How to help Indian farmers grow money?

 

While the share of agriculture in India’s economy has progressively declined, even today the sector directly and indirectly occupies over 50 per cent of the country’s workforce and contributes to over 17 per cent of the Gross Domestic Product (GDP). However, the farm sector’s importance in our economic and social fabric goes well beyond these indicators as the majority of India’s poor live in rural areas where farming is the primary source of livelihood. Additionally, with a growing population and rising incomes in the cities, farmers face the burden of increasing yields and improving the quality of their produce.

But, for many years now we have been beset with an agrarian crisis for a variety of reasons. The Government’s strategy, over the years, primarily focussed on raising agricultural output, improving food security and providing subsidies and waivers rather than recognising the need to raise farmers’ income. While these prove helpful in the short run, they are not effective measures for the long haul as farmers continue to face the same issues that got them into a catastrophic situation in the first place.

 

Instead of handing out loan waivers, the  Government could help farmers by providing access to exploitation-free credit. This has been attempted but both vision and implementation have been lacking. If easy credit is available, farmers will have improved access to seeds, pesticides, irrigation facilities and even mechanisation. Since farmers typically procure all these materials via an open market as there is no State support, higher income or easy credit will enable them to produce more/better.

As farm incomes reduce or stagnate over time, conversion of farmlands for alternate uses to generate money has gone up significantly in the past decade as land prices have seen a considerable uptick. After putting in all the hard work, farmers do not receive fair wages for their labours. This has traditionally been due to unfair exploitative practices at the mandis (wholesale food markets) and the large number of middlemen across the supply chain, right from production to consumption.

In addition, for years now, low global prices have hurt exports and encouraged cheaper imports, that further hit farmer incomes. A highly-fragmented supply chain and poor farm infrastructure is a contributing factor to the farm crisis as more than 50 per cent of the produce is wasted in distribution alone. At the front end, there is very little demand insight for various crops and virtually no marketing infrastructure and at the farmers’ end there are non-existent or poor storage facilities and additional transport and manpower costs.

Due to all the contributing factors above, farmers’ incomes have either stagnated or been lower while the cost of production and support services is perpetually increasing. The farmers, despite high interest rates, take the risk and cultivate only to be disheartened when their produce does not fetch suitable prices that cover their costs and leave something over as profit. Only a small portion of the farm produce gets the Minimum Support Price (MSP) and more than 90 per cent of farmers are at the mercy of the traders who set the market price.

As incomes become insufficient, more and more farmers face poverty. This situation discourages the current crop of farmers but more so the next generation which gravitates towards the city for better opportunities. This leads to a shortage of hands for farm activities and is a very prevalent problem in an agri-rich State like Maharashtra where a lot of the farm help and labour is being brought from other States. The lack of fair return on both financial and effort investment by farmers has led to a marked increase in farmer suicides.

 

To solve this crisis all controllable, supporting factors (Government policy, spending, initiatives, incentives among others) have to singly focus on helping the farmer be self-sustainable. On an average the farmers’ income today is only `20,000 a year in 17 States or about half the country. That means that the monthly income of a farming family — with an average of five members — is less than `1,700. It is hard to imagine how farmers are surviving today with these incomes which have to suffice for supporting their families and continuing with their farm production activities. With 50 per cent of our population working in the agri sector, it is imperative to help generate more income for them both for their betterment and for the economy to keep ticking.

 

Thankfully, the Centre has set a target to double farmers’ income by 2022. While this is a good first step towards enabling farmer self-sustainability, the income has to go up significantly more than double at the current  levels for it to be truly transformational. The broader strategy and framework outlined by the Government is based on good principles. However, implementation on the ground and ensuring effective and timely impact for the farmer will make the difference. Some of the key factors to ensure that the outcome is favorable are given below:

 

Productivity of farmland holdings has to be prioritised and improved: Most importantly, reducing dependence wholly on rainwater through better irrigation mechanisms and better planning of groundwater, is important. Enabling better support services such as easy access to credit on fair terms, availability and access to high-quality seeds, fertilisers, pesticides and technology-driven enhancements would be extremely beneficial.

 

Helping farmers align their production with seasons and market demands: As phone and internet penetration grow exponentially, providing farmers education, information on weather, market requirements, pricing, Government schemes and subsidies would be useful.

 

Crop diversification for better income: A lot of companies, especially start-ups are taking up the important task of educating and advising farmers how to not only improve farm yield but also to diversify their produce to increase incomes. This farmer education and awareness, at a larger scale, would not only help increase farm income but also help meet the demands of a growing population.

 

Better access to markets and pricing: Currently, the control of pricing or what the farmers receive for their hard work is in the hands of a few traders in mandis. Traditionally, this has been the area of most severe exploitation of farmers. Ensuring transparency in buying and selling of agri goods at the mandis and ensuring MSP is an immediate impact solution. In the last few years, with the rise in overseas Fast-Moving Consumer Goods (FMCG) companies coming to India and recently minted and existing companies working in agriculture, farmers have been given an alternative to selling in mandis.

Here, for production to certain specifications and quality standards, farmers earn more than what they would at mandis and have some demand guarantees as well. Companies such as Big Basket, More, Godrej, Reliance and so on all have centers where farmers can sell their produce directly with transparent pricing. However, this is limited to areas that are closer to urban centres and has not yet penetrated the deeper rural areas wherein there is a larger number of severely- impacted farmers.

 

Improved agri-infrastructure and supply chain: A lot of the produce, be it vegetables, milk, grains and so on, is lost in distribution across the supply chain. All stakeholders suffer additional costs due to these losses. Farmers suffer the most due to loss or quality deterioration and it also discourages them from diversifying their crops to fruits and vegetables. Enabling efficient, low-cost storage options at farmer locations, improving access to transport or credit facilities for the same, subsidies on cold storage, use of technology to predict demand and so on would help eradicate some age-old problems and positively impact farmer incomes.

 

Cooperative farming/cluster farming/Farmer Producer Organisations: Most farmers across India have marginal land holdings and this reduces their ability to generate higher incomes individually. Consolidation of land holdings becomes an important strategy to raise farmer incomes. They can voluntarily come together and pool land to gain the benefits of size. Through consolidation, farmers can reap the benefits of economies of scale both in input procurement and output marketing.

 

Focussing on these areas and implementing programmes with a single, unified vision will be a huge step in the direction of reviving India’s agriculture sector. Improving purchasing power in rural areas, especially that of farmers, will also help accelerate overall economic growth. Poor policy, high price volatility, climate risk and indebtedness plague India’s farm sector. A majority of farmers — 85 per cent — include small and marginal ones, with declining and increasingly fragmenting landholdings, where these external factors and uncertainty make them even more vulnerable.