This small essay on agro-reforms should be analyzed keeping in mind one major peculiarity of Indian agriculture. Here farmers commit suicide or reel under utter destitution on two occasions:
➢ They suffer when their crops fail and thus they are unable to recover the basic cost of production.
➢ On the other hand, Indian farmers also suffer when they end up having a bumper production because it leads to massive crash in the price of the product in the market. Thus, India’s farm related problems are revenue related mostly.
• In the first place, it has to be understood that the issue of agriculture and the problems related to it are mostly systemic problems and such problems have mushroomed because of too much government intervention over the last six decades and too much of power given to the Mandis and Wholesalers in the agri-market at the expense of the farmers.
• It is also to be understood that a skewed policy towards production of more food grains, like wheat and rice as well as too much incentivization of sugarcane production, each of which is water guzzling in nature, has not just depleted the groundwater reserves but has also contributed majorly to a gargantuan power crisis since water pumps are extensively used in India to extract water to flood the crop-fields. Free electricity for farming led to more misuse of ground water. It did not help India’s farming or power sector or ground water condition either.
• Even when ground water has been extensively exploited in many regions of India for watering crops, it has not let to any major increase in the levels of productivity because water simply flows away than being absorbed by soil thereby leading to more wastage than usage. This can be confirmed by a comparative analysis of the level of farm productivity between India and China. China is way ahead of India in the same.
• In the third place, farmers have suffered also because the states for decades have completely disallowed or rather denied the farmers’ fundamental right to have direct connect with the end consumer. In most cases they have to necessarily sell in the Mandis. The concept of Minimum Support Price further destroyed their will to sell in the market especially in states like Punjab, Haryana and in Western UP. The government borrows money to procure that food-grain at a high price and then literally let in rot in the granaries. Sadly, this has been happening for decades and the end result is that even when the borrowings of states have been increasing for the same, resulting in fiscal imbalance, it has not resulted in food grain reaching to the needy. By certain estimates, more food grains are wasted in India every year than being produced by Australia every year.
Further, the APMC (Agricultural Produce Marketing Committee) Act has acted like a stranglehold wherein the farmers don’t get the remunerative price and get peanuts even when the retail price of many farm produce skyrocket and pinch the pockets of the end consumers, resulting in only the intermediary / middlemen elements minting all the profits. There is too much restriction even on the movement of farm goods from one state to another. Good harvest often leads to over supply thereby reducing the price and eventually hurting the fortune of the farmers. Even as India is moving towards a unified market for goods and services through the GST, it is equally important to have a seamless and transparent market for agro-products.
• A farmer is like an entrepreneur. He takes a decision to invest money and produce a particular crop. He sows, cultivates and harvests the crops and then makes all the arrangements to sell it as well. If farming is like any other business, then it has to necessarily have division of labor and considerable capital infusion for the business to have a reasonable debt/equity ratio. Unfortunately for decades faulty policies have completely debarred the creation of capital in farming because agriculture in India has completely become non-remunerative. The concept of Farmer Producer Organization has been a step in the right direction but it has to be ably supplemented with more impetus to Contract farming, Cooperative revolutions on the lines of AMUL, a positive environment for start-ups in the farming sector.
• By encouraging only a particular kind of farming in some areas, say like, sugarcane in certain belts of Maharashtra (or wheat in Punjab), and then forcing the sugar mills to buy the sugarcane at a specified rate, farmers have become pawns in the hands of the politicians . Forcing the sugar mills to pay a higher than market price, have created a huge issue of rising debt burden for sugar mills and resulting NPA for Banks and companies are not in a position to repay the money borrowed from banks.
• The problem gets even more profound and complex because of the inherent inefficiencies in the procurement system. The entire culture of the states to borrow money for procuring food-grains and then literally letting millions of food grains to rot in open mandis even when millions remain malnourished does not augur well for India. This is not viable either in the long run. The nation has to find a viable way of making agriculture remunerative and viable for farmers as well as create a mechanism whereby efficient entities driven by market dynamics can then take that food grain to distant places of the country where it might solve much of the food problem. The Centre needs to work with states for creating a viable market driven mechanism.
