A bitter crop

Current rural distress is not about land acquisition. It is rooted in the low viability and high volatility of agriculture.

Written by Ashok Gulati | Updated: April 28, 2015 9:49 am
Low viability comes from the small size of the average holding in India (only 1.15 hectares), with 85 per cent of them being under two hectares. Low viability comes from the small size of the average holding in India (only 1.15 hectares), with 85 per cent of them being under two hectares.

Gajendra Singh’s tragic death has triggered a political debate over agrarian distress. Interestingly, each party swore that it stood for the welfare of farmers. Parties across the spectrum have also recognised that concrete measures need to be taken. The government has swung into action, preparing a contingency plan to tackle drought, in case there is below normal rainfall this monsoon. Prime Minister Narendra Modi has said that the agrarian distress is a deep-rooted problem and has been so for years now, and that we need to find a sustainable solution.

What has caused this farm distress and what are the possible solutions? Before trying to diagnose the causes and suggest answers, let’s get this clear: the current distress has nothing to do with the land acquisition bill.

One can identify several factors that have caused agricultural distress from time to time, but the central issues are the low viability and high volatility of the farm sector. Low viability comes from the small size of the average holding in India (only 1.15 hectares), with 85 per cent of them being under two hectares. Low productivity adds to this problem. More than half the land cultivated is rain-fed. But even an irrigated plot of two hectares, planted with two crops a year and with reasonably high productivity, will not give the farmer sufficient income to feed a family of five, unless it is used to grow high-value crops such as grapes. That is why almost half the income in rural households comes from non-farm sources today.

So we must recognise that people will have to move out of agriculture in due course, as has happened in almost all countries. The only thing to be mindful of is that this movement is driven by the “pull factor”, which draws the rural population towards jobs with higher productivity in the manufacturing and services sectors, and not by the “push factor”, stemming from agrarian distress. The movement to high-productivity jobs will depend on the overall growth of the non-farm sector as well as skills that are developed among those in rural areas. And this is going to take time, maybe 15 to 20 years. In the meanwhile, our policymakers have to answer this crucial question: is it acceptable to have an overall GDP growth of 7 to 9 per cent with less than 2 per cent growth in agriculture? If the answer is “yes” then there is a deeper problem in the model of development. But if the answer is “no”, there is still some hope.

It is incumbent on us to ensure at least 4 per cent growth in agriculture, if not more, to make a smooth transition from agriculture to non-agriculture over the next two decades or so. For that, we need to invest in raising productivity as well as ensuring countrywide market access for farmers’ produce. This calls for reforms in agricultural research and development and irrigation, as well as in marketing institutions (consider the APMC acts and the Essential Commodities Act). Successive governments have talked about these measures but none could carry through with them. The reason is that our political and bureaucratic system is more tonnage-centric than farmer-centric. We are content when production goes up and don’t care whether farmers have gained from it. This attitude needs to change.

The other reason for the current distress, high volatility, is caused either by the vagaries of nature or by tumbling prices. Unseasonal rains and hailstorms, but also a crash in the prices of several agri-commodities, whether it is potatoes, corn or cotton, are responsible. This fall in prices has slashed farmers’ incomes substantially, and the MSP system is benefiting less than 10 per cent of them. We need to fix this problem if we want to make Indian agriculture somewhat more viable.

In my last column in this paper (From Plate to Plough: ‘A Baisakhi gift for the farmer’, IE, April 13), I had given some details about the proposed insurance system that could be put in place. There is available technology to capture each farm on a pixel, linked to farmers’ accounts and UID numbers. Satellite imagery, with some help from agronomic experts, could be used to assess the extent of damage in a particular area, bypassing the time-consuming (and often corrupt) patwari system. If there is a hailstorm tonight in any area, within 24-48 hours, all damage can be identified and compensation money transferred to farmers’ accounts. This is absolutely feasible, and India can take pride in using high-end information technology and satellites for the benefit of those at the bottom of the economic pyramid. The sums insured could be raised to at least Rs 40,000 per hectare of irrigated crop. The state would have to subsidise the premium — 50 per cent by the Centre and 25 per cent by the state, apart from the 25 per cent put in by the farmer. This is the practice in countries like China and the United States. Resources for this premium subsidy can be raised through a 2 per cent cess on the input industry. Could the Centre take up this plan?

