Agriculture: Make India Win

Most developed economies go through a period where the population dependent on farming reduces and manufacturing grows, absorbing labour. In India, the manufacturing sector has not been able to create much employment. India entirely skipped this particular stage of economic evolution. India developed the services sector, most notably the IT sector, which by design can only absorb a miniscule segment of the country’s burgeoning population. Though technology contributes as much as 8 percent of the country’s GDP, it employs a mere 3.9 million people.

Consequently, farm employment is expected to remain a mainstay in terms of employment for decades. Indian economy has been derailed by poor policies in recent times and went into recession owing to the harsh lockdown. In this scenario farming has provided a much-needed buffer to those who have had to return to their villages. Preserving the agricultural sector, even as it fails to deliver high incomes, has been an entirely understandable rallying cry across much of India, and especially in its breadbasket in the northwest of the country.

Farmers’ protest is going on in India. The government is unwilling to accept the major demands of the protesting farmers, i.e to withdraw the three recent laws enacted and include assurance of MSP through legislation. The farmers are not accepting the few amendments to the laws that the government has offered. The protest has definitely brought the nation’s focus upon the problem of farmers (good thing). Let us analyze the state of agriculture and the major problems to deduce some solutions.

 

Important Facts

· At 157.35 million hectares, India holds the second largest agricultural land globally. Only, the United States has more agricultural land than India.

· India is the second largest producer of rice and wheat after China, with China producing about 40 percent more rice and wheat than India. India is also the second largest producer of fruits and vegetables in the world after China, but China’s fruit production is three times India’s production.

· Milk is India’s largest agri-commodity. Its production (about 177 million tonnes in 2017-18) in value terms exceeds that of rice and wheat combined.

· India has tried to address farm distress by announcing higher MSPs for about 23 major commodities in 2018-19, but in the absence of a large scale procurement mechanism by the government, the market prices for most commodities have remained 10-30 per cent below the announced MSPs.

· Edible oils:India imports edible oil and oil seeds in large quantity. Oils are mainly imported from USA and Canada. In 2004-05 oil worth Rs. 10500 crore was imported.

· A report in Mint using 2013 data from the Food and Agricultural Organization points out: “India produces 106.19 million tonnes of rice a year from 44 million hectares of land. That’s a yield rate of 2.4 tonnes per hectare, placing India at 27th place out of 47 countries. China and Brazil have yield rates of 4.7 tonnes per hectare and 3.6 tonnes per hectare, respectively.”

· In case of wheat the productivity is better than that of rice. “With 93.51 million tonnes of wheat from 29.65 million hectares, India’s yield rate of 3.15 tonnes per hectare places it 19th out of 41 countries. Here, we do better than Brazil’s yield rate of 2.73 tonnes per hectare, but lag behind South Africa (3.4 t/ha) and China (4.9 t/ha),

 

· 86% of farmers own less than 2 hectares of land and sell whatever is left after their own consumption to private traders.

· The top three states as far as monthly farm income goes are Punjab (Rs 23,133), Haryana (Rs 18,496) and Kerala (Rs 16,927).Average income of farmers in India is Rs 6000 per yr.

· 60% of Indian farmers depend upon non-farm income.

· Farming in India is too diverse to be controlled through central policies and letting the subject be controlled by states is quite sensible. Very rightly agriculture was designated as a state subject by the framers of the Constitution.

· NHFS Survey has shown that eighteen of the 22 states and UTs recorded a rise in the percentage of children under five years of age who are stunted, wasted and underweight compared with 2015-16, reversing decades of gains. There is also a rise in obesity. These figures are in consonance with the fall in GDP since demonetization and indicate the inability of the poor to get the required protein and minerals in their diet.

 

· Only 6% of farmers benefit from MSP but in Haryana and Punjab, where the vast majority of the procurement of wheat and rice happens, farmers are much more dependent. For example, 95-98% of Punjab’s wheat and paddy are procured at MSP prices.

 

· Deflation in farmers’ earning has been maximum since 2014. Promise of the government to double the farmers’ income by 2022, like many other promises, is apparently false. Production increase has caused no increase in profits.

