Doubling farmers’ income will remain a dream as long as the govt adopts ad hoc policies and schemes
By Seela Subba Rao
The union Budget allocation for the agriculture sector was Rs 27,049 crore for 2013-14, and this outlay was enhanced by over 4-fold to Rs 1,23,017.57 crore in 2020-21. Institutional credit (banks and other financial institutions) for the sector increased from Rs 7.30 lakh crore in 2013-14 to Rs 16.5 lakh crore in 2020-21.
Commensurate with the hike, foodgrain production in India too increased to the highest ever, from 265.05 million tonnes in 2013-14 to 305.40 million tonnes in 2020-21. Similarly, horticulture production increased from 280.99 million tonnes in 2014-15 to 320.48 million tonnes in 2020-21, also the highest-ever.
Farmers’ income doubled in five years from the financial year 2017-18 to 2021-22 for certain crops such as soyabean in Maharashtra and cotton in Karnataka. However, in all other crops, income rose in the range of 1.3 to 1.7 times only. Thus, the doubling of farmers’ income remains a dream despite efforts of the government such as doubling of institutional credit, sizable budget allocation to agriculture and better physical infrastructure. Various farmer organisations/bodies opined that ad hoc policies and schemes will not help as long as the government intervenes in the market to control prices to keep consumers happy at the cost of farmers.
Survey Reports
The income-related data of farm households in India was released by the National Sample Survey Office (NSSO) for the first time in 2002-03. It is also popularly known as Situation Assessment Survey (SAS). The second SAS data series was published by the NSSO for 2012-13 and the third survey for 2018-19 was in September 2021. The analysis of these SAS reports reveals that the average annual increase of total farm income was 20.38% between 2002-03 and 2012-13, which decelerated to 11.9% between 2012-13 and 2018-19. It further reveals that among the different sources of income such as crop cultivation, wages earned, farming of animals and non-farm business of the farm households, the growth of income realised from crop cultivation decelerated sharply between 2012-13 and 2018-19.
As per SAS reports, the average monthly income per agricultural household in the country stood at Rs 10,218 in 2019 as against Rs 6,427 in 2014. Of the 28 States, for 16, the income from crop cultivation is less than 40% of the total monthly income. The reasons for this deplorable income level from crop cultivation are many. First, the government had been adopting a production-centric approach instead of market-centric. Second, just the announcement of the Minimum Support Price (MSP) will not help farmers as due to the non-availability of adequate procurement centres at the ground level, farmers do not get any benefit.
Third, there is a need to reduce the cost of cultivation which is pulling down farm income growth. Fourth, during periods of glut, farmers are resorting to distress sale of their produce. Fifth, occurrence of frequent natural calamities has an adverse impact on crop production.
Ashok Dalwai Panel
To examine the issues and recommend strategies relating to doubling of farmers’ income, the government constituted an inter-ministerial committee headed by Ashok Dalwai in April 2016. The committee identified seven sources of income growth viz, increase in crop productivity, livestock production, increase in crop intensity, diversification to high-value agriculture, remunerative prices on farmers’ produce, reduction in cost of production and shift of surplus manpower from farm to non-farm occupations. The committee submitted its report in September 2018, with a plethora of recommendations.
A few include:
• Creation of better physical infrastructure, improving price dissemination campaigns and reforming regulations that force farmers to sell their produce to local monopolies.
• Formation of farmers producers organisations (FPOs), village producer organisations (VPOs) which can play a critical role in integrating small and marginal farmers into the agricultural market.
• The committee estimated that the country would need nearly 10,000 wholesale and 20,000 rural retail markets to achieve the desired market density to build a pan-India system.
• The one-India market concept may benefit from placing agricultural markets under the Concurrent List. State governments may convert Agricultural Produce Market Committee-run markets and sub-markets into full-fledged and independent markets.
• Storage godowns, including cold storage, should be upgraded as per standards laid down by the Warehousing Development & Regulatory Authority so that they can issue Negotiable Warehouse Receipts to farmers to avoid distress sale.
The Road Ahead
Some of these recommendations have been adopted and some are yet to be considered. Initiatives taken by the government have started yielding positive results. The average annual income (in current prices) per farm household from all sources at the all-India level increased from Rs 77,112 in 2012-13 to Rs 1,22,616 in 2018-19. There is a need for the government to incentivise the cultivation of crops that are environmentally friendly and consume fewer resources such as water and fertilizers. Millets, pulses, oilseeds and horticulture crops could be given carbon credits to encourage their cultivation. Subsidies/support should be crop-neutral or skewed in favour of crops that are beneficial for the planet’s resources.
Farmers should diversify to include high-value crops that have better market demand and can fetch higher prices. This can be done by introducing better seeds, irrigation facilities and training on sustainable farming practices. The government can collaborate with corporations/agencies to provide farmers with better market access and an assured buyback arrangement to reduce their market risk.
Corporations can also offer farmers better prices for their produce by using them for making value-added products such as tofu, soya milk powder and soya ice-cream. More investments in research and development can help farmers increase their productivity and profitability. Production of more organic food items for exports is a must since importing countries prefer chemical-free and high-quality products. In 2021, India occupied the 8th position among the exporting countries of agricultural products. At present, there are around 6,000 FPOs (including farmers producer companies) in the country and there is a need to increase this number since FPOs have the potential to be the change agent in India’s rural economy.
Arrangements for better avenues for farm producers to get lucrative prices for their products must be put in place by all means. Otherwise, farmers will continue to become victims in the hands of middlemen and resort to distress sale.