Cooperation (DAC), the Department of Agri-cultural Education and Research (DARE) and the Department of Animal Husbandry, Dairying and Fisheries (DAHDF)—allocation of Rs 500 crores for crop diversification, for instance, in Punjab, Haryana and other green revolution areas, as a Central Plan fund extravaganza is neither fiscal stimulus nor consolidation.

The integrated watershed programme steered by the Department of Land Resources in the Rural Development Ministry has garnered an increase of nearly 77 per cent to Rs 5386.7 crores over last year’s Central Plan outlay. Given the annual weather shocks since 2009 on account of deficient and/or delayed monsoon and over 70 per cent cultivated area falling under the rainfed group, knowledge domain complementarity and support from budgetary allocations are always welcome.

Both these generic Central Plan supports, however, have to be implemented as ‘one size fits all’ (OSFA) in areas that have biodiversity, location (agro-climatic) and production land-scape specificities. They must indeed necessarily merit State Plan interventions. Is it not sheer profligacy given that a State-specific Plan of additional Central assistance under the RKVY—Rashtriya Krishi Vikas Yojana—accounts for almost 46 per cent of the 2013-14 BE Plan outlay?

Who holds the Key?

The FM has acknowledged three sources for critical understanding of the issues—Saint Tiru-valluvar, the Chief Economic Advisor and eminent agricultural scientists. Three knowledge domain issues become critical for clarity of purpose of the Budget proposal. The first is the recognition of the fact that the Green Revolution-led growth did heighten deleterious effects in Punjab and Haryana much akin to the power of Hydrogen (pH)’s underpinnings. Secondly, both States in particular ignored the severity and waited for Central Government interventions. The pattern of Union Budget allocations over a period of time seems to suggest that increasing knowledge domain dependency (as in the DARE) was the default setting. Thirdly, the apprehension that the Central Plan allo-cation of Rs 1000 crores for extending the Green Revolution to the eastern parts of the country—bringing the Green Revolution to eastern India (BGREI)—would replicate similar deleterious effects (pH) as the first two propositions have become necessary parts of the agricultural development template.

Hence the group of scientists charged with the responsibilities must address these signifi-cant aberrations in the agricultural development template. The pH is a classic case of dependency on the Central scheme and perpetuating environ-mental degradation through factor pricing. PM Dr Manmohan Singh has been pointing this out since 2011 and done so thrice in the preceding two months. The agri-scientists, notwithstanding their eminence, have ignored this so far.

Instead, the Budget could have clearly provided a firm signal towards a set of sustainable agro-ecological practices that would have explicitly factored in the soil health, water and other biotic stress issues in a holistic manner. The National Mission on Sustainable Agriculture to that extent is a silo concept that shows no signs of application of biodiversity knowledge in the country.

Flag March with Admirals—NFSM, NFSM

Agriculture is a State List subject and the critical role of State governments and State agricultural universities become predominantly funda-mental. The RKVY was conceived as an inclusive and bottoms-up programme with liberal fund flows under the special dispensation—additional Central assistance (ACA). While the open-ended fund flows continued, the former two traits have been lost due to excessive centrali-sation and admiralty of knowledge domain players during the implementation stage, for instance, of flagship programmes.

The DARE is the sole knowledge domain-keeper in the Agriculture Ministry trinity. Interestingly, this is the only entity that has the uniqueness to prosper on slightly more than 40 per cent of its Budget share under the non-Plan category. The total Budget outlay of the DARE accounts for nearly one-fifth of the Agriculture Ministry’s Budget allocation. They are respon-sible for the ‘immaculate conception’ of eight mission mode programmes that account for almost 73 per cent of the Central Plan assistance to the States.

For illustration, the National Food Security Mission (NFSM), a Central sector scheme, accounted for nearly 10 per cent of the DACs budgetary support. The NFSM is aimed at select districts and three crops, namely, rice, wheat and pulses. A set of other six missions on certain critical areas, for instance, has been further expanded by the Finance Minister by incorporating a sub-mission—the National Livestock Mission—with an allocation of Rs 307 crores.

The NFSM expenditure patterns relative to the Budget allocation and releases have severe embedded ceteris paribus assumptions. The key for these ceteris paribus assumptions are held by the agricultural administrators who may or may not be scientists.