· Bihar. In 2006, Bihar was the first state in the country to abolish the Agricultural Produce Market Committee (APMC) Act which facilitated private companies to directly purchase from farmers. Some farmers there claim they have to sell their produce to private companies at throwaway prices as middlemen and local traders make huge profits by buying the produce below the MSP.

· MP. In MP farmers’ agitations, taking place at frequent intervals in the state, have failed to attract national attention, barring the 2017 Mandsaur incident in which five protesting farmers died. The Krishi Upaj Mandi Act, 1972 was recently amended, and the Model Mandi Act passed in May 2020 allowed traders to make purchases outside the “mandis” without any levy. In the first six months of the amendments, there has been a significant decline in their business. Moreover, a reduction in “mandi” cess on the traders from 1.7 per cent to 0.5 per cent in October this year has weakened the revenue-generating capacity of the “mandis”. Wheat was procured by the state government during April-July 2020 at the MSP of Rs 1925 per quintal. Fieldwork done in Hoshangabad showed that most of the produce was sold to the state government at MSP. The rates of wheat in the open market in Hoshangabad during the time of the harvest hovered around Rs 1,450 per quintal. Similarly, maize and “moong” crops, for which there was no procurement by the state, were sold in Hoshangabad at Rs 1,000 and Rs 6,000-6,500 per quintal respectively, whereas the MSP announced for these crops was Rs 1,850 and Rs 7,196 per quintal. Incidents of farmers destroying standing crops of vegetables like cauliflower and tomatoes in the face of high cost of cultivation and extremely low prices have become common in the state and elsewhere.

· Jafar is a farmer from Meerut where he owns four bigha land in his village in Sardhana tehsil. He grows wheat and sugarcane on his land but lack of an organised mandi is a big factor. He says, “Only Rs 800-1,000 is what we get from our baniya. When we bring the same to Karnal mandi in Haryana after crossing the border, we get a better price. But the transport cost is high, so I have no option but to work as a labourer in Karnal. If I had two acres of land here, then I would have been a landlord too”.

 

 

· Small land owning farmers of Bihar work as labourers in farms in Punjab and Haryana.

 

· One acre of land utilized to establish a factory would generate more employment and GDP than growing rice/wheat.

 

· India can reduce farm land and population engaged in farming and yet increase quantity and quality of production.

 

· Only 10% of food in India is processed. This too is mostly primary processing like pasteurised milk. India has high tax on food processing. Major investment in food processing is minimal because there is hardly any domestic demand.

· Only 7% of food is exported. Major items are Basmati rice and mangoes. India is No 13 in food exports. Exports have been falling since 2014 at the rate of 12%. Not opening trade is a stumbling block.

· Farmer suicides are 12000 per year.

· Case of Vietnam. Vietnam increased 4% agriculture GDP by free trade agreements, value chains and exports. Vietnam exports agricultural products to 185 countries, ranking second in Asia and 15th worldwide. At present, China is known as Vietnam’s biggest export market, followed by the US. In 2019, Vietnam’s export turnover of agro-forestry-fishery products reached nearly $41.3 billion, occupying 15.6 per cent the country’s total export revenue, up 3.25 per cent compared to 2018.In the first nine months of 2020, despite the impact of COVID-19 pandemic, the export of agro-forestry-fishery products reached $30.5 billion, accounting for 15 per cent of the total export of the country, up 1.6 per cent over the same period in 2019.

 

· No farmers’ group was consulted before the three laws were brought and no credible farmers’ group had asked for these laws.

 

· The government does not have the sole preserve over wisdom.

· All the protesting farmers are not misguided and stupid.

· Government’s credibility is low with the farmers because of the numerous false promises made in the past and three major policy decisions which have ruined the Indian economy: demonetization, poorly planned GST and an unplanned harsh lockdown.

· Sikhs Are Not Risk Averse: Policies are Bad. India has an oversupply of wheat, rice and sugar. Indian farmers engaged in growing these crops are not fools that they grow these crops. These are the main crops for which they can get assured returns because of the government’s policies. Poor people are risk averse and so are the farmers. The Sikh community can arguably be considered the most enterprising community in India and if they are unwilling to diversify more then there is reason to doubt the policies.

 

Problems of Agriculture/Policies

· India is food surplus, thus domestic demand is less than the supply and hence getting the right price for the crops produced is always a problem.

