Gist of Editorials: Remove The Roots Of Farmers’ Distress| GS – III

Relevance : GS Paper III


The farm problems

  • low agricultural prices
  • poor farm incomes
  • Low productivity in agriculture
  • supply side factors
  • declining average size of farm holdings

Prices And Incomes

  • The rise in prices for agriculture was much lower than general inflation in recent years.
  • Market prices for several agricultural commodities have been lower than those of MSP.
  • In the absence of an effective price support policy, farmers are faced with a loss in income.
  • Ways to deal with prices and incomes:
    • Schemes such as ‘price deficiency compensation’, ‘open procurement system’ ‘price deficiency’, etc. may compensate farmers when prices decrease.
    • Rythu Bandhu Scheme (Telangana) and the KALIA scheme (Odisha) can serve as models.
    • Market reforms combined with trade policies favourable to export.
    • Unified national market is needed for farmers to get better prices.
    • Agriculture has to go beyond farming and develop a value chain.

Low productivity

Ways to enhance productivity

  • Basics such as seeds, fertilizers, credit, land, etc should be taken care of.
  • Investment in infrastructure and research and development are needed.
  • Efficiency in water management in both canal and groundwater that is important.
  • Technology can help to reduce ‘yield gaps’ and thus improve productivity.
  • Shift from rice and wheat to millets, pulses, fruits, vegetables, livestock and fish.

Land size

  • Shrinking size of farms is also responsible for low incomes.
  • Consolidation of land holdings is important to raise farmer incomes.
  • Farmers can voluntarily come together and pool land to gain the benefits of size.
  • Through consolidation, farmers can benefit both in input procurement and output marketing.

Conclusion

Farmers’ distress is due to low prices and low productivity. We need a long-term policy to tackle the situation.


 

Editorial Simplified: Support for Lives on the Move | GS – III

Relevance: GS Paper II (Agriculture and Economy)


Why has this issue cropped up?

A national policy for internal migration is needed to improve earnings and enable an exit from poverty.


Issues with migration

Though migration is expected to enhance consumption and lift families out of absolute poverty at the origin, it is not free from distress —

  • distress due to unemployment or underemployment in agriculture,
  • natural calamities, and
  • input/output market imperfections.

Drivers of internal migration

  • Internal migration can be driven by push and/or pull factors. In India, over the recent decades, agrarian distress (a push factor) and an increase in better-paying jobs in urban areas (a pull factor) have been drivers of internal migration.
  • Data show that employment-seeking is the principal reason for migration in regions without conflict.

The costs of migration

  • However, at the destination, a migrant’s lack of skills presents a major hindrance in entering the labour market.
  • Further, the modern formal urban sector has often not been able to absorb the large number of rural workers entering the urban labour market. This has led to the growth of the ‘urban informal’ economy, which is marked by high poverty and vulnerabilities.
  • Most jobs in the urban informal sector pay poorly and involve self-employed workers who turn to petty production because of their inability to find wage labour.
  • Then there are various forms of discrimination which do not allow migrants to graduate to better-paying jobs. Migrant workers earn only two-thirds of what is earned by non-migrant workers.
  • Further, migrant workers have to incur a large cost of migration which includes the ‘search cost’ and the hazard of being cheated.
  • Often these costs escalate which forces them to borrow from employers in order to meet these expenses. And frequent borrowing forces them to sell assets towards repayment of their loans.

The benefits of migration

  • Despite the above issues, internal migration has resulted in the increased well-being of households, especially for people with higher skills, social connections and assets.
  • Migrants belonging to lower castes and tribes have also brought in enough income to improve the economic condition of their households in rural areas and lift them out of poverty.
  • Circular migrant’s earnings account for a higher proportion of household income among the lower castes and tribes. This has helped to improve the creditworthiness of the family members left behind — they can now obtain loans more easily.

