Make Agriculture Great Again

on
farm_2.jpeg
Photo Courtesy: Satyabodh Shirhatti

Agriculture has always been a controversial sector in India. Every government tries to please farmers in their own ways. But the sector is haunted by a variety of problems.

CHALLENGES

There are different factors that affect agriculture [1]:

  1. Local and global environment
  2. Soil and crop-specific issues affecting yield of the crop
  3. Government policies like minimum support prices, subsidies, etc.
  4. Market prices
  5. Illness, accidents, and other life-cycle risks
  6. Uncertainties in the timing of repairs and reinvestment

Now let us glance through some India-specific problems.

Arable Territory

Total arable territory in India as of 2014 was 17,96,000 sq. km., which represented about 60.41% of the overall land zone of the country. In 1991, it was 61.07%. [2] Arable land in India is diminishing because of an ever-increasing population and growing urbanisation.

Size of Farms

A survey showed that as the size of land increases, the surplus increases in greater proportion. Over 65% of the households have less than one hectare of farm land. These households cannot generate any surplus. [3]

Credit

Many marginal and small farmers still rely on money lenders for obtaining credit. Today, bank penetration is considerable, but factors like income proofs, land records and verifiable paper trails often dock the creditworthiness and eligibility criteria. Generally, one-size-fits-all credit models are created rather than designing products suitable for individual borrowers. [1]

Investment

Gross capital formation (GCF) in agriculture is less than 10%. Since individual farmers are not capable of investing, public sector investment becomes necessary to stimulate household and private capital formation. But this is also quite low in India. [1] [4] [5] 

Insurance

In India, crop insurance is slowly gaining momentum, but lacks awareness and reach. It was found that in the absence of insurance, farmers employed insurance substitutes such as cash reserves and traditional technologies. Banks also refuse to lend if insurance cover is not available. [1]

Irrigation

After 1990-91, decadal growth rates of net irrigated areas fell to around 15% from 24%. There is wasteful exploitation of groundwater resources due to lack of law enforcement. [5] If not stopped, the groundwater level would get depleted and affect farming.

SUBSIDIES

No other sector in India is as subsidized as the agriculture. It gets subsidies at every stage of the supply chain for example, on inputs (fertilizers, power, seeds, loans, water), on outputs (minimum support prices, insurance), on infrastructures (storage facilities) and on exports. They also enjoy other subsidies like LPG and education.

Farmers are at the centre of India’s politics and populist measures are floated continuously. Green revolution increased the output of agriculture, but made the electricity boards poorer as cheap electricity was promised. If subsidies were the sole answer for every farmer problem, then today every Indian farmer would have been in a better condition. Subsidies reduce farmers’ ability to innovate and sustain pressures and calamities by themselves. Today, every farmer is dependent on the government for the survival. This also makes farmers a soft target in political conundrum.

Problems with Subsidies

  1. Excess subsidization leads to the uneconomic use of land. [6]
  2. It locks farmers into small farms and overuses cheap fertilizers which lead to degradation of soil and wastage of water. [6]
  3. Most subsidies do not benefit the actual beneficiaries. There are also deliberate exclusions and inclusions by fraudulent methods. Middlemen, bureaucrats, politicians and corporates are often blamed for siphoning subsidies.
  4. Illiteracy, poor land records, lack of resources and insufficient information distort the efficiency of subsidies.
  5. Withdrawal of age-old subsidies attracts antagonism from every part of the nation.

Smart Subsidies

Smart subsidies could be the answer. In India, Direct Benefit Transfer (DBT) combined with Jan Dhan-Aadhar-Mobile (JAM) scheme has plugged many loopholes in delivering various subsidies.

Subsidies need to create public goods which can benefit farmers and financial institutions. The government must fix a timeline to withdraw subsidies and try to increase farmers’ income. Increasing their productivity, risk management capabilities and financial literacy should be the main focus.

LOAN WAIVER

The Past

The previous government waived farm loans aggregating to Rs. 52,000 crores in 2008 (Agricultural Debt Waiver and Debt Relief Scheme, 2008), just a few months before the general elections. The government auditor, Comptroller and Auditor General (CAG) had exposed fraud in this scheme while The World Bank quoted it as unproductive.

Thus, the loan waiver scheme of 2008 was bad economics. However, it was a good political move as the government was re-elected in 2009.

The Present

The state of Uttar Pradesh waived Rs. 36,359 crores of farm loan. Opposition parties from Maharashtra are also demanding loan waiver for the farmers.

Rationality of Loan Waiver

Over half of all agricultural households are indebted. [3] According to National Crime Records Bureau statistics, 39% of farmers’ suicides in 2015 were on account of indebtedness. [7]

To be successful, the new loan waiver scheme must plug all irregularities pointed out in the previous versions. Farm loan waivers may act as a temporary solution. They disturb the credit culture and discipline in the economy. They create moral hazard as farmers do not repay their loans in anticipation of another waiver. The banks hesitate to re-lend farmers in the fear of becoming a prospective NPA. Nonetheless, the topic becomes a political gimmick which costs taxpayers at the end.

SUGGESTIONS

To attain long-term benefits, institutional and structural changes are required. Apart from various programmes carried by the governments, the blog wishes to put forth a few suggestions –

  1. Digitalizing land records. This would streamline land deals and help farmers to mortgage their lands with authentication.
  2. Encouraging organic farming, rainwater harvesting and non-conventional modes of energy sources (solar, gobar gas, etc.).
  3. NGOs, agricultural scientists, research institutions and many farmers who engage in modern farming should share their expertise and knowledge across the nation. Success stories of such farmers should be shared with the help of technology.
  4. India has various tribunals for different purposes. But there is no separate tribunal for handling agriculture-related cases. Generally, there are issues pertaining to inherited land. Is it the right time for Farmers Tribunal?
  5. Making mandatory for SOME farmers to just FILE income tax returns (and not pay tax). Filing returns would give the government some additional data of farmers’ income. This would help the government in setting up policies and taxing agricultural income in phased manner.
  6. Governments must invest in agriculture to increase productivity and not to subsidise institutions or farmers. Investment in research should be the priority.
  7. Education must be decentralised. Different techniques to modernise agriculture should be taught in rural schools itself.

It is the time that farmers must be self-reliant and self-sustained. Farmers should work on various techniques which are non-conventional and technology driven. In absence of rainfall, money or government support, farmers must not be burdened to commit suicide or go on strike. They should be empowered to rise every time with vigour and make agriculture great again. Jai Kisan!

 – Swapnil Karkare

Sources:

  1. Subsidies as an Instrument for Agriculture Finance: A Review, Joint Discussion Paper by The World Bank, BMZ, FAO, GIZ, IFAD and UNCDF
  2. The World Bank Data on Agricultural Land
  3. The Hindu, Data updated on 6th September 2016
  4. Crisil Opinion, February 2016
  5. State of Indian Agriculture 2015-16, Ministry of Agriculture and Farmers Welfare, Government of India
  6. Swarajya Magazine
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s