In 2014, P.K. Mishra submitted an excellent report to the government on reforming the crop insurance sector. If its suggestions had been adopted, we would not be in the panic mode that we find ourselves in today. Mishra is now in the PMO, and has been agriculture secretary. If he could get the proposals implemented now, it would be doing a great service to the Indian peasantry. Of course, the report could be fine-tuned and even extended from weather-based insurance to income insurance. Income insurance would cover natural as well as market risks.

It is high time a serious and sustained effort was made to reform agriculture, rendering it economically viable and reducing its exposure to risks. The current agrarian crisis needs to be converted into an opportunity for change, one that benefits millions of our farmers.

The writer is Infosys Chair Professor for agriculture, Icrier.

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    Girish
    Apr 28, 2015 at 6:31 pm
    why is he talking of insuring individual farmers? insure the entire state, or insure an entire crop across the nation. group insurance rates will substantially lower the premium- basic economics. insurers on the other hand, have a larger corpus and lowered risk profile. win-win. doesn't somebody have this much sense in the economics fraternity of india?
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    1. H
      Harsh
      Apr 28, 2015 at 10:35 pm
      The solution of this problem is very simple; just decide the procurement price of farm produce from farmer on the basis of industrial costing. And I am sure 80% of not only Indian cities but the cities of the world will be empty within a period of five years. If we calculate how much we spend on food and sanitation, which is only essential to sustain our life, we will immediately came to know who is real criminal for the misery of humanity on this planet.
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        anil
        Apr 28, 2015 at 12:03 pm
        Really good article on a very important and very very emotive issue. All along Indians have been fed non analytical high decibel 30 seconds each kind of debate on TV channels. It is time some good suggestions as mentioned in this article for improving the lot of farmers are also debated, discussed and taken up for implementation very very urgently. I hope print media , which is professional among all, will do its part.
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          Madhusudhan Haravu
          Apr 28, 2015 at 11:53 am
          Excellent article. It is unfortunate that such views never get aired on the noisy shouting TV discussions.
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            Niladrinath Mohanty
            Apr 29, 2015 at 9:09 am
            Great article. Back in 1978 Prof. Balawant Reddy of ASCI, Hyderabad had told us that Indian farmer does farming as hobby and not for living. No wonder he is still in distress and politicians are taking advantage of his distress to gain power and enjoy benefits of power without really caring for the farmer. Will RaGa or any other opposition politician care to read this article by the professor?
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              Dr Motilal
              Apr 28, 2015 at 4:16 pm
              Excellent analytical article . Congress ruled India for more than 61 years but never took "FARMERS CAUSE" seriously . They used SC/ST/Minority (specially Muslims) as "VOTE BANK " and used "RESERVATION AS TOOL " to ensure that they vote for congress . Now congress is in search of new vote bank . So focus on farmers . The government can learn a lot from this article to frame an effective strategy backed by an appropriate policy to address the real problem faced by farmers.
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                Narendra M
                Apr 28, 2015 at 7:08 am
                (1) This article makes valid observations about causes of rural distress which have led to problem of rural indebtedness. Perhaps situation has remained unchanged for last hundred or more years with majority of famers’ dependence on rain, low productivity, small holdings and lack bank credit. (2) In Maharashtra and in many other states, there are millions of farmers who have very small farms, sometimes less than an acre. Many farmers have to take part time employment as income from their farms is insufficient even for survival. But since the economy has failed pointed to generate enough number of permanent jobs for those who wish to quit farming and move to other occupations, index of rural distress has continuously increased. (3) Some have suggested crop insurance as a remedy for farmers’ woes but I believe farmers' distress and agony cannot be mitigated by crop insurance alone. For that both the Central and State governments will have to implement policies which take care of marginal and medium farmers' financial interests, as also deal with hazards ociated with poor monsoon, and similar natural hazards.
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                  srikanta patnaik
                  Apr 29, 2015 at 8:41 pm
                  We need to encourge cash crop ; because we can food surplus easily: bio fuel ' organic farming can save lot money on petro -& fertiliser expence ! Than only govt can affort help cultivators
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