· 44% of the farming population contributes to only 15% of the GDP. Thus majority of the farmers are poor everywhere, including in Punjab and Haryana.

· Farm sizes need to be increased to improve efficiency.

· Not more than 15% of the population is required for agriculture. Thus approximately 30% of the population needs to be shifted to manufacturing and services sectors. With the current high unemployment rate and “Make in India” being only a slogan like most of the present government’s promises there is no scope for absorbing this population.

 

· India cannot sustain grain stocks of 97 million metric tonnes, which is substantially more than double the buffer stock requirement of 41.2 million tonnes.

· Food exports are very limited. Indian food products may find it difficult to meet the international quality standards as regards the use of chemicals, pesticides and so on.

· Over production of wheat and rice, particularly in Punjab and Haryana and now MP have resulted in a surplus of these grains in India. This has adversely affected the water-table which is unsustainable. The stubble burning, which the farmers are forced to resort to has caused immense pollution.

· There is an over-supply of sugar in the world. India produces surplus sugar. The production of cost of sugar in India is high because of inefficiencies like transportation cost, loss of sugar percentage in transit, inadequate utilization of sugarcane for production of ethanol and other by-products. India often has to export sugar at a loss.

· Over 60 percent of farm land is totally dependent upon rain. There is a need to increase irrigation cover of farm lands.

· Private sector has to be brought in the farm sector because government does not have the required financial capacity.

· The present system of public procurement is untenable and cannot continue. There are levels of wastefulness up to 40% in the PDS system which inflate costs. In addition there is leakage of up to 46% in the procurement system.

· A study by National Academy of Agricultural Sciences (NAAS) concludes that storage is the major cause of post-harvest losses for all kinds of food in India. This is primarily discussed in the realm of fruits and vegetables, where India faces a critical deficiency of cold storage capacity – this belies the enormous potential of its processed food industry. As of March 2017, India had 7,645 cold storages having an aggregate holding capacity of 34.95 million tonnes. Around 57% of these are based in UP and West Bengal, and 75% of the cold storage capacity is used for potatoes. On the other hand, 30-40% of fruits and vegetables are estimated to be wasted due to lack of proper cold storage facilities.

· Agriculture reforms are due since long but have not been undertaken. The UPA and NDA governments are both blameworthy.

· The UPA government’s plans for reforms were on the similar lines as those undertaken by the present government.

Recommended Solutions

· The government should accept the demand of the farmers and repeal the recently enacted three farm laws.

· State governments should lay down the MSP for most of the crops and it should be determined considering the cost of production as also the domestic and international prices.

· The central government should avoid legislation on agriculture. Agriculture policies should be left to the states.

· As stated in the beginning the solution to the problem of farming lies outside farming. The government should encourage the manufacturing sector and attract FDI. As this sector increases automatically poor farmers will be attracted to shift to it in the next 5-6 years. The present time is not right to destroy the existing agriculture system because it may result in increased unemployment and poverty. The examples of MP and Bihar indicate this likelihood and provide evidence that the farmers’ apprehensions are not unfounded.

· The government should enter into trade deals with foreign countries to create opportunities for exports of farm products.

· The government should promote value addition to farm products and thus increase employment in the value chains and reduce losses of farm produce thereby reducing cost of farm products.

· The state governments should encourage aggregation of farm lands and creation of value chains, thereby increasing efficiency in farming, increasing production, reducing costs, improving quality and making India’s agriculture products globally competitive. Amul can be taken as an example of creating cooperatives in farming.

· The state governments should wean away the farmers from growing wheat and rice and increase production of oil seeds and high protein products by offering suitable incentives.

· The state governments should increase establishment of industries, particularly in Punjab, Bihar and UP to create employment opportunities for the disguised employment in farming.

· All forms of subsidies should be removed gradually and replaced by direct transfer of money to the farmers.

Final Words

There is no short term solution to the problems of farming. India has already suffered under the hands of the present government in seeking quick solutions. There is a need to talk and resolve issues and come up with a strategy to implement the ideas suggested above and more in the true spirit of democratic federalism. I will repeat again that government does not have all the wisdom and all the protesting farmers are not stupid. It is better to deliberate and move ahead in a cooperative manner. The government and farmers should not look at winning or losing the both should come together to Make India Win.

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