Can the rural sector revive India’s fortunes?
Agriculture is important. It will save India’s 50% of population. But it cannot completely turn around India’s economy. To completely revive India, the services and Industry sector have to become strong. But the current status is untenable, where 50% of India’s population is dependent on agriculture and its share of GDP is 17%.In future we have to increase the share of agriculture to 30-35%, increase the price of agricultural products, and reduce the dependence of Indian population on agriculture till a equilibrium is reached.
Principal causes of Rural Distress
Pricing of land
Reservations-:The biggest hurdle here is the reservations introduced by the Government of India. Reservations like A tribal land cannot be sold to non-tribal. A Kashmiri land cannot be sold to non-Kashmiri. A Shimla land cannot be sold to non Shimlaite. Whenever such reservations come to play, the pricing of land gets distorted. Because of this reason, when a tribal wants to sell his land, no one except another tribal can buy his land and the price of land falls. Banks cannot take it also , as it not worth the money. In Jharkhand, the price difference between tribal land and non-tribal land is 1:100.The ideal situation here that government can do is to make the sell of land to all. Second thing that the Government can do is to take up the land and pay to the tribal the market rate or upper rate of the land. This will ensure that farmer gets the highest price. This land will be kept by this vehicle which has financed the purchased and will be given to industry on lease. In this way, the tribal land is protected, it still remains tribal. The Industry will make this land productive and the tribal will not face distress. This will ensure that politicians do not exploit small farmers in Jharkhand, Kashmir, Shimla. The politician or the politically well connected farmer buys these lands at peanuts. This is the reason why in Kashmir, politicians accumulate lands after lands, because they get it cheap and this puts the small farmer in distress.
The second issue is of the encumbrances -: There has been instances where a person brought a small non- agriculture land and wanted to set up a 500 square foot industry. However, to proceed with his Entrepreneurship, he was asked to get 12 clearances. When he sought approval from the Irrigation department , he was asked to pay a bribe of Rs 2.5 lacs. He approached the Media for help , and Media then made this issue viral and brought this matter to the ears of The Relevant Ministry. Within matter of days, the revenue ministry approached him and clarified him that he need not have to pay anything. The Ministry will give all the clearances. It is obvious from this incident, that media plays a important role in highlighting the corruption .The junior Government officials can be very corrupt. Suppose a small farmer, wants to start a small industry on his agriculture land, then he is not allowed. He is threatened and asked for bribes each year. If he does not comply, then he is threatened that his industry will be closed. The Junior Government officials are very corrupt. Either this clearances have to go away or government have to give a time period within which it has to give clearance. Government over the years in trying to protect the citizens enacted legislations that have stifled entrepreneurship. In trying to do good, it had promoted bad. Government has to learn to how to promote good practices, legislations without discouraging entrepreneurship. But it has yet to learn it.
Pricing of Produce
When the prices of produce falls, it falls for farmers but not for consumers. In Vashi market sometime in this year in Mumbai, the prices of onion fell to 1 rupee per kilo from Rs 20 per kilo. However, the local Vegetable vendor were selling the onions at Rs 20 to the consumers. This confirms one thing that the difference in price of Rs 1 and Rs 20 is consumed or eaten away by the middleman. Government has done a wonderful thing by abolishing APMC, but abolishing APMC is not the only thing to be done. Because today, the politician controlled APMC controls the storages, controls the transportation, controls the market access. Farmers need to be handholded, need to be taught how to create this access and be independent and be free from the extortionate politically backed infrastructure. The farmer has to get 30-40% price of what the consumer is buying, otherwise the farm distress will continue. Maharastra has the largest no. of suicide. The FPOs have to be strengthened .And also the power to import and to tinker with exports of agriculture produce has to be taken away from the Government and instead should be given to farmers. When Government imports the prices fall down which is a problem .The Government has stopped the import but still it is continuing with the bad practice of subsidy/doles for exports., which is again bad as it weakens the efficient.
Access to funds
It is becoming difficult for farmer to get loan from Banks. There is twin problem of corruption and Lethargy. The farmer is told to bring this document, that document, is asked for collateral. Farmer is not guided enough on filling forms and various schemes by the Government. The farmer has become an untrustworthy borrower. It is because Government after Government ever since Indira Gandhi introduced the Loan Mela in 1980 , the farmer has been taught to take the loan and never repay it. This has caused the bank to distrust the farmer. In light of this, Government has started a new scheme wherein, the Government gives a guarantee to pay back the money loaned to the farmer. Hopefully this does not turn out be another new financial scam.
