Raising Farm Income

Context:

It is important to focus on the need to promote sustainable and diversified agriculture to achieve the goal of doubling farmer’s income.

Relevance:

GS-III Agriculture, Economic Development, Prelims

Dimensions of the Article:

1. Background: Agrarian reform is required
2. Agriculture Sector’s Challenges
3. India’s plan to Increase Farmers’ Income
4. Need to refocus on doubling farm income
5. Government efforts to improve agriculture:
6. What are the issues?
7. Way Forward
8. Conclusion

Background: Agrarian reform is required:

• Agriculture currently contributes approximately 15% of national output and employs approximately 50% of the population directly or indirectly.
• Farmer dissatisfaction is a real and pressing issue, as evidenced by the protests currently taking place across the country.
• Historically, government policy focused on increasing agricultural output and improving food security rather than recognising the need to increase farmer income.
• Low global prices have harmed exports, while cheaper imports have harmed domestic prices.
• Natural disasters and crop losses cause rural households to become impoverished.
• Increasing demographic pressure, disguised agricultural employment, and conversion of agricultural land for alternative uses have all contributed to a significant decrease in average land holding.

Agriculture Sector’s Challenges

• Institutional Agricultural Credit vs. Non-Institutional Agricultural Credit: Historically, rural agrarian credit needs were met primarily through moneylenders, resulting in large-scale indebtedness.
• Small land holdings: The land is fragmented, and 87% of farmers are subsistence farmers.
• Low productivity: Indian farms are smaller (1-2 hectares on average), making economies of scale more difficult to achieve.
• Low mechanisation: It is low, and Indian farmers do not use many high-yield input varieties used in other agricultural producing countries.
• High logistics costs: India’s logistics costs are currently around 14% of GDP, which is higher than developed-country exporters such as the US (9.5%).
• Limited value addition: India exports more primary commodities than value-added agricultural products; the country ranks 10th in processed meat, 18th in processed fruits and vegetables, and 35th in dairy.
• Low value addition can be attributed to a lack of private sector investment and adequate incentives.
• Procurement: In 14 years, FCI/state agencies did not procure 69 to 73% of the rice and wheat produced.
• The Food Corporation of India (FCI) and state government agencies are two of the main platforms available to farmers for the sale of agricultural produce, but they cannot be a complete substitute for an efficient marketing system, according to the fourth volume of the Dalwai Committee Report on doubling farmers’ income.
• Lack of APMC markets: These markets do not exist in five states: Bihar, Kerala, Manipur, Mizoram, and Sikkim.
• Furthermore, no APMC market exists in the UTs of Andaman and Nicobar Islands, Lakshadweep, Daman & Diu, and Dadra & Nagar Haveli.
• Infrastructure scarcity: Another important factor that is being overlooked is the poor state of infrastructure in these markets. Only 15% of APMC markets have cold storage facilities. Only 49 percent of the markets have weighing facilities.

India’s plan to Increase Farmers’ Income

• National Commission for Farmers was constituted in 2004, chaired by Prof. M. S. Swaminathan, to suggest methods for faster and more inclusive growth for farmers.
• Then, the Government of India in 2016 constituted an expert committee headed by Ashok Dalwai to look into the entire agriculture ecosystem in the country to suggest ways and means to reform it so that farmers’ income can be doubled by 2022.
• The Committee submitted its final report to the Government in September 2018.

Need to refocus on doubling farm income:

• Increase in farm income is significant to have  a sustained high growth of overall GDP.
• Agriculture engages the largest share of work force.
  • It is about 45.5% in 2021-22, as per the Periodic Labour Force Survey.
• Also, the manufacturing sector starts facing a demand constraint soon after meeting the demand of well-off urban consumers.
• Hence, focusing on agriculture is essential to ensure long term high growth of the overall economy.
• Apart from this, agriculture provides food and nutritional security to the largest population, stressing the need to focus on this goal.

Government efforts to improve agriculture:

• The goal of doubling farmers’ income can’t be seen in isolation from the need to promote sustainable and diversified agriculture.
• Subsidies to farmers:
  • With reference to the fertilizer subsidy, the government budget crosses Rs 2 trillion.
  • The Indian price of urea remained at around $70/tonne even when the global prices of urea crossed $1,000/tonne. This is perhaps the lowest price of urea in the world.
  • There is also a subsidy for crop insurance, credit, irrigation (drip), etc.
  • States also give power subsidies in abundance and on irrigation water from canals, etc.
  • Few states also subsidise farm machinery for custom hiring centres.
  • The combined value of these subsidies would easily cross Rs 4 trillion per annum.
• The PM-KISAN Scheme
  • The scheme has a total outlay of 60,000 crore.
  • Under the scheme an income support of 6,000/- per year in three equal installments will be provided to small and marginal farmer families having combined land holding/ownership of upto 2 hectares.
• PM’s Garib Kalyan Anna Yojana:
  • The scheme provides free ration of at least 5 kg/person/month to many small and marginal farmers.

What are the issues?

• There is a need to bring a fundamental change in the policy framework and the government should adopt a ‘pro-farmer approach’.
• Certain policies that affect farmers:
  • Ban on exports of wheat,
  • 20% export tax on rice,
  • Suspension of several commodities from the futures markets,
  • Imposition of stocking limits on certain commodities
• The policy of heavy subsidisation of input subsidies, especially fertiliser and power, along with assured and open-ended procurement of paddy and wheat in some states is playing havoc with environment. There is a need to rationalise this.

Way Forward:

• Policy efforts:
  • The future policies must be re-aligned to focus on the possible impact it could have on the environment.
  • Millets, pulses, oilseeds, much of horticulture that consumer less water, and less fertilisers may be given carbon credits to incentivise them.
  • There is a need to bring in and support crop-neutral subsidies as compared to the present policy that offers free/heavily subsidised wheat and rice. if they need to be skewed, they should be in favour of those crops that are benign to the planet’s basic resources.
  • India must focus on policies that also protect the basic resources of this planet, such as soil, water, air, and bio-diversity.
• Audit mechanism:
  • The Comptoller and Auditor General (CAG) should conduct audit of all subsidies given by the Centre and by the states to examine their outcomes in terms of incomes of farmers and environmental consequences.
  • This can streamline these policies to make them farmer- and planet-positive.
• Other measures:
  • Increasing productivity through better seeds, better irrigation, etc. It will have to combined with unhindered access to best markets for their produce.
  • Further, diversifying to high-value crops, and even putting solar panels on farmers’ fields as a third crop could help raise incomes sustainabily.

Conclusion:

• The bottom line is that we need innovations of technologies, products, institutions, and policies, for more diversified, high-value agriculture that is also planet-friendly.
• Hence, only with a concerted and sustained efforts that one can hope to double farmers’ incomes.