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Removing the roots of farmers’ distress (Agriculture and its multiple problems in India)
Read more on - Polity | Economy | Schemes | S&T | Environment
- Agrarian distress : It is mainly seen in terms of low agri prices and poor farm incomes. Low agri productivity, and poor supply side factors are also discussed. Viability of agriculture due to decreasing farm sizes is talked about.
- The role of prices : Farmer incomes directly depend on farm produce prices, and that was so during Green Revolution years too. Since 2016, farm price inflation was much lower than overall inflation. The price deflator for GVA in agriculture was 1.1% only, while it was 3.2% for total GVA, in 2017-18.
- Bad news for 2018-19 : This deflator is likely to be 0% for agriculture, and 4.8% for total GVA. Why so? Because agri growth was at 3.8% for both nominal prices and constant prices in 2018-19. The market prices for many goods is less than their MSPs. So terms of trade are unfavourable for agriculture.
- Why do prices decline? As output grows very rapidly, and market demand does not grow as much (at a good price for farmers), then market prices will decline. Price support policies aren't effective really, and so farmers are losing incomes. Small farmers cannot absorb such losses in income. So, the blessing of high production turns into the curse of low incomes.
- Suggested schemes : Many attempts have been made.
- Bhavantar Bhugtaan Yojana (Price-Deficiency Scheme) - Govt. agrees to pay the difference between market price and the MSP.
- Open ended procurement - For many years, this has been used for rice and wheat, at MSP levels for any amout of output. What to do with other crops? (A suggestion - Limited procurement for price stabilisation)
- Rythu Bandhu scheme, Telangana - It's a farm support scheme, but doesn't cover tenants (only covers landowners). It's an income support scheme that will work year after year.
- KALIA of Odisha - The Krushak Assistance for Livelihood and Income Augmentation (KALIA) is similar.
- Limited procurement scheme : The govt. will procure the "Excess" from the market, leaving normal production levels to meet market demands (thereby prices may not crash). So operationally, procurement by govt. will continue till prices touch the MSP levels.
- Operational precautions : If the MSPs are unrealistically high, then this scheme will not work. Also, the govt. can sell the procured grain in later years, or use in welfare programmes.
- From short-term to long-term solution : The only way to resolve this problem in long run is to bring market reforms to enable better price discovery and long-term trade policies promoting exports.
- We need a competitive, stable national market for farmers
- APMC agri markets are inefficient, intermediary-oriented, and fragmented
- Developing a value chain is needed - farming + wholeselling + warehousing + logistics + processing + retailing.
- Low productivity problem : Focus is needed on streamlining all inputs - seeds, fertilizers, credit, land, water, technology. The biggest input is water, and 60% of irrigation water goes into just 2 crops - rice and sugar cane. Better efficiency in utilisation is needed (for both canal and groundwater). We use 3X the water used per tonne of grain, compared to Brazil, US and China.
- Reorienting govt. policies : The policies focussed today on cereals like rice and wheat need to think of millets, pulses, fruits, vegetables, livestock and fish.
- Farm sizes : From 2.3 hectares in 1970-71 to 1.08 ha in 2015-16, the average farmholding size dropped fast. Small and marginal farmers not account for 86%, compared to 70% in 1980-81. Average marginal holding size was only 0.38 ha (< 1 acre) in 2015-16. Incomes of such farmers is very low, compared to larger ones.
- Why not leave agriculture altogether? Other sectors are not offering enough opportunities. So, consolidation of land-holdings is now a must, if farmer incomes are to be raised. In the 1970s, B.S. Minhas argued that compulsory landholding consolidation should be done, to enhance poor people's incomes in rural areas.
- Summary : Low prices and poor producitivity has created farmers' distress. To resolve it, we need limited procurement, improvement of productivity, and landholdings consolidation. All this can come only through a long-term policy.
- India now needs a long-term agrarian distress resolution policy that uses strong tools like consolidation of land holdings, limited procurement to stop rapid price falls, and methods to improve productivity.
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