Agriculture needs a booster dose

News: The cure for the farm sector’s ills lies primarily in making agriculture remunerative.

Why are farmers discontented and uneasy?

Income from crop farming has become insufficient for the livelihood of an average farm family: The “Situation Assessment of Agricultural Households” survey, carried out by the National Sample Survey Organisation in 2018-19, clearly indicates that an average farm family now earns more from wages than from farming.

If farmers rely solely on growing crops, they would earn less than what an unskilled labourer does. This is the reason why numerous farmers are giving up this occupation. The count of non-cultivator rural households has increased from around 66 million in 2013 to nearly 80 million in 2019

It needs to be supplemented with earnings from other sources, notably wage employment and agriculture’s allied activities.

Increase in the indebtedness of farm families: Most farmers need to borrow even to meet their household expenses. The average outstanding loan per household has risen from around Rs 47,000 in 2012-13 to as much as Rs 74,121 in 2018-19. Thus, while the farmers’ income (nominal) has increased by around 60% during this period, their average debt has also simultaneously shot up nearly by the same proportion.

Since a sizable part of these loans is generally taken from informal sources, notably moneylenders, the debt-servicing cost is usually far higher than normally presumed.

The terms of trade for agriculture (the ratio of agricultural versus non-agricultural prices) are also turning unfavourable to farming: The data compiled by the agriculture ministry, shows a decline from 99.07 in 2016-17 to 96.43 in 2018-19.

Productive assets of farmers, such as land and water, are decreasing in terms of both magnitude and quality: The size of an average landholding has shrunk from 0.8 hectare at the beginning of 2000s to 0.5 hectare in 2019.

Increasing landlessness in rural areas: Some of the lands have become too tiny to cultivate. As a consequence, many farmers opt not to till these uneconomic holdings and, instead, let them out, or sell them resulting in landlessness.

What needs to be done to make the farming sector remunerative?

Firstly, there is a need is to facilitate increase in the size of farm holdings to make them economically viable: Consolidation of holdings, as was done during the post-Independence land reforms, can be one way of doing so. The success of that exercise in some states had created the base for the green revolution. But its replication does not seem feasible today.

The practical option now is to legalise land leasing. This would let farmers lease in or lease out land without fear of losing its ownership, resulting in an expansion of operational holdings.

Secondly, there is a need to shift focus from maximising output to optimising profits: Solo crop farming should give way to integrated farming systems. It should use judicious blending of crop cultivation with agriculture’s allied activities like animal husbandry, poultry, fisheries, beekeeping, horticulture, agro-forestry, and similar others.

The by-products and wastes of some of these activities can serve as inputs for the others, thereby reducing production costs and elevating productivity.

Thirdly, In the case of agricultural marketing, the growers can be compensated for lower returns through mechanisms like the Madhya Pradesh’s price deficiency payment system. Farmers can also be assisted in deferring the disposal of their produce until the off-season, when the prices are usually high.

Fourthly, processing farm produce into value-added and shelf life-enhanced products, needs to be encouraged to ensure higher returns.

Finally, the direct income support, now fixed at Rs 6,000 a year, can be increased appropriately.

Source: This post is based on the article “Agriculture needs a booster dose” published in Business Standard on 27^th Dec 2021.