Reforms in agriculture marketing, adoption of land leasing laws, crop diversification and low government intervention may help India to accomplish its mission of doubling farmers’ income by2022.
In three years’ time India will turn 75. Hopefully, by that time, the country ought to have accomplished its mission of doubling farmers’ income. Just where do we stand vis-à-vis that laudable goal today?
The current trends are not very encouraging. The agriculture growth has dwindled in recent quarters. While that alone may not be the sole criterion to jump to any conclusion—for some sectors like fisheries (Gross Value Added or GVA 7%), horticulture (GVA 4.5%) and livestock (GVA 6.5%) have logged in a better performance—there are some startlingly worrying signs.
Agricultural reforms have not happened as expected. In whichever state the reforms have happened, they have been half-hearted, patchy and even diluted. Field crops are growing at a snail’s pace. According to Crisil Research’s Agriculture Report 2019, Kharif output this year might even decline by 3.5%, shrinking farmers’ profits by 10%-12%. In contrast to China’s agricultural sector annual growth rate of about 4.5% over the last 40 years, India has been growing at around 3%. This falls much short of the 10.4% annual growth rate target NITI Aayog envisaged in its model road map crafted in 2017, to bring about a transformative change in the country’s desolate fields.
On its part, the Centre has rolled out many well-meaning schemes like Pradhan Mantri Krishi Sinchan Yojana, PM Kisan, and Pradhan Mantri Fasal Bima Yojana to ameliorate the lot of farmers. In June this year, the Union Government even constituted a high-powered committee of Chief Ministers of seven states to suggest ways to increase farmers’ income. Just last week, they hiked the Minimum Support Price (MSP) of wheat, pulses, barley, grams, rapeseed/mustard and safflower substantially.
All the steps are in the right direction, but obviously, something does not seem to click. Perhaps we need a second agricultural revolution to speed up growth and productivity and, of course incomes. For this to happen it is imperative for states and the Centre to put in well-coordinated efforts to unleash reforms, with alacrity, in pricing, trade and infrastructure and enhancement of investment and efficiency.
PRICE REALISATION
Price realisation is a significant element of growth in farming. Its power is such that if the price increases by 1%, farm incomes increase by 1.6%. While there is no study available to measure the impact of market modernisation on prices received by the farmers, some sporadic experiments that have been attempted in the immediate past indicate a favourable trend.
In 2015-16, Karnataka government launched the Unified Market Platform (UMP), which showed a substantial benefit to the farmers. Peasant received almost 13% higher remuneration than anywhere in the country for 10 specified commodities. Created by the Rashtrita e Market Services (ReMS), an initiative similar to the Union Government’s eNAM initiative, UMP was a joint venture between the Karnataka government and NCDEX e Markets Ltd.
APMC ACT
Organised private players are reluctant to invest in production side of agriculture. A reform in the Model Agricultural Produce &Market (Promotion &Facilitation) Act, 2017 is likely to attract private capital in agriculture, precipitating competition, fetching better remuneration and reducing farmers’ dependence on MSP. The Act would eliminate many of the current regulatory constraints that inhibit free marketing. Maharashtra government’s decision to take out fruits and vegetable from APMC Act proved to be a boon to its farmers, who received much better prices, as they were free to sell their produce anywhere. States also need to aggressively develop the supply chain connecting farms with food processing and storage up to the retail. This is bound to generate employment at all links.
LAND LEASING ACT
Low scale and low productivity have been the bane of Indian agriculture for years. One of the chief reasons for this is the continued fragmentation of farms. By 2040, India is slated to have almost 200 million farm holdings, which means an average farm size of less than 0.75 hectares. Low or no access to irrigation, high input and labour costs coupled with market risks and vagaries of weather are making such farm holdings uneconomic, difficult to sustain, and increasingly unable to provide gainful employment to the owners. According to an NSS-SAS survey of agricultural households, 13.9% farm households had negative returns from crop production during 2012-13.
These problems are not intractable. Consolidation of land might be a good solution to handle fragmentation. Instead of states working on relocation of land parcels, a better idea would be to involve peasants themselves in farm restructuring. The exchanging farmers would have to pay a nominal stamp duty of 1% instead of the general 6%, as assured by the Farm Restructuring Guidelines of 2014-15.
The adoption of the Model Land Leasing Act, 2016, would further facilitate tenants, who constitute 13.7% of the total land holding (NASSO survey) and who wish to lease land for cultivation. They are suffering today because either landlords do not lease out land to them and even if they do, they do not want a written code. Such a lessee is not entitled for institutional credit and direct benefit transfer. The law can make a huge difference to end the tenants’ woes and also that of the landowners.
NON-FARM JOBS
Almost 45% of people are dependent on agriculture. Providing farm families with employment outside agriculture is a good way of decreasing pressure on land. The labour intensity of the non-agricultural sector has declined considerably. Between 2005 and 2012, in rural areas, the manufacturing output increased by 14.5% per annum but employment increased by only 0.6%. According to the Union Ministry of Skill Development and Entrepreneurship, the requirement of skilled labour is likely to increase by over 100 million by 2020, but will actually decrease by almost 35 million in agriculture. This clearly signals that agricultural “development” will actually mean finding jobs for a large number of farmers in the non-farm sector.
LOW OR NO GOVERNMENT INTERVENTION
It has been observed that higher the government intervention in the sector, lower is its growth. Take for instance the livestock, horticulture and especially fisheries sectors, where government intervention is very low. These sectors have seen a growth of 6.5%, 4.5% and 7% respectively, without MSP, credit cards, insurance or fertilizer subsidy etc. Only Karnataka gives some sort of a minimum price for livestock. But agriculture with all the usual trappings of farm welfare including free power and MSP has not grown by more than 1.5%. We need to reflect on this.
INCREASING PRODUCTIVITY OF RAIN-FED AREAS
While irrigation matters as it adds three times to the productivity of land and gives quick returns, it is also important to utilise the rain fed areas by changing the cultivation pattern. Our track record in irrigation is not very encouraging. Only 45% of our arable land is irrigated. In more than 50% of the states, the area under irrigation has not increased for more than 25 years. Rather, there is a decline despite huge government investments. Conversely, in rain red areas, post 2002, agriculture has increased at a much faster pace than in the irrigated region. With only 18% of irrigated land, Maharashtra received a yield in High Value Crops (HVC) like bananas, grapes, and pomegranates five times higher than in Punjab, which is 99% irrigated. We should look at such initiatives.
The goal of doubling farmers’ income is ambitious but certainly not impossible. There will be light at the end of the tunnel provided the Centre and states put up a collective fight against the deep-rooted malaise that has destroyed the country’s once verdant farms. That is the need of the hour.