Heroic Assumptions

Why is OSFA the preferred programme design guide? It provides a good camouflage to heroic ceteris paribus assumptions. Besides, the federal governance system is always looking for ease in management and no or low risk of control, command and compliance to suit the audit and parliamentary oversight elements. For instance, the farm mechanisation intervention was allocated nearly a quarter of the NFSM Budget in 2009-10 but the expenditure was just about nine per cent of the total expenditure. The made-in-“Krishi Bhavan” label certainly explains widening gaps between allocations and releases as well as with expenditure respectively.

The firm emerging message, nonetheless, is that the absorptive capacities of the selected districts can be better understood by the decen-tralised institutions if the subsidiarity principle was given a fair chance of reckoning. That the NFSM design and strategy utterly failed to reckon with such decentralised realities is not a secret any more since the results-framework document (RFD) 2012-13 clearly explains the performance parameters. It was indeed heartening to notice a space being created for gram panchayats in foodgrains storage.

The queer irony is reflected in less than 10 per cent of Budget allocation (2012-13 BE) being expended, despite the ‘March fever’ detours in fiscal governance parlance or the fanciful template of the RFD.

Spending Soakpit

The shocking revelation that unspent balance as a ratio of the released amount under the RKVY rose to almost 32 per cent in 2010-11 while 55 per cent was the pending amount on account of failure to send the utilisation certificate to the epicentre in the ‘Krishi Bhavan’.

Thankfully the FM did not throw the RKVY baby out with the wash water. An increase of 18.5 per cent has been given in the 2013-14 BE over the 2012-13 RE. However, challenges to steer the RKVY to its rightful inclusive direction from ‘rashtriya kosh se vyarth-vyaya yojana’ have been completely missed.

For instance, the RKVY supported district agricultural development plan’s lament about marginal and small framers’ preponderance and illiteracy as the major weakness rather than the main strength speaks volumes about the intent of the agricultural scientists. The inclusion of rent- seeking activities like construction of 1BHK residential accommodation in villages; orna-mental fish development; construction of jeepable roads, infrastructural facilities for diagnostic facilities for some of the poultry and canine diseases; etc. are several of most thriving and delectable ironies to be seen to be believed in the plan of action documents of the RKVY.

The Golden ‘Non-Plan’ Rooster

The agriculture knowledge domain is culturally reproduced by a set of national level institutions and research centres under the DARE umbrella that feed into the network of State agricultural universities. A strong message that scientific merit is at a heavy discount is conveyed by the rebellious sounding roadmap for ‘transformative change in Indian agricultural education’ that was chalked out by the Indian agricultural scientists at the XIth Indian Agricultural Science Congress during February 7-9, 2013. One of the seven strategies of the roadmap (http://alturl.com/ev79z) strongly argues for ‘greater administrative, financial and scientific autonomy and increased investment, beyond that of staff costs’ and willingness to take ‘some hard choices’ that ostensibly will emerge on the transformation path. They also stridently put forth the plea to replicate untested and inappropriate foreign models of bilateral collaborations.

The four per cent growth target is held to ransom by the non-Plan rooster. Correctives must be introduced lest the template ‘FM proposes and agri-scientists disposes’ becomes the intractable reality.

These sentiments are reinforced by a 27 per cent decline in the RKVY project numbers in 2012-13 over 2011-12 while costs increased by about 4.5 per cent during the same period. There is this additional ground reality of man-power-deficit following the 1991 economic reforms programmes of structural adjustment.

The FM must certainly realise that the agrarian crisis cannot be solved without the active and sustained commitment of the scientific human capital. The Budget 2013-14 needs to show a strong solidarity with the soil health improvement and protection of biodiversity issues. The subsidy issues of fertiliser and energy become critical instruments here.

Food and fertiliser subsidies need to be viewed extremely cautiously and in separate fashion. Food subsidy can be converted into investment in the hands of the producer-consumer following the social impact investment fund principles. Universal coverage therefore becomes the bedrock of food security. In order to achieve this universality the FM needs to forget subsidising the FCI and pivot subsidy with the gram panchayats.

The fertiliser subsidy, on the other hand, must be immediately linked to soil health and agroecology rather than subsidising inefficiency in manufacturing and/or cartelisation in fossil fuel trade and production besides inadequate pass-through episodes. The DBT will encourage exclusion errors through local capture by agents of cartels.

A market nurturing new farm fundamentalism is the way out for the FM if his Budget 2013-14 is to deliver what the BoSP narration demands.

Prof. J. George, an economist, is currently an independent researcher and commentator. This commentary borrows from the author’s research work carried out as the ICSSR Senior Fellow at the Institute of Economic Growth, Delhi. The views and comments are his personal.

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