Access to Basic Services
Farmer needs market information, he needs price discovery. He needs handholding. He needs to be taught how to use technology. Because the best brains in the agriculture family go to city and not so bright brains work in agriculture and it becomes difficult for them to understand technology.
Case studies where Farm distress was Mitigated
Collectivism among farmers – Gujarat
There is a village in Gujrat, NETAFIM taught villagers how to grow crops in such a way that they could grow crops day after day after day. The farmers with their knowledge decided to grow watermelons with a 90- day cycle, 100-day cycle. The village decided to collect all the lands together and then divide it into 100 parts. On first day, they planted seeds in part 1, on second day they planted seeds in part-2, and so on. After 100 days the watermelons were ready for part 1, and they knew the prices are not that great in village. They realized that to earn profits they have to be clever. They sent two or three farmers in a truck with all the watermelon produce to mandi in Delhi. There they sold the produce at a very high price. These way the farmers came to know about three things-;1.The right place where the produce should be sold.2.They travelled to mandi in delhi thereby understanding how markets work.3.By taking the produce of whole village, they made sure that every famer in the village got benefitted.4.Finally, the money was distributed to the villagers on the basis of pro-rata contribution of Land and Labor. They worked out the whole formula. Gujrat is a mercantile state, so they could think commercially and could arrive at a commercial solution. To remove farmer distress, farmer needs to be taught to think commercially. Three states where this has worked very well is Andhra Pradesh, Gujrat and spices markets in Kerala. Jharkhand and Chhattisgarh are also slowly learning this trade.
Contract farming
One of the shortest ways to help farmers is contract farming. Contract farming is not so successful in India, because when the prices of agriculture produce grows up, the farmer cheats and he breaks the contract. Respect for contracts is what India has to learn. Godrej Agrovet grows lot of palm trees via contract farming, by giving palm seeds to farmers. This helps them to extract plam oil from those tress. Similarly Bayers and East west seeds are also involved in contract farming, by giving seeds to farmers.
In Gujrat there is a wonderful example of contract farming on potatoes. There is a ceiling 0f 200 hectare of land that a person can buy. So people buy land in their brother’s name, children’s name, parents name, grandparent’s name ,grandchildren’s name and so on. So a particular farmer go on to accumulate 2000 hectare of land and grows potatoes. He has back to back contracts with Balaji, ITC . Balaji ,ITC purchase these potatoes at a negotiated price from this farmer. ITC wanted a certain kind of potatoes so it gave the seed. Balaji wanted a certain kind of potatoes so it gave the seed. The farmer grew the seeds and sold the crop back to the industry. The contract farming is very successful here. It is successful because the farmer has learnt the trick of collecting lands.2.The farmer here has learnt the trick of producing high quality potatoes at a large scale and reaching out to corporates for contract farming.3. and he has learnt how to negotiate prices.
India’s biggest states are the poorest
if we look at the first two states, Up and MP and below that is Bihar. These three are the most populous states or and these states farms are making big losses. These are the places where cooperative farming is not growing healthily. These are the places where politicians exploit farmers. These are the places where land is rich, lots of water, but farmer is poor .Politicians have not allowed the farmer to get a decent price. These issues have other consequences for India, the taxes that we pay goes into subsidizing these three states, money that instead could have been utilized for development. These money are going to politically connected farmer, who are keeping the farmers poor. This needs to stop. Subsidy needs to be stopped to farmers and people who are keeping farmers poor need to be penalized. These three states have made India impoverished.
Distress in crops
Most of the crops saw a fall in prices compared to previous year. Agriculture distress is there for almost every type of crops except rice, wheat, sugarcane.
Maharashtra Agriculture distress
Overall, if we look, Maharashtra’s net sown area, it has decreased only 7.40% compared to 26.23% decline for All India. Here it looks as if Maharashtra is doing well, but it is misleading. In Net Gross Sown area, Maharashtra declined by 21.36% which is better than the national average of 33.35%.This also does not paint the real picture.
Gross sown area ratio of Net-sown area is 1 .0 which is smaller than rest of India. This data shows Maharashtra has mismanaged agriculture. This shows reality.
