Agriculture needs a booster dose

Why are farmers discontented and uneasy? The reason, simply put, is the erosion of profitability in agriculture. Income from crop farming is insufficient for the livelihood of an average farm family. It needs to be supplemented with earnings from other sources, notably wage employment and agriculture’s allied activities. Most farmers need also to borrow to meet household expenses. Indebtedness is growing at a menacing pace.

The “Situation Assessment of Agricultural Households” survey, carried out by the National Sample Survey Organisation in 2018-19, bears this out. The report of this survey was released in September this year. It clearly indicates an average farm family now earns more from wages than from farming.

Of the average household income of Rs 10,210 per month, crops contribute only Rs 3,798. A larger sum of Rs 4,063 comes from wages, and the rest from other sources. In contrast, in 2012-13, the returns from crops worked out to Rs 3,081 while the share of wages was much lower at Rs 2,071.

Clearly, crop cultivation — which is what agriculture is typically deemed to be — is now less important, as a source of income, than other means of earnings. If farmers rely solely on growing crops, they would earn less than what an unskilled labourer does. The only exceptions are those farmers whose crops are picked up by procurement agencies at minimum support prices (MSPs). Little wonder, therefore, that a large number of farmers are giving up this occupation. The count of non-cultivator rural households has swelled from around 66 million in 2013 to nearly 80 million in 2019.
 

What is equally or, perhaps, even more worrisome is the spike in the indebtedness of farm families. 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 per cent during this period, their average debt has also simultaneously shot up nearly by the same proportion — about 57 per cent. 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 moneylenders often charge usurious interest rates, upwards of 20 per cent, against the modest and, in most cases, subsidised rates of 3-7 per cent on institutional agricultural credit. This apart, the terms of trade for agriculture (the ratio of agricultural versus non-agricultural prices) are also turning unfavourable to farming. The data related to this aspect, compiled by the agriculture ministry, shows a decline from 99.07 in 2016-17 to 96.43 in 2018-19.

The farmers’ misfortune does not end here. Even their productive assets, such as land and water, are dwindling 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. Worse still, even these farms are usually fragmented into smaller parcels, some of which are too tiny to cultivate. Little wonder that many farmers opt not to till these uneconomic holdings and, instead, let them out, or sell them. This is resulting in increased landlessness in rural areas.

The cure for the farm sector’s ills lies primarily in making agriculture remunerative. This requires well-advised action on various fronts. The most basic 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. Also needed is a shift in focus from maximising output to optimising profits. Solo crop farming should give way to integrated farming systems, involving a judicious blending of crop cultivation with agriculture’s allied activities like animal husbandry, poultry, fisheries, beekeeping, horticulture, agro-forestry, and similar others. This helps harness inherent synergies among these ventures. The by-products and wastes of some of these activities can serve as inputs for the others, thereby reducing production costs and elevating productivity.

In the case of agricultural marketing, since procuring all farm produce at the MSP throughout the country is implausible, 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. Processing farm produce into value-added and shelf life-enhanced products, too, needs to be encouraged to ensure higher returns. Going a step further, the direct income support, now fixed at Rs 6,000 a year, can be suitably stepped up. 

surinder.sud@gmail.com