By Major General PJS Sandhu
Recently, NITI Aayog unveiled a draft for ‘Three Years Action Plan’ in its third governing council meeting. This included bringing the agricultural income into the tax net to widen the tax base. The income tax rates proposed were to be the same as for other individuals’ income, except that for rural areas it was to be based on the average income of three years to cater for the vagaries of nature. Mercifully, the Finance Minister denied considering this proposal. Since more than 60 percent of India?s working population is engaged in agriculture, such a proposal on the face of it looks very lucrative, but it needs some interrogation in order to evolve into an informed and a pragmatic viewpoint.
What is the ground reality?
Land, agriculture and food security for the nation are interconnected. The land is in the Concurrent list while agriculture is a state subject. Food security for the nation is an unwritten national responsibility. India inherited primitive forms of agricultural practices at the time of independence. As a consequence, it was dependent on food imports for the first two decades.
With the Green Revolution in the 1960s, India soon became self-sufficient in food and most other agro products. Around this time, the states implemented some unrealistic land ceiling laws which caused a great setback to agriculture as a profession and industry. The Cooperative Movement (based on the Soviet model) which was launched with great fanfare by Pandit Jawaharlal Nehru was a great failure. The result was that the agriculture became highly uneconomical and the farmers started moving away from it. The Green Revolution has stood still for the last four decades. It will not be an understatement to say that 90 percent of the farmers are under perpetual debt.
A risky venture
Let us look at some other factors which are peculiar to agriculture. Agricultural practices vary from place to place based on soil fertility quotient, means of irrigation, quality and extent of ground water, climate and, natural calamities. Droughts are not uncommon to India. Untimely rains and hailstorms at the time of harvesting bring the efforts of the past 4-6 months to a nought. In a cycle of say, five years, a farmer may have a crop failure for 2-3 years.
When a farmer has a crop failure, there is practically no compensation for the expenditure on inputs. He is left with a negative income. Will the government be ready to compensate the farmer to the extent of his damage and provide him with enough to sustain himself and his family? Keeping in mind the meagre compensation that has been paid to the farmers in the past, it seems almost impossible that the government would be able to compensate a farmer adequately.
Will the negative income be taxed?
Farming in India is labour intensive. Is there a mechanism to realistically quantify the labour that a farmer puts in to prepare the fields, sow and tend the crop, and finally sell it? Moreover, he has to wait for the payment to materialise, especially where government agencies are the procurers. The prices of most crops have remained stagnant. They are not remunerative enough to break even all the expenditure. Even getting good quality seed is a major hassle. For example, to get BT Cotton seed, the farmer has to first obtain an authority from a Gram Sevak (an agriculture official) and should he succeed in getting that, there is no certainty that the seeds would be available to him in the required quantity.
All this sums up to a herculean task that a farmer has to do. Adding the income tax to the non-existing or a negative income will add to the burden of the farmers. If the government is unable to fulfil its promise of doubling the farmers? income, it should not create another problem for them in the form of an income tax.
Major General PJS Sandhu retired from the Army on 31st July in 2003 and is now engaged in farming after his superannuation from USI of India where he worked as the Deputy Director & Editor from May 2007 ? Dec 2016.
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