Way forward

  • There exists a need to scale-up interventions aimed at enhancing the benefits from circular or temporary migration.
  • Interventions targeting short-term migrants also need to recognise the fact that short-term migration to urban areas and its role in improving rural livelihoods is an ongoing part of a long-term economic strategy of the households.
  • Local interventions by NGOs and private entrepreneurs also need to consider cultural dimensions reinforced by caste hierarchies and social consequences while targeting migrants.
  • There is a need of national policy on internal migration. Policies on this could be twofold. The first kind could aim at reducing distress-induced migration and the second in addressing conditions of work, terms of employment and access to basic necessities.
  • There is a need to distinguish between policy interventions aimed at ‘migrants for survival’ and ‘migrants for employment’.
  • Local bodies and NGOs which bring about structural changes in local regions need to be provided more space.
  • Government interventions related to employment can be supported by market-led interventions such as microfinance initiatives, which help in tackling seasonality of incomes.
  • Interventions aimed at enhanced skill development would enable easier entry into the labour market.
  • We also need independent interventions aimed specifically at addressing the needs of individual and household migrants because household migration necessitates access to infrastructure such as housing, sanitation and health care more than individual migration does.
  • As remittances from migrants are increasingly becoming the lifeline of rural households, improved financial infrastructure to enable the smooth flow of remittances and their effective use require more attention from India’s growing financial sector.

 

Editorial Simplified: Helping the Invisible Hands of Agriculture | GS – III

Relevance: GS Paper III (Agriculture)


The theme of this issue

With the ‘feminisation of agriculture’ picking up pace, the challenges women farmers face can no longer be ignored.


Why has this issue cropped up?

The govt. has proposed to discuss the challenges that women farmers face in crop cultivation, animal husbandry, dairying and fisheries. The aim is to work towards an action plan using better access to credit, skill development and entrepreneurial opportunities.


Data and reality

  • The Agriculture Census (2010-11) shows that out of an estimated 118.7 million cultivators, 30.3% were females
  • Women are responsible for about 60-80% of food and 90% of dairy production, respectively.
  • The work by women farmers, in crop cultivation, livestock management or at home, often goes unnoticed.
  • Attempts by the government to impart them training in poultry, apiculture and rural handicrafts is trivial given their large numbers.

Problems that women farmers face

  • The biggest challenge is the powerlessness of women in terms of claiming ownership of the land they have been cultivating.
  • In Census 2015, almost 86% of women farmers are devoid of this property right in land perhaps on account of the patriarchal set up in our society.
  • A lack of ownership of land does not allow women farmers to approach banks for institutional loans as banks usually consider land as collateral.
  • As of now, women farmers have hardly any representation in society and are nowhere discernible in farmers’ organisations or in occasional protests. They are the invisible workers without which the agricultural economy is hard to grow.
  • Land holdings have doubled over the years with the result that the average size of farms has shrunk. Therefore, a majority of farmers fall under the small and marginal category, having less than 2 ha of land — a category that, undisputedly, includes women farmers.
  • Female cultivators and labourers generally perform labour-intensive tasks. In addition to working on the farm, they have household and familial responsibilities. An increased work burden with lower compensation is a key factor responsible for their marginalisation
  • When compared to men, women generally have less access to resources and modern inputs (seeds, fertilizers, pesticides) to make farming more productive.

Way forward

  • In order to sustain women’s interest in farming and also their uplift, there must be a vision backed by an appropriate policy and doable action plans.
  • Women with access to secure land, formal credit and access to market have greater propensity in making investments in improving harvest, increasing productivity, and improving household food security and nutrition. Provision of credit without collateral under the micro-finance initiative of the National Bank for Agriculture and Rural Development should be encouraged.
  • Better access to credit, technology, and provision of entrepreneurship abilities will further boost women’s confidence and help them gain recognition as farmers.
  • A declining size of land holdings may act as a deterrent due to lower net returns earned and technology adoption. The possibility of collective farming can be encouraged to make women self-reliant.
  • Training and skills imparted to women as has been done by some self-help groups and cooperative-based dairy activities (Saras in Rajasthan and Amul in Gujarat). These can be explored further through farmer producer organisations.
  • Government flagship schemes such as the National Food Security Mission, Sub-mission on Seed and Planting Material and the Rashtriya Krishi Vikas Yojana must include women-centric strategies and dedicated expenditure.
  • Most farm machinery is difficult for women to operate. Manufacturers should be incentivised to come up with better solutions. It is important to have gender-friendly tools and machinery for various farm operations.
  • Farm machinery banks and custom hiring centres promoted by many State governments can be roped in to provide subsidised rental services to women farmers.
  • The Food and Agriculture Organisation says that equalising access to productive resources for female and male farmers could increase agricultural output in developing countries by as much as 2.5% to 4%.
  • Krishi Vigyan Kendras in every district can be assigned an additional task to educate and train women farmers about innovative technology along with extension services.
  • As more women are getting into farming, the foremost task for their sustenance is to assign property rights in land. Once women farmers are listed as primary earners and owners of land assets, acceptance will ensue and their activities will expand to acquiring loans, deciding the crops to be grown using appropriate technology and machines, and disposing of produce to village traders or in wholesale markets, thus elevating their place as real and visible farmers.