Lower Irrigated area is hurting Maharashtra
Next comes Gross Irrigated Area. Irrigation is important, as that ensures farmers do not have to dependent on rain for their cultivation. For Maharashtra, it is only 29% with the national average being 51%..Compare this with irrigation areas of 80% in Neighboring Madhya Pradesh, and 70% in Karnataka. More water means one can grow more vegetables, more fruits 4-5 times a year, which means more crops can be sown.
The Irrigated area is less, as most of the water is used by sugarcane lobby. Next when it comes to the Net Irrigated Area, Maharashtra produces lesser quantity then all over India. This means in Maharashtra increase in productivity per acre of Land was poorer than rest of India. This means technology adoption was poorer by Maharashtra and the fault clearly lies with the Government.
If we now look at cropping intensity, that is no. of crops sown by farmers in Maharashtra , it is again lesser than national average. Lesser crop sown leads to lower income.
Hypocrisy of Sugarcane
The last two nos. tell the savagery of the sugarcane lobby. In Maharashtra, the sugarcane output grew by 91%, which is almost the double, this is despite the fact that Maharashtra does not have enough water .The three largest sugarcane growing states are UP, Maharashtra , Karnataka .Uttar Pradesh has Ganges and Yamuna. Karnataka has Tungabhadra and Krishna. Lots of water and alluvial soil are important for Sugarcane. Sugarcane should have been grown in UP and Karnataka. However the hypocrisy is that the growth of sugarcane nationally is 45% compared to 91% in Maharashtra.
Why Maharashtra has the highest no. of suicides ?
Next if we look at the Land area of sugarcane, it grew by 122% in Maharashtra , while all India it grew by 33.67%.Water rich area did not expand the acreage of sugarcane, but water scarce areas were allowed to expand acreage. This is because of Government’s policy. Government decides the command area under which sugarcane can be grown. Maharashtra’s politician’s year after year , decade after decade were complicit in this .They allowed the sugarcane lobby to become rich. This takes away the water from rest of the farmers. As a result of this , the farmer has little water when there is no rains. This is the reason why Maharashtra has more suicides than any other state. If the Government was sensible, it should have put a price on water or penalized sugarcane co-operative owner for exceeding the acreage and output of Sugarcane.
Alcohol should me made part of Co-operatives
There is another sad point about sugarcane. After the cane has been extracted, after you make gud and sugar, there are two items that remain with sugarcane. One is molasses and another one is spent wash. Spent wash can be used for growing Methane, for making gas that can be used for cooking and molasses can be used for making distilleries that can be used for making alcohol. If we watch all Sugarcane cooperatives, all alcohol companies are privately owned so that they buy cheap molasses from cooperatives sell the alcohol at very high prices .Alcohol is also used for pharmaceuticals because from alcohol we get acetic acid- a building block for pharmaceuticals which is also transferred to private companies.
Even in milk dahi, shreekhand, value added products are in private hands. Then the co-operatives say , we do not have enough money. You do not have money because the profitable parts have been taken away. You have privatized the profits and socialized the losses. Then you go back to the Government and say we want a dole, we want a subsidy. The Government knows the truth but still gives the doles away and its the taxpayers like us who have to pay for it.
Smaller farmers are terribly distressed
The smaller the farmer is , more poor he is. Income from cultivation is pathetically poor. He earns more from being a laborer, less from cultivation. This is the reason why many laborers come to cities, run autorickshaws and when monsoon has come , time is right for sowing or harvesting , he returns back to their village, supports his family. Although the APMC has been removed, the politician still controls the mechanics of transportation, distributions, marketing channels, storage. The farmer needs to become stronger by strengthening the FPO’s .
Small farmers cannot even afford Agricultural Inputs
The small farmers cannot afford basic inputs to agriculture and cannot even pay for nutrients, the pesticides, the right seeds, the fertilizers as a result has terrible returns.
Terrible return for Farmers
If we look at livestock farming as an example , In Gujrat, the farmer makes 100 rupees per cow everyday as profit after meeting expenses. In Maharashtra, he barely makes Rs 50.This is what happens where Government has not promoted co-operative farming, ethical farming the way NDDB wants it to be.
Cultivation does not provide much money unless one teaches them how to take control of its production, storage, marketing , processing and distribution.
The idea is to practice collective farming. Organizations need to collect 1 kilo from you,5 kilos from him, 100 kilos from him, put them together so that everyone gets a reasonable price, because you have collective purchase and you have collective sale. Farmer is the only person who purchases his requirement retail and sells wholesale. He pays higher prices for inputs and gets little money from output because he does not control marketing, production, distribution.
