Making agriculture profitable

Agriculture has become a negative economic proposition forcing the farming community into perennial debt-trap. Andhra Pradesh and Telangana are the leading states in terms of peasant indebtedness.

It’s unbecoming of these progressive states to have this dubious distinction. Reviving the agrarian economy has been the focus of many commissions.

The National Farmers’ Commission, headed by reputed scientist M S Swaminathan, and the farmers’ commission, led by eminent economist Jayati Ghosh, which is appointed by the united Andhra Pradesh government, and the Mohan Kanda commission that studied the crop holiday in the united state, etc., made a number of recommendations to stem the agrarian crisis.

Yet, the new commission appointed by the present Andhra Pradesh government, which is led by another prominent economist Prof R Radhakrishna, offers many candid insights for the governments to implement.

The recommendations of this report entitled, ‘Inclusive and Sustainable Agricultural Development of Andhra Pradesh,’ are relevant elsewhere too.

This article refers to some of these recommendations worth ruminating to bring about a change in the farm and farmers’ economy.

Hope that this report at least would not be consigned to the academic discourse and shall translate into urgent policy action.

The basics of economics reveal that income increases as value addition takes place. Farmers confined to mere production fail to get additional revenue generated from the value addition.

The commission, therefore, suggests the concept of farm enterprises. It stresses the need to persuade farmers to participate in supply chain management, both in trade and processing.

Farmers need to be organsied into farmers’ enterprises with a view to undertaking trade and processes associated with a wider range of products such as fertilisers, animal feed, milk, coffee, coconut, palm oil, cashew, pepper, rubber, poultry and fish products etc.

Farmers can also be encouraged to participate in production of sugar, cotton yarn, handlooms and in management of retail shops.

The commission’s recommendation is quite interesting. But, the moot point is how such farmers’ enterprises can face competition from big agri business tycoons who are consolidating against the farmer.

Tiny farmers’ enterprises are pitted against the big multinationals. At a time when farmers are unable to get capital to sustain their crops, where can they procure funds for running these enterprises?

The commission calls for setting up of collective of small farmers to realise the scale of economies and to participate in modern competitive markets. But, the experience with existing farmers’ cooperatives is not so encouraging.

Certainly, there are significant yet small examples of remarkable success stories of such collectives. But, to organise them on a universal scale is a herculean task, though the recommendation is noteworthy.

The commission has rightly referred to the lackluster implementation of the market intervention schemes. Intervention in agricultural markets by State agencies is vital for ensuring income security for the farmer and food security for the consumer.

The amplitude of fluctuation in agricultural prices in India is relatively less as compared to that in advanced countries, precisely due to State intervention in agricultural markets through the system of announcing Minimum Support Price (MSP). However, the market intervention programme is half-heartedly implemented.

The commission report rightly emphasises the fact that the market intervention scheme is sporadically implemented and does not cover all commodities.

It recommends that the commodities not covered by the Minimum Support Price (MSP), particularly commercial crops like tomato, chillies and horticultural products, should be supported by a floor price scheme.

The middlemen in the supply chain reap huge profits to the detriment of both farmers and consumers. The innovative schemes like Rythu Bazaars were intended to bring the farmer and the consumer together so that the middlemen will be eliminated.

If implemented effectively, it would be a win-win situation. However, as the commission itself observed, in a few Rythu Bazaars, traders in the guise of farmers have occupied the stalls meant for farmers.

Infact, the problem is much more serious than what is being described by the commission. However, the recommendation of the commission to deal with the problem is certainly pertinent.

The commission recommends that the farmer-sellers at the Rythu Bazaars should be selected by farmers’ federations or Self Help Groups (SHGs) in a transparent manner. The number of Rythu Bazaars should be increased significantly.

Financial intermediation is a major challenge in agriculture. Institutional credit is largely inadequate. Farmers require credit not just for raising crops but even for meeting education and health needs.

The micro finance which was purported to fill the credit-gap of the poor has also turned into an exploitative mechanism. Agriculture also requires investment credit. The commission makes an interesting recommendation in
this regard.

Banks should provide credit for the construction of storage facilities and warehouses by small farmers to avoid distress sale, and reap the benefits of higher price in the lean season.

The financial institutions should also provide short-term credit to small farmers against warehouse receipts to address the fiscal woes during the post-harvest season. MS Swaminathan recommends setting up village-level storage facilities which would be more accessible to small farmers.

Tenant farmers’ access to institutional credit is a major concern today, more so, as they have no record of rights. Land owners are often ready to keep their land uncultivated rather than give it on tenancy due to fear of land alienation to tenants.

To address the credit needs of tenant farmers, the commission makes a significant recommendation. The banks may be asked to include land rents in the scale of finance for tenant farmers.

But, the problem is all these contracts of tenancy fees or land rents are not in written form, making it difficult to judge the land rents to assess the quantum of credit to tenant farmers.

The most seriously affected section in the agrarian crisis is the tenant farmer. The incidence of tenant farming is increasing with each passing year.

The tenant farmers do not have access to credit and are not even the beneficiaries of government largesse. The tenant fees are also rising, making their agriculture totally unviable.

Tenant farmers constitute a major segment of farmers committing suicide. They are not even assured of getting the same land on tenancy next year. This makes it impossible for them even to make small investments on land.

The commission comes out with an innovative idea of forming land banks for tenant farmers. The State has created land banks and acquired land to attract industry.

Similar arrangements may be made to benefit small and marginal farmers. Absentee land owners and large land owners may be encouraged to give land to the land bank on lease.

The land bank in turn may lease out the land to tenant farmers for relatively long periods. The government should guarantee the restoration of land to land owners at the end of the lease period.

This recommendation of the commission is interesting, but, its feasibility and practicability should be studied. Will the land owner be ready to alienate their lands even on lease for longer period is something to explore.

The commission makes a far-reaching recommendation to ban purchase of farm land by non-cultivating households.

This measure is intended to reduce pressure in the lease market by a likely increase in the supply of land, moderate the tenancy rates and also improve the bargaining position of tenants. But, identifying non-cultivators is not an easy task.

Crop insurance schemes are poorly implemented making farmers highly vulnerable to natural calamities. The commission felt that the major focus should be on addressing the weakness of the delivery system.

Many other initiatives are needed in areas like rainfed agriculture, input supply management, livestock sector, fodder development, tribal agriculture, fisheries and other allied sectors, irrigation and combating climate change to make agriculture inclusive and sustainable.