Conclusion

While the “feminisation of agriculture” is taking place at a fast pace, the government has yet to gear up to address the challenges that women farmers and labourers face.


 

Editorial Simplified: The Price is Wrong | GS – III

Relevance: GS Paper III (Agriculture)


Why has this issue cropped up?

The farmer and his income is an important theme of discussion these days. A lot is being discussed on ways to increasing, and doubling, the farmers’ incomes by the year 2022.


The farmer’s income

  • The income of a farmer is a function of three things —
    • the cost of cultivation,
    • production and
    • sale proceeds of the produce.
  • COST OF CULTIVATION: The cost of cultivation can be influenced by the farmer in a limited manner. Farmers can reduce the consumption of inputs per unit of land by using a better package of practices. However, the rising cost of inputs like seeds, phosphatic and potassic fertilisers, pesticides, etc is not in the hands of farmers. That is why subsidy for inputs remains important.
  • PRODUCTION: By using high-yielding variety seeds, mechanisation, fertilisers, irrigation facilities, micro-nutrients and the correct package of practices, it is possible to increase productivity and production. Areas where the yields are substantially less than the national average are the low hanging fruits where, with some concentrated effort and use of technology, it should be possible to enhance the yields quickly.
  • PRICE: Getting the right price for their produce is the most critical issue for farmers today. The point of discussion has shifted from a shortage of seeds and fertilisers 10 years ago to securing remunerative prices for the produce. The challenge for the farmers is that when production goes up, the price tends to fall. This results in zero or very little net gain for the farmers. The government procures wheat and paddy for the public distribution system. Hence, a large number of farmers sowing these are able to obtain the minimum support price. The government’s intervention in these commodities serves to shore up their price in the open market as well.

The solutions

  • INTERVENTION: For a large number of crops including oilseeds and pulses, farmers are not able to get remunerative prices. This makes a strong case for governmental intervention by providing an enabling policy environment, a robust institutional framework and a vibrant regulatory regime.
  • INFRASTRUCTURE: The government has increased the MSP of kharif crops substantially for this season, which has come as a shot in the arm for the farmers. But to increase their income substantially, marketing infrastructure and institutions need to be strengthened.
  • PM-AASHA: The recently announced Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA) is an important step towards securing remunerative price (read MSP) for the farmers. This provides for three methods of procurement: Price Support Scheme (PSS), Price Deficiency Payment Scheme (PDPS), and Private Procurement and Stockist Scheme (PPSS). PDPS and PPSS have been allowed only for the procurement of oilseeds whereas for all other MSP crops, PSS will be the main instrument. That brings us to the age-old Price Support Scheme, which can help the states provide remunerative price to the farmers for MSP crops other than wheat and paddy.
  • PSS: The mechanism under PSS needs to be strengthened. Currently, the procurement takes place through state government agencies on behalf of NAFED, which itself is a weak organisation. Farmers are not able to get the sale proceeds in time and so prefer to sell their produce at a lower rate in the open market. The states and Centre will have to come together and put a robust system in place in order to provide the real benefit of the MSP increase to the farmers.
  • PDS: The inclusion of pulses and millets in the PDS will result in the quick disposal of accumulated stocks. This will also lead to health gains for the population and monetary gains for the farmers.
  • VALUE ADDITION: Efforts to add value to the agricultural produce at the village level will have to be made. Even if primary processing like cleaning, sorting and grading of produce can be done at the farm-gate level, this will increase returns.
  • STORAGE: Storage and negotiable warehouse receipt facility for farmers will have to be expanded so that they are not forced to undertake distress sales.
  • EXPORTS: Incentives for exports of surplus produce will expand the market for farmers.
  • ACREAGE: There has to be a strategy to ensure appropriate acreage for crops so that the production is dictated by the market demand. Most farmers tend to go by the herd mentality and whichever crop gives good returns this year sees a jump in the acreage the very next year. This leads to overproduction and the price tends to crash leading to distress in the farming community.

 

Editorial Simplified: From Plate to Plough – Get Smarter on the Farm | GS – III

Relevance: GS Paper III (Agriculture)


Why has this issue cropped up?