Inconsistent policies have hurt exports
The exports have stagnated because Governments policies keeps on changing and waffles all the time.
The imports have also caused the farmers to suffer. In 2014, Government imported pulses. Farmers thought it was a good crop with a good prices and lot of money to be made. Imported pulses , when the harvesting was about to take place. Farmers were ready to get a good price. Market prices crashed, farmers went broke. They lost money and expectedly many farmers committed suicide.
The Marine Sector declined by 3.57%, the Meat sector declined by 12.5%, the basmati rice declined by 10%, the rice declined by 35%,the spices increased by 23% and others declined by 11.7%.Ovrall there has been a decline of 9-10% across sectors and in agriculture field crops, Basmati rice is the saving grace with only 12% decline , a very marginal decline. This is after all expected, as rice and wheat are politically motivated, politically pampered and the procurement prices are increasing year after year.
Corrective measures Required-:
- Easy loans is required for farmers to purchase Seeds, Fertilizers, Nutrients and Pesticides. Farmers need to be taught how to pay back the loans. We should not teach the farmers how to become dishonest otherwise the next rounds of loan become expensive. Farmers across the world are an honest god-fearing person .Indian politician have taught them how to become dishonest. This is very dangerous as the credit will become expensive and the farmers ultimately have to resort to the moneylender.
- Protection-: Farmers need protection, need insurance. Government should devise methods on How to measure risk? How to use technology to measure Risk? Drones should be used, precision farming methods need to be adopted.
- Harvesting support-: Reduce wastage by developing proper cold storage infrastructure, need for large scale aggregators and need of processing to make more value added products thereby increasing the shelf life.
- Giving agriculture an Industry Status-:A large Company can come into a village and start negotiating for prices. Suppose a farmer makes Rs 100 a year, then the company would give him Rs 105 and would take back the land , make it productive, sow and harvest . A farmer let’s say signs a contract for 3 years, then the company would return it after that much time. If the farmer wishes , he can make additional money by working in that field as a laborer also. The politicians do not want this as the industry can become more powerful than the politician .So they prefer a weak farmer, weak industry, a weak India. Until and unless they are rich it does not bother to them.
- Farmers must get at least 30-50% of market price .
- Dignity to farmers must be restored-:Today if a girl wants to get married, she would not like to get married into a farmers family.
Risk mitigation measures sorely required
The Insurance premium is increasing year after year. Although government is paying part of it. But farmers need to be taught , how to use it. There are instances, wherein the rain sensors are not put properly .So when there is a rain in adjacent areas , it does not get detected. Because of this , the deserving and honest farmers does not get benefit. We need more of rain sensors to capture the details accurately.
Foreign Investment in Farming
We have to make Farming Investor friendly. In the last few years , these are the foreign players who have come to agriculture . They collectively only have brought 56 million. This is Nothing compared to billions of rupees coming to other sectors. Farming can become stronger and attract investors if it is declared industry status.
Need to Allow more Corporates-:
These are some of the companies which are into agriculture .Agriculture is exciting for corporates because of two reasons, because agriculture is tax free for corporates and they make more money and profits. This is the reason why companies well connected with agriculture find it easy to make investment. And the Government does not like to give this permission /concession to industry as this would make the industry strong and also agriculture does not enjoy industry status.
How The USDA handled Agriculture during coronavirus times ?
India should learn from United states department of agriculture. The United States does not give doles. What the Government did was promised 1. 300 billion dollars of support 2. $100 million each month for fruit and vegetable 3.$100 million each month for dairy products 4.$100 each month for meat (in US animals are grown only for meat and it is a very expensive way of agriculture)
What it did was it did not give money directly to agriculture.it identified through NGO, through various bodies, the right packers. They told the packers to buy 100 million USD of fruits and vegetables for farmers every month. They connected these packers to the NGOs. The Govt. directed the packers to give these packages to the NGO’s. The NGO’s distributed the packers free of cost to the poor and the needy. The Government gave money to the processor and not to the farmer. The farmer was taught how to be commercially vibrant. The farmer through this process was able to sell crops at market prices that are commercially viable even when the market was down.
The lesson our Govt. can learn here is to never give subsidies and doles. This makes the farmers weaker. The practice of Maharashtra and Karnataka Government to give subsidies to Milk is not correct. If Amul can do without subsidy, if Hatsun can do without subsidy, then why state governments cannot do ?
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