1. Rejuvenation of ground water, improvement of agriculture, mitigating the financial crisis issues of power sector and NPAs of Banks are somewhere intrinsically correlated to each other.
2. While the national e-mandi initiative is a great step forward so far as the creation of a national integrated market for agri-products, it would be beneficial for the farmers in the truest sense, only if farmers and farm producers organizations are allowed to access the end-consumers, agro-e-tailers and major departmental stores directly.
3. The budget this year has mentioned some extremely positive steps towards rejuvenation of ground water and a considerable amount of money has also been allocated for the same. However if groundwater has to be sustained in the long run and if it has to be made sure that its indiscriminate exploitation is controlled. This can only be done through promotion of
a. Drip Irrigation- The concept of Drip Irrigation which was pioneered by the Israelis and which converted the arid regions of Israel into literal oasis, needs to be explored in India. Drip Irrigation is the best way to use water for agriculture purpose even while making sure that water is not wasted and maximum is absorbed by the soil. India should have a policy of promoting drip irrigation among farmers and especially for crops which need huge amount of water such as wheat, rice and sugarcane. All incentives and subsidies given to farmers should be linked to drip irrigation techniques embraced by Farmers.
b. Encourage production of those crops that need less water- India needs to have an urgent policy in place which would promote those crops (including food crops ) which require lesser amount of water than those variants of rice and wheat produced in India presently which require a huge amount water.
4. On the lines of GST, India needs a policy for creation of a seamless market across India for its agri-products. There has to be a strong policy in place through which surplus produce of one place can find buyers of the same from other regions of the country. Trade of Agri-produce should be done on the lines of commodity exchanges and the manner in which e-commerce sites operate.
5. The government should strive to create a National Exchange for agro-Commodities. This entity should have block level offices. Farmers and Farmers Producer Organizations should be allowed to directly sell their produce through the exchange.
6. There is a pertinent need for creation of an ecosystem for a new generation of ago-entrepreneurs to thrive. It is sad that India is witnessing a massive entrepreneurial revolution across many fields but the same is not visible in the realm of agriculture simply because there is tremendous restriction on the rights of farmers and agro entrepreneurs to decide price and ship products. The stranglehold of Mandis has destroyed the financial viability of entrepreneurship in agriculture because of which farming as a profession today is a loss making proposition.
7. To reduce the risk that farmers face, there is an urgent need to promote cooperative farming and contract farming.
8. Study the Chinese Model initiated by Deng Xiao Ping- The economic well being of India has a strong correlation with the economic well being of rural India and the farming community. In this respect it would be important to do a case study of how China under Deng Xiao Ping endeavored to increase the purchasing power of rural China by allowing the Chinese farmers to sell a substantial part of their farm produce in the open market instead of selling to the state for food security.
9. Agricultural income will have to be supplemented with other income. In this respect, apart from other initiatives, there is a pertinent need to incentivize those industries in drought prone regions of India, which require less money. A mapping of such industries, both small and large, needs to be done.
10. Last but not the least, Food processing centers needs to come up right in the heartland of Indian agro-zones so that the nearest agro-processing centre from the farmland is literally at walking distance. If the production of onion increases, it would certainly not increase the consumption of raw onion by people. What ideally is the way forward to make sure that bumper production does not lead to massive fall in price, is the development of a food processing centers across every sub division of every district of India.
11. A certain amount of incentive can also be given to many of the manpower intensive industry such as private security industry (around 70 lakh private security personnel are employed in India) or the construction industry to source manpower from the drought prone regions of the country. This can also be extended for recruitment in Central Police Forces and respective State Police Forces. Such policies do exist for preference or certain amount of quota for recruitment of Constables from Maoist affected regions.
You can reach the author at @live_pathikrit