Recently Union Finance Minister Arun Jaitley remarked that India needs a good blend of investments and subsidies in its agriculture policy.


Policy followed by India to support farmers

The main policy instruments to support farmers in India include

  • subsidised fertilisers,
  • power,
  • agri-credit,
  • crop insurance, and
  • minimum support prices for major crops

Negative price burden

  • A recent study, conducted jointly by the OECD and ICRIER, estimated that India’s trade and marketing policies have inflicted a huge negative price burden upon the country’s farmers.
  • The Producer Support Estimate (PSE) for India works out to be minus (-) 14 per cent of the gross farm receipts for the period 2000-01 to 2016-17. This is primarily because of restrictive export policies (minimum export prices, export bans or export duties) and domestic marketing policies (due to the Essential Commodities Act, APMC, etc).

The wrong way to support agriculture

Public capital formation in agriculture has been declining from 3.9 per cent of agri-GDP in 1980-81 to 2.2 per cent in 2014-15 — it recovered to 2.6 per cent in 2016-17 — while input subsidies on fertilisers, water, power, crop insurance and agri-credit have risen from 2.8 per cent to 8 per cent of the agricultural GDP during the same period. This is the “dumb” way of supporting agriculture, as the marginal returns on subsidies are far below those from investments.


Impacts of excessive subsidies in agriculture

  • Excessive input subsidies have caused large-scale inefficiencies in the agriculture system. For example, fertiliser subsidies, especially on urea, have led to the imbalanced use of soil nutrients.
  • The subsidy on irrigation water has resulted in an inefficient use of scarce water.
  • Highly subsidised power has led to over-exploitation of groundwater.
  • Subsidy on the interest rates on crop loans has diverted substantial amounts of agri-credit to non-agricultural use.

The right way to support agriculture

  • The results show that expenditure incurred on Agri-R&E (Research and Education), roads or education are five to 10 times more powerful in alleviating poverty or increasing agri-GDP than a similar expenditure made on input subsidies.
  • The rapid increase in input subsidies has squeezed public investments in agriculture. The results of the analysis, therefore, point out that India has not got the biggest bang for its buck being spent in the agriculture space. The smarter way to support agriculture and alleviate rural poverty would have been to increase investment in agriculture at a rate much faster than subsidies.

Way forward

  • Although the new crop insurance scheme, PMFBY, has dramatically reduced the burden of premium paid by farmers, its effective implementation and the quick settlement of claims into farmers’ accounts remains a challenge.
  • The best blend of subsidies and investments must now give more weightage to the latter, as the finance minister indicated.
  • Investment in public irrigation is very expensive, as it involves long lags, and the gap between the potential created and potential utilised has increased over time. To give higher returns, this leaky system must be fixed, it should be made more transparent and the gap between potential created and utilised bridged.
  • The present system of delivering subsidies through the pricing policy needs to be shifted to an income policy, which could be well-targeted, and leakages minimised— on the lines of JAM trinity. Many OECD countries, as well as emerging countries such as China, are moving in that direction. Indian farms can also benefit from this move where input subsidies at least are given as DBT on a per hectare (ha) basis.
  • Investments need to be prioritised towards agricultural research and development, roads and education. If India needs to access that technology, it needs to develop a proper IPR regime, which is in the interest of farmers as well as investors.

Conclusion

Can India make bold moves to give its farmers access to the best technologies in the world, which in turn can augment their productivity and incomes and give the nation long-term food security? Only time will tell whether India follows smart or dumb policies in its agri-space.


 

Value Added Article: Covering the Last Field | Category – Agriculture | Source – The Hindu

Relevance: GS Paper III (Agriculture)

Source:

The Hindu - Chrome IAS


Why has this issue cropped up?

Excess rains and floods in Kerala, deficit rainfall in eastern and north-eastern India, and associated large-scale crop losses have again highlighted the need for providing social protection to poor farmers.


