Mains Paper 3: Economy
Prelims level: Small and marginal farmers
Mains level: Issues in agriculture sector
• The farmers are agitating on Delhi’s border against three laws passed by Parliament in September 2020 but Government has been explaining the beneficial provisions of the laws, and social media is full of stories about how farmers in Punjab have been “exploiting” the system of procurement of crops at minimum support price (MSP).
• While Punjab and Haryana have become the focus of the farmers’ agitation, the current scenario in agriculture is not very hopeful in other states too.
Current situation of land in agriculture:
• Area under agriculture has been shrinking — it reduced from 159.5 million hectares (mn ha) in 2010-11 to 157 mn ha in 2015-16 — but the number of operational holdings has been rising (increased from 138.3 million to about 146million).
• This reflects in the falling average landholdings’ size of farmers, which has come down from 1.2 ha to about 1.08 ha.
• About 86% of farmers have an average landholding size less than 2 hectares; they are referred to as India’s small and marginal farmers (SMF). The SMFs operate on about 47.35% of the total agri-area. More than half of India’s farmers reside in the five states of UP, Bihar, Maharashtra, MP, and Karnataka.
Is fragmentation of land a problem?
• Smaller landholdings produce smaller pockets of produce, aggregation of which becomes essential to be carried to an agricultural produce market committee (APMC) mandi or a nearby market.
• Due to small holdings caused by fragmentation, small and marginal farmers are forced to sell their produce at farm gate itself. This is especially so in states that have a weak network of APMC mandis.
Workforce is engaged in agriculture:
• As per recent estimates from the Labour Bureau, 45% of India’s workforce is employed in agriculture.
• According to Census 2011, 55% of the agri-workforce comprises agri-labourers, i.e., those who do not own land and work for wages on the land of others; less than 45% are “farmers” who own and cultivate land. Indian agriculture cannot support such a large population through growth in agriculture alone.
• 1 kg of sugar requires about 1,500-2,000 litres while 1 kg of rice requires 5,000 litres. There are variations across states. A kg of sugar produced from cane cultivated in UP consumes 1,044 litres of water, while in Maharashtra it takes double that—2,086 litres.
• In Maharashtra, sugarcane is cultivated on 4% of the cultivable land but consumes more than 70% of irrigation water. Due to the high returns on sugarcane compared to other crop combinations and assured marketing, the area under sugarcane has been going up even in water-stressed regions.
• The three Acts passed by Parliament do not touch the sugar sector. In Punjab, sugar is grown only on 1.2% of gross cropped area. So, they do not benefit from policies favouring sugarcane.
• While the government declares MSP for 23 crops, only wheat and paddy (rice) are procured in large quantities as they are required to meet the requirement of PDS, which is about 65 million tonnes.
• In 2019-20, Punjab procured 92.3% of its rice production. Haryana procured 89.2%, while Telangana procured 102% of its production.
• In the case of wheat, Punjab procured 72% of its production this year, while Haryana and MP procured 62% and 66% respectively.
• Since 2015-16, the government has been procuring larger quantities of pulses through National Agricultural Cooperative Marketing Federation of India (NAFED) and Small Farmers’ Agri-business Consortium (SFAC) for maintaining a buffer stock of 2 million tonnes.
• Cotton is procured by Cotton Corporation of India, while groundnut is procured in some states like Gujarat.
• Some horticultural products are also procured in a sporadic manner, e.g., apples in J&K in 2019-20 and onion in Maharashtra almost every year.
• Sugarcane is not procured by the government but its farmers are assured of Fair and Remunerative Price (FRP) paid by sugar mills.
• In some states, the government declares State Advised Price which is higher than the FRP. Jute is another crop protected by the government even though it is not directly procured.
• Under Jute Packaging Material (JPM) Act, 1987, the Government has decided that 100% of food grains and 20% of sugar shall be mandatorily packed in diversified jute bags.
Subsidies given to agriculture in India:
• Farmers in India are provided support on both the input and output side.
• On the input side, an average Indian farmer receives subsidies on fertilisers, seeds, farm machinery and equipment, electricity, logistics, etc. On the output side, the MSP regime offers support in states having robust procurement infrastructure.
• However, small and marginal farmers are able to get only a small amount of these subsidies.
• A number of subsidies meant for agriculture also flow to businesses, e.g., grant given to food processing units and cold chain projects.
Why recent protest?
• The farmers of Punjab, Haryana and other states that have robust APMC mandis and an efficient system of procurement opine that these laws signal the beginning of the end of open-ended procurement of wheat and paddy. They fear that the success of these states in creating the infrastructure for procurement may now become the reason for withdrawal of support of the Centre.
• Farmers cannot be left entirely to the mercy of market forces. Farmers growing non-MSP crops, especially fruits and vegetables, have experienced huge volatility in prices over the years. The price deficiency payment scheme did not succeed in MP.
Challenges in procurement and need of PDS:
• The procurement system in India serves two purposes — purchases on MSP supports farmers, and subsidised distribution of procured grains under PDS supports India’s economically vulnerable.
• As per recent National Family Health Survey (NFHS) data on malnourishment in India, malnutrition indicators for women and children have worsened over the years.
• With this in focus, the PDS system is likely to stay in the coming years. But the government will do well to prepare a 10-year roadmap of PDS to 2030 so that only the required quantities of wheat and rice are procured.
• In case of high-value agricultural commodities in which India is in deficit or has only marginal surpluses (like pulses), there is a genuine fear of stocking by corporates, especially those which are in modern retail and e-commerce.
• Direct income support is the only way to shield them from suffering huge losses. A predictable trade policy can also help in attracting private investment in the agriculture chain which can act as a shield against volatility.
• Option contracts through FPOs can also bring stability, but most farmers are not educated enough to deal with future markets, so they need support and guidance from the government.
• The government must make it compulsory that they keep their stock in Warehousing Development and Regulatory Authority-registered warehouses only, so that the private stocks are known to the government.
• If India has to move away from procurement-based support, at present restricted to certain crops only, a more attractive income support scheme has to be conceived. However, it has to be coupled with much higher investment, both public and private, in agri-infrastructure.
• The Rashtriya Krishi Vikas Yojana (RKVY) incentivised the states, which increased their expenditure on agriculture. The Centre’s assistance for such states should be higher.
• Several states of India have already achieved productivity levels seen in developed countries. But there are also states that have low productivity. Focused research on crops grown in low-productivity states can deliver better seeds, which can withstand the challenge of higher temperature due to climate change.
• Drought-tolerant varieties of seeds are also needed for crops grown in rain-fed areas. Good quality seeds can enhance productivity by 15-20%.