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Agriculture – need for agglomeration of land holdings

The recent budget has been welcomed for the generous packages offered for the farm sector. However, these are the linear extensions of practices that have been followed routinely over the years.
The NDA-2 government has been the promising doubling of the income of the farmers in five years. The Budget proposals include:
• Increasing farm loans from Rs 10 lakh to Rs 11 lakh
• 50 per cent increase in minimum support price
• Expansion of soil testing facilities

But more fundamental, structural reforms are needed.
In 2006, IE promoted the Agriculture Consultancy Management Foundation (ACMF) with the participation of several leaders from different sectors. ACMF has been working on productivity improvements. The primary aim is to bridge the vast gap between average productivity levels in developed countries and ours. With the experience gained in this period of 12 years, I have been suggesting fundamental structural reforms that would form a radical break from existing policies. The suggestions bears repetition:
Relentless fragmentation of landholdings has decreased average farm size to around two acres, and this is getting reduced further.
In our experience we found such small farms do not lend for the application of science, technology or management. This size directly impacts on productivity and hence on the very viability of farming. The immediate requirement is the agglomeration of land holdings to viable sizes without alienating ownership. Cooperative farming mooted in the early years of independence did not succeed.
The government has been implementing the concept of farmers’ producer companies. This concept is one welcome experiment, but a more viable reform relates to permitting lease of land over 15 years and more to corporates and private individuals. This should be strengthened by easily enforceable leasing contracts that would protect the interests of both the lessor and the lessee. A farm size of 50-100 acres would attract investments from the private sector and individuals, reducing much of the burden on the government. Such management can work for increasing the profitability of operations in quick time, provide the land owner regular lease income and also wage employment.
The size will enable availing the very many incentives and subsidies offered effectively and without leakages. It would also help access the wealth of information provided by agriculture universities, research institutions and other government agencies on successful farming practices. These are not of much use to the average farmer owning two acres and less. Such a size would also help to look for wider markets for getting better prices within the state and even outside. For this to happen, the facility to market agriculture produce across states would help. Lastly, size would also help to look for processing the food to get much higher returns.
The last item assumes importance for value addition. Look at the effectiveness of PepsiCo that helped revolutionise potato and tomato farming in Punjab some three decades ago. The company offered quality seeds and advice on scientific farming practices that helped enhance productivity manifold. The company purchased the produce on remunerative prices and processed these to high-value consumer products. Just look at this: procuring potato in bulk at Rs. 3 per kg and converting this into chips/ruffles and marketing it at Rs. 200 per kg!
Such a reform would help make farming highly profitable in quick time. Over a third of farm produce is wasted at the farm gates, in transportation and at the mandies. Saving on this alone can result in crores of rupees of additional income to farmers and others in