PMFBY

  • A highly subsidised Pradhan Mantri Fasal Bima Yojana (PMFBY) was launched in 2016 to provide insurance to farmers from all risks.
  • Aiming to reduce basis risk and premium burden of the farmers, the scheme’s total expenses today are almost ₹30,000 crore.
  • In comparison to earlier schemes, the PMFBY is more farmer friendly, with sums insured being closer to the cost of production.
  • The scheme’s linkage with parallel programmes like the ‘Jan Dhan Yojana’ and ‘Digital India’ makes it a truly inclusive and welfare-based scheme.
  • The scheme therefore led to increased coverage of 5.7 crore farmers in 2016 and the sum insured crossed ₹200,000 crore.
  • However, notwithstanding its ambition and intent, the scheme since its operation has been scrutinised more for its misses than its hits.
  • Some handicaps of the scheme are:
    • outmoded method of crop loss assessment;
    • inadequate and delayed claim payment;
    • high premium rates; and
    • poor execution.
  • Consequently, in 2017, the expansive coverage of the scheme suffered some setback as seen in a drop of nearly one crore farmers in enrolment (about 17%).
  • Such shortcomings have inspired recent announcements such as that of Bihar to start its own scheme, the “Bihar Rajya Fasal Sahayata Yojna”.

Giving PMFBY teeth

In order to make the PMFBY a sustained developmental action for a comprehensive climate risk protection for every Indian farmer, the following action points are suggested.

  • Faster and appropriate claim settlement:
    • Timely estimate of loss assessment is the biggest challenge before the PMFBY.
    • The Achilles heel of the PMFBY is the methodology deployed for crop loss assessment: the crop cutting experiments (CCEs).
    • They have large errors. To improve the efficacy of the PMFBY, technology use such as detailed weather data, remote sensing, modelling and big data analytics must be intensified.
  • Universal and free coverage for all smallholders:
    • Farmers’ awareness about the scheme and crop insurance literacy remain low in most States, especially among smallholders in climatically challenged areas in most need of insurance.
    • The complicated enrolment process further discourages farmers.
    • To increase insurance coverage we should think of a system whereby farmers do not need to enrol themselves and every farmer automatically gets insured by the state.
  • Improved and transparent insurance scheme design:
    • Insurance companies are supposed to calculate actuarial rates, and based on tenders, the company quoting the lowest rate is awarded the contract.
    • We have seen rates quoted by companies for the same region and for the same crop varying from 3% to more than 50%. Such large variations are irrational.
    • One reason for such inflated premiums is lack of historical time series of crop yields at the insured unit level. To minimise their risks caused by missing data and to account for other unforeseen hazards, insurance companies build several additional charges on pure premium.
    • Science has the capacity today to characterise risks and reconstruct reasonably long-time series of yields. The premium rates, and hence subsidy load on the government, can come down significantly if we make greater use of such proxies and appropriate sum insured levels.

Conclusion

The government today spends more than ₹50,000 crore annually on various climate risk management schemes in agriculture, including insurance. This includes drought relief, disaster response funds, and various other subsidies. Climate-risk triggered farm-loan waivers are an additional expense. All these resources can be better utilised to propel farm growth.


 

Editorial Simplified: Not by MSPS | GS – III

Relevance: GS Paper III (Agriculture)


Why has this issue cropped up?

The Union Cabinet has approved a new initiative called PM-AASHA.


What is PM-AASHA?

Short for Pradhan Mantri Annadata Aay Sanrakshan Abhiyan, it basically combines three schemes —

  1. One existing (Price Support Scheme, in which MSP-based procurement of pulses and oilseeds is done by central agencies such as Nafed),
  2. One tried out by Madhya Pradesh and Haryana with limited success (Price Deficiency Payment Scheme), and
  3. One new (Pilot of Private Procurement and Stockist Scheme, in which private players have also been enlisted for MSP operations).

The problem

The question arises with regard to implementability of AASHA.

  • When market prices today are consistently ruling below MSPs, it only means that the latter do not reflect supply-demand fundamentals. That being so, the responsibility for making purchases at MSP and incurring both sale as well as storage losses would be solely on government agencies. How much can these agencies buy and store?
  • Moreover, how will they dispose of these stocks? Nafed is now struggling with the roughly 6.5 million tonnes of pulses and oilseeds it bought in 2017-18 — and which is currently being offloaded back into the market at below MSPs. Even if private corporates are entrusted with procuring on the government’s behalf, they will have to be compensated for losses and not merely paid a service charge of up to 15 percent on the MSP.

Way forward

  • If farmers are to be paid remunerative rates, the best way to do it is not through distorting but by liberating the markets. Let the farmer grow any crop based on market signals and sell anytime at the going price that traders are willing are pay.
  • Simultaneously, introduce competition by allowing anybody from anywhere to buy from any mandi within India, while doing away with all storage and movement restrictions.
  • A truly national market for agricultural produce, coupled with a flat per-acre government payment independent of the crop being grown, is the need of the hour.

