An Uphill Task: Can Yogi Adityanath turn around the finances of Uttar Pradesh?

Uttar Pradesh Budget is pulling in two opposite directions - populism and austerity. On the one hand, there is the farm loan waiver, announced within days of the BJP government taking charge in March this year but whose precise cost to the exchequer - Rs 36,359 crore - has been made clear only with the announcement of the government's first Budget on July 11. But on the other hand, spending on a number of infrastructure and irrigation projects, some education schemes as well as schemes like the beautification of the Gomti riverside in Lucknow - a pet project of the previous government - has been slashed. There is no allocation even for continuing the much-publicised free laptop distribution scheme of the previous government, though the BJP had promised, in its manifesto, to continue with it.

Stopping the laptop scheme, along with other freebie schemes - such as the stainless steel thalis and tumblers the previous government gave schoolchildren on the last dhanteras day - will save the state Rs 15,000 crore. "The first thing governments do in a fund crunch is to cut down on social sector spending," says Pinaki Chakraborty, Economic Advisor to the 14th Finance Commission. "This will obviously impact the human development index, which in any case is not high in UP." Yet religious tourism has been given a Rs  1,240 crore boost, with further development of Ramayana, Krishna and Buddhist circuits, providing, in particular, better infrastructure in the pilgrimage towns of Ayodhya, Mathura and Sarnath, respectively.

The farm loan waiver - which the state government prefers to call "redemption" of loans - will help 21.5 million small and marginal farmers but will do nothing to solve the problems of agriculture in the state. "It will at best provide the farmer temporary relief, giving the government time to work out a proper plan," says Tajamul Haque, former Chairman, Commission for Agricultural Costs and Prices.

Among long-term reforms, the government wants to orient more farmers towards cash crops rather than the subsistence ones for which the state provides a minimum support price. "We want to make cash crops more viable," says Surya Pratap Shahi, UP Agriculture Minister. Prominent among them is oilseeds. UP intends to soon join the National Mission on Oil Seeds and Oil Palm (NMOOP). In April this year, NMOOP guidelines were liberalised to allow 100 per cent corporate investment, including FDI, in oilseed farms. "This will help since we have industrial units in Kanpur with the capacity to process large quantities of oilseeds," says a senior UP official.

A major problem for farmers in Western UP, where sugarcane is the main crop, is late payment by mills. In its manifesto, BJP had promised to ensure payments within 14 days of delivery of the sugarcane at the factory gates, and soon after taking charge, Adityanath gave mill owners a month's window to settle farmers' dues, or else face penal action. Though the crushing season ended in April, dues of around Rs 2,500 crore from 32 mills still remain outstanding. The mills have their own problems of viability which restricts their options. "We're working on a sustainable policy to make the payment schedule more regular," says a senior UP government official. The Budget allocates Rs 273 crore for the promotion of the sugar industry.

Prime Minister Modi has stated that he wants to see farmers' incomes double. To achieve this, the UP government will have to take steps to modernise the state's agriculture. It has announced its intention to set up 20 Krishi Vigyan Kendras, but given that their budget allocation is just Rs 10 crore each, they are unlikely to achieve much. Experts maintain that public investment in agriculture is needed to increase crop yield and expand diversification. The various constraints on UP's Budget - such as the large outlay on interest payments amounting to 18 per cent of total expenditure in the latest budget, or the outgo on employees' salaries - have ensured that the share of expenditure on agriculture and rural development is significantly lower than the national average. Nor is the situation likely to change in coming years. ~

@anileshmahajan