Paying for Poison? Income Taxpayers Do Not Subsidise Farmers in India
Implicit taxes of Rs 2.65 lakh crore per year are imposed on Indian farmers
The ongoing farmer struggle in India has brought some very important issues before society and the state. A recent article by Jessica Seddon and Ashok Gulati in the Indian Express titled ‘Paying for Poison’ takes up the case of air pollution in the northern plains of India, including Delhi, which is slowly killing and damaging the health of people who live and work in these areas.
Besides the heavy traffic, dust, construction work, waste incineration, power generation in Punjab, Haryana and western Uttar Pradesh, they argue that the air is getting highly polluted due to burning of paddy straw, and that subsidies to the agricultural sector are forcing the country’s taxpayers to breathe in polluted air.
They say these subsidies, in the form of free electricity and water, are responsible for the large scale planting of paddy and burning of paddy straw. Besides, the Food Corporation of India already has large stocks of foodgrains, and assured paddy procurement adds to the problem. Similarly, the huge subsidy on urea fertilizers leads to their increasing use, increasing air pollution.
To overcome this problem of poisoning, the authors suggest providing farmers with subsidies in the field of investment for the inputs they use, for drip irrigation in orchards, vegetables, maize, cotton, pulses and oil seeds. They say a good way to control pollution created by the agriculture sector is by taking a step towards agricultural diversification, by spending 10,000 crore rupees of public money equally shared by the Union and State governments, and for the States to contribute to agricultural diversification by saving on subsidies given for electricity and water for the agricultural sector.
According to the authors, value-added activities by the commercial private sector can make a significant contribution to agricultural diversification. They also suggest cash payments per hectare instead of subsidizing urea chemical fertilizers, and handing over the pricing of chemical fertilizers to the open market. They say that implementing their suggestions would double the income of farmers, increase the efficiency of agricultural inputs and reduce pollution.
There can be no doubt that the northern plains of India, especially the towns, are facing a serious problem of air pollution. Delhi is the most polluted capital city in the world according to reports. But various research studies conducted in the country have revealed the fact that burning of straw during paddy harvesting in Punjab, Haryana and western Uttar Pradesh contributes only 4 to 6 per cent to Delhi's air pollution, for a mere 20 to 25 days in a year, and the rest of the time other factors are responsible for this problem.
It is important to control all forms of pollution in the country, including Delhi, but it is not justifiable to blame the agriculture sector for this problem. Seddon and Gulati’s claim that agricultural subsidies are forcing the country’s taxpayers to pay to eat poison is by no means justified. With regard to the taxes levied in India, it is important to understand that there are two types of taxes – direct and indirect – levied in our country.
Indirect taxes are levied on almost all consumer-like products. Even those with a low level of knowledge of economics are well aware of the fact that indirect taxes carry a heavier burden than direct taxes, as they hit the poor harder. They also contribute the larger share to the public exchequer.
Direct taxes are usually levied on income, capital, wealth, etc. Since the ‘New Economic Policies’ adopted in the country since 1991 the economic disparities between various sections have rapidly been increasing, and the income, capital, wealth, etc. of rich Indians too has increased very rapidly.
These rich people give only a small proportion of their income in taxes. It is by no means correct to call only those who pay direct taxes as taxpayers.
Ashok Gulati himself published an article in the Indian Express last year asking ‘What the farmer is owed’. Citing a research study by ICRIER and the OECD he wrote that in the period from 2000-01 to 2016-17, implicit taxes of Rs 45 lakh crore were imposed on Indian farmers, amounting to Rs 2.65 lakh crore per year at 2017-18 prices.
That study looked at 52 countries accounting for more than three-fourths of the world’s agricultural output. It found that no other state in the world levied as much tax on farmers in these 17 years as did India. The marketing and trade policies of agricultural commodities in India are highly distorted, restrictive and pro-consumer, which is why farmers are being hit harder than any other country in the world.
When we look at the statistics of subsidies given to the agricultural sector in different countries of the world, it is found that a farmer gets USD 379 per year in India, USD 20-25,000 in most OECD countries, and USD 59,000 per year in the United States of America.
Here it is important to understand that about 50 per cent of India's population, which depends on agriculture for their livelihood, is being given only about 16 per cent of the national income. Of this agriculturally dependent population, the condition of the lower peasants is worse, but the condition of farm labourers and rural small artisans is much worse since they have no means of production except selling their labour.
There is a special need to control industrial units, congested traffic, construction works, waste incineration, use of coal and electricity, use of electronic devices etc. to control the problem of pollution in the whole country including Delhi.
In order to control agricultural pollution, it is necessary that crops are grown in accordance with agro-climatic conditions and procurement is assured of agricultural products. Emphasis should be placed on research activities for the development of natural farming while controlling the use of chemical fertilizers, insecticides, pesticides, fungicides, herbicides and other chemicals used in agricultural production.
In order to avoid pollution, and to produce non-toxic agricultural products in the country, the corporate economic development model has to be replaced by a people and nature friendly economic development model which ensures that taxes are levied on the rich people of the country.
It is imperative for state and society to repay the implicit taxes collected from farmers so that our lifeline, which is only agriculture, can continue.
Gian Singh is former professor of economics at the Punjabi University, Patiala