 

Editorial Simplified: End Sweet Deal | GS – III

Relevance: GS Paper III (Agriculture/Industry)


Why has this issue cropped up?

India is likely to overtake Brazil as the world’s leading sugar producer next year.


How will India overtake Brazil?

Thanks to good monsoons, India’s sugar output will scale to 350-355 lakh tonnes in sugar year 2018-19, surpassing Brazil’s output of about 300 lakh tonnes.


Is it a good news for India?

  • This would saddle the domestic market with a supply of 450 lakh tonnes against demand of just 255 lakh tonnes.
  • This supply glut may well push mills presently teetering on the brink of bankruptcy.
  • It will also aggravate distress for beleaguered cane growers who are staring at dues of over ₹18,000 crore from the mills this year.

The sugarcane sector crisis

  • The Centre and States have only their own short-sighted policies to blame for this enduring crisis.
  • While Brazil’s sugar economy has acquired both resilience and global competitiveness by being extremely responsive to the fluid demand-supply dynamics of the global sugar trade, the Indian sugar sector is sinking deeper into a quagmire, thanks to policies that try to cosset growers and the industry from inexorable market forces.
  • By now, it is quite well understood why India’s farmers, despite the stagnating sugar demand, have continued to ratchet up sugarcane acreage at the expense of most other food crops.
  • Rising Fair and Remunerative Prices (FRP) for cane irrespective of sugar prices, giveaways by State governments in the form of ‘advised’ prices and loan waivers, and the onus placed on the industry rather than the Government to guarantee minimum procurement prices, have all combined to make sugarcane a lucrative crop at a time when the MSP promise is ringing hollow for most other produce.
  • While these policies actively encourage higher cane output, they don’t offer any solutions for liquidation of the resulting sugar surplus.
  • While the Centre has devised solutions like production subsidies and minimum export quotas, exports are all but ruled out by global sugar prices ruling a good 40 per cent below Indian production costs.
  • Ethanol blending has been an oft-prescribed solution that has been hamstrung by State policies actively favouring the alcohol lobby.
  • While dismantling the Central and State-imposed shackles on the sector presents a patently obvious solution, the nexus between State politics and the sugar economy has effectively scuttled reform attempts.

Way forward

  • With a water crisis now looming large over India, it has become imperative to de-link politics from sugar so that that the growers’ fatal attraction to this water-guzzling crop can be ended.
  • Both the Centre and States must bite the bullet on ending the special treatment for sugar by letting market signals dictate crop prospects and prices.
  • Treating sugarcane on a par with other food crops and moving from price support to income support for the farmer across crops, is the only way forward to deal with this bitter harvest.

 

VAA – Minimum Support for Small Farmers | Category – Agriculture | Source – EPW


Section: Agriculture

Title: Minimum Support for Small Farmers

Relevance: GS 2


Why has this article surfaced?

Recently, the government has declared the MSP hike for the 2019 kharif marketing season.

Problem in Implementation

The most worrying aspect is the implementation of these assured prices, especially for the small and marginal farmers. Evidence from various parts of the country reveals that the market prices of several major crops fell far below the announced MSP during the kharif season in 2017–18. Of what use is such a hike in MSP if it cannot be implemented?  

Widening gap between MSP and Market Prices

  • The widening gap between market prices and the MSP is indicative of the mismatch between production-augmenting and agri-marketing policies.

 

  • This gap arises out of the fact that MSP estimations are conventionally based on a cost-plus-pricing formula that ignores the demand side of commodities.

 

  • An MSP higher than market prices would lead to an unprecedented increase in production. But, in the absence of commensurate demand, this could result in a glut in the market and prices would crash further below the MSP.

Hurdles

  • The implementation of MSP in India is ensured through public procurement. Except for paddy and cotton, other kharif crops covered by the increased MSP do not have a robust procurement system.

 

  • The price volatility of agricultural commodities in India cannot be fully explained by production shocks alone. Nearly half or more of the price formation of these commodities takes place after the harvest.

 

  • The post-harvest value chain is usually fragmented with many middlemen. Intermediaries exploit production-induced surplus and scarcity situations to optimize their margins, while farmers end up receiving low prices irrespective of good or bad harvests.

 

  • Farmers are under pressure to sell their produce immediately after the harvest. This makes their supply inelastic, while traders can afford to wait strategically for the right time to buy.

