Monday, 17 September 2012

The benefits of taxing agriculture

Everyone pays tax—directly or indirectly. Yet, those who pay income tax tend to be more vociferous in demanding value for their money as both consumers of government-provided services and as citizens of the country. In contrast, the vast bulk—who pay them indirectly—are not as vocal in this respect.
I have often wondered why marginal why farmers struggling to make ends meet do not expect more from their government and are happy with the crumbs that come their way. The occasional subsidy on seeds or agricultural inputs; poor or non-existent agricultural extension services; loans that they cannot access; or even the much touted fertilizer subsidy in spite of which they cannot afford optimal quantities for their crops. Why are our farmers silent? Why aren’t there large-scale powerful and organized associations of farmers in each state or at a regional or pan-Indian level?
These farmers think of themselves as “beneficiaries” of the government. This is something the government continues to reinforce. Unlike citizens who have rights, beneficiaries are expected to be grateful for whatever comes their way. Since benefits made available by the government are limited, whereas the demand is infinitely greater, the incentives to compete are far higher than those for cooperating. “Capture” by better informed, politically astute and richer farmers becomes the norm, and the bulk of the farmers are left out. Till such a time that unorganized farmers begin to think of themselves as citizens, they will neither demand accountability nor perceive the need to organize.
Historically, it is only in areas with assured access to irrigation and where high value crops are grown, that farmers have asserted themselves. Think of the sugarcane growers or grape farmers of Maharashtra or the farmers in Punjab and Haryana 20 years ago. We must remember that irrigated areas account for less than two-fifths of the total cultivable land in the country. Even in areas where the Green Revolution was initially promoted with its accompanying investments in inputs, infrastructure and allied services, as the productivity declined or the contribution of agriculture relative to other industries shrank, the political significance of farmers eroded.
It is time, in my view, for agricultural income, i.e., income from the sale of crops, to be taxed. Eschewing taxation of agricultural income surely cannot be the only significant benefit we can provide our farmers. This populist measure perpetuates a culture of silence and submission among two-thirds of our population.
If agricultural income is taxed, small farmers will not remain silent any more. There will be an uproar—led initially by the large farmers. But importantly, it will lead to small and marginal farmers demanding better services, infrastructure and facilities. It will also create a significant incentive for farmers in this country to get organized into associations, demand accountability and seek to influence the debates around development rather than to remain mute beneficiaries.
Issues crucial to agriculture—rural infrastructure, roads, irrigation, storage or cold storage facilities, agricultural prices, extension services and support, financial services, among a host of other rural issues—need farmers to influence them. These cannot be left to the whims of the government or other institutions.
For agriculture to be revitalized, its contribution to the economic growth and for the push factors leading to migration to decrease, India needs to empower its farmers. The country needs to give farmers a voice. Taxing agriculture will ensure that our farmers—small, marginal or large—will stand up and seek to be counted as citizens and not mere beneficiaries.
V.K. Madhavan has worked in the not-for profit sector for two decades and spent 15 years living and working in deserts and hills. He’s still on the fringe asking questions and looking for answers. He will write every fortnight. Comments are welcome at
Original Article Here

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