 

  • Moreover, in the absence of diverse marketing mechanisms, uncertainties regarding the timeliness and the stock limits of MSP procurements are likely to depress market prices, with traders taking full advantage of it.

 

  • The distortionary effects of support prices are, therefore, likely to create havoc for farmers, especially small farmers who generally sell their produce at the farm-gate level to aggregators. They would be the worst victims of these low market prices, as support schemes like the MSP never reach them.

Conclusion

Unless interventions are dovetailed with heavy investments in marketing infrastructure, storage, and food processing, as well as changes in the Agricultural Produce Market Committee Act, 2003 to allow direct buying from farmer producer organizations and bypassing the archaic mandi system, raising the MSP alone will be useless to these vulnerable farmers.


VAA – Doubling Farmers Income | Category – Agriculture


Section: Agriculture

Title: Doubling Farmers Income

Relevance: GS 3


 

Introduction

Agriculture and allied activities are thrust areas as more than 50 percent of our population depends on agriculture for their livelihood. In addition, the fortunes of industrial sector as well as service sector are intricately linked with the output and growth of this sector. Hence, accelerating reforms in agriculture for improving its productivity is crucial for inclusive growth.

Steps to improve agricultural sector

  • Investment in irrigation sector
  • Investment in farms and allied activities such as aquaculture & animal husbandry
  • Provision of marketing support
  • Provision of food processing
  • Availability of credit on easy terms.
  • Addressing the supply side bottlenecks

Initiatives by Union Budget 2018-19 to transform agriculture

  • Pradhan Mantri Krishi Sinchai Yojana (PMKSY) with the objective of ‘Har Khet Ko Pani’ and ‘Per Drop More Crop’.
  • 99 projects under mission mode whereas the works for identified 48 projects will remain in progress alongwith left over works of other projects from previous phase.
  • PMKSY- Accelerated Irrigation Benefits Programme & Command Area Development (AIBP-CAD) has been provided Rs. 6000 crore
  • PMKSY-Watershed Development has been provided Rs. 2146.crore. It will lead to higher agriculture.
  • The government has proposed to include 96 most water deprived districts with an allocation of Rs. 2600 crore where only less than 30 per cent of the land holdings covered are under irrigation.

 

Micro Irrigation

  • The Water Use Efficiency (WUE) in Indian agriculture, at about 30-40 per cent, is one of the lowest in the world, against 55 per cent in China.
  • This requires paradigm shift in conservation and in agriculture policies, which should lead to saving of water, fertilizer and energy resulting in crop diversification and equitable distribution of resources.
  • The objective of PMKSY-Per Drop More Crop is the use of innovative water saving technologies in irrigation called Micro Irrigation.
  • Micro irrigation
    • saves irrigation water from 40 to 70 per cent (Mo Agri & FW,
    • conserves energy from 10-17 per cent
    • reduces fertilizers consumption from 15 to 50 per cent, and
    • decreases labour cost of about 30-40 per cent
    • leads to increment in gross irrigated areas
    • leads to adaptation of multi crop system
    • shrinks the expenditure on agriculture and
    • enhances farmer’s income.

 

Minimum Support Price (MSP)

  • MSP is a tool of market intervention by the Government of India to ensure the farmers from any sharp fall in the market price of a commodity.
  • While the structural reforms of agriculture takes time to trickle down the effect on the grass root level, the increase in Minimum Support Price has immediate effects on the farmers income, agricultural productivity & growth.
  • Addressing the issue of agrarian distress of farmers in India, the Union Budget has ensured MSP for all 23 crops with at least one and half times of their production cost (A2) plus the imputed value of family labour at prevailing wage rate (FL).
  • Ensuring MSP is a significant and straight step in moving towards the goal of doubling farmer’s income by 2022.

 Operation Green

  • The government has launched “Operation Green” for onion, potato and tomato crops on the line of “Operation Flood”.
  • It will promote FPOs, agri logistics, processing facilities and professional management with a budgetary allocation of Rs 500 crores.
  • These three vegetables are consumed throughout the year, however, the seasonal and regional production of these perishable commodities pose a challenge in connecting farmers and consumers.

 

FPOs:

  • Farmer Producer Organizations (FPOs) are the most appropriate institutional form for a prosperous and sustainable agriculture sector that enable farmers to enhance productivity.
  • FPOs remove hurdles in enabling farmers’ access the markets, both as buyers and sellers, enable policy environment for investments in FPOs to leverage their collective production and marketing power.
  • The 100 per cent tax deduction for FPOs with annual turnover of Rs 100 crore will boost ‘Operation Greens’ and ‘SAMPADA’ Yojana
  • Also, Farmer Producer Organizations (FPOs) will be encouraged to take up organic farming.

 

National Bamboo Mission

  • Recognizing the significance of Bamboo tree as a ‘Green Gold’, the government has launched a Restructured National Bamboo Mission.
  • There is also a change in the definition of bamboo too i.e. bamboo grown outside forest areas is removed from the definition of trees.
  • The objective of the mission is the holistic growth of the bamboo sector which contains enhancing acreage and productivity of bamboo, marketing of bamboo and bamboo-based handicrafts, promotion of Research and Development (R&D), etc.

 

Agri-exports

  • The country’s agricultural exports are around $ 33.38 billion at present against the potential of $100 billion.
  • To harness the optimum potential, the Union Budget 2018-19 has proposed to set up state-of-the-art facility in 42 mega food parks.
  • The government is also in the process of identifying and creating new markets for Indian agri products.
  • The boost in export of agri products will lead to the boost to Indian agriculture and enhance productivity through upsurge demand and better prices.

 

Agriculture Marketing

  • The objective of doubling farmer’s income depend largely on the efficient management and elaborate arrangements of agriculture marketing.
  • To strengthening and upgrading the agriculture marketing networks, the government has proposed to set up an Agri-Market Infrastructure Fund to develop and upgrade existing rural haats into Gramin Agricultural Markets (GrAMs).
  • Through the electronically linked GrAMs, farmers can sell directly to the last end consumers. This step will reduce wastage’s and improve farmer’s income.

 

Food Processing

The food processing industry plays a vital role in

  • minimizing wastage at all stages in the food processing chain,
  • enhancing shelf life of food products,
  • ensuring value addition to agricultural produce,
  • diversification & commercialization of agriculture,
  • generation of employment,
  • enhancing farmer’s income and
  • creating surplus for the export of agro & processed foods.
  • To make food processing sector dynamic and strong, there is a need to encourage R&D in food processing for product and process development and improved packaging.
  • Further, a policy support, and support for creation of Infrastructure, capacity expansion/upgradation and other supportive measures are needed for the growth of the sector.
  • Focus on infrastructure and testing facilities will help reduce wastages, increase value addition and address food safety aspect as well.
  • Establishment of specialized agro processing financial institutions will help design suitable financial instruments and increase flow of credit to the sector.

 

Agriculture Credit

  • Credit for agriculture plays a pivotal role in the agricultural development of India.
  • It adds to the productivity by supporting mechanization and contributes to the growth of Agriculture by enabling the purchase of variable inputs.
  • Recognizing the multifold benefits of agricultural credit, the volume of institutional credit for agriculture sector has been raised from Rs. 10 lakh crore in 2017-18 to Rs. 11 lakh crore for the year 2018-19.
  • Meeting the rural economy’s credit requirement will improve livelihood for farmers, reduce dependency on the informal lending sector, allow investment in better inputs & help the farmer deploy technology at the field level.

 

 Aquaculture and Animal Husbandry

  • Small-scale fisheries and aquaculture have an important contribution in the areas of employment generation as well as adding to the farmer’s income and agri exports.
  • As the population of India is growing and per-capita income is rising, the demand for aquaculture products and livestock products are expected to grow.
  • To meet the required demand, there is a need for government intervention to utilize the optimum potentials of aquaculture and animal husbandry.
  • The government has proposed to set up Fisheries & Aquaculture Infrastructure fund and Animal Husbandry Infrastructure fund with a combined corpus of 10,000 crores.
  • Further, the government has decided to provide Kisan Credit Card benefit to fisheries farmers.

 Other Initiatives

  • The government has provided Rs. 200 crores to encourage an organized cultivation of highly specialized medicinal and aromatic plants and associated industry.
  • There is also a provision of subsidized machinery for management of crop residue for Haryana, Punjab & UP farmers to get rid of environmental hazard.

 Conclusion

The Indian agriculture is on the path of structural as well as institutional transformation. The multi-pronged approach will make agriculture more dynamic and productive.  The Union Budget has come up rightly on the expectations of agriculture community both on the short as well as long term perspective. This is the way forward in the doubling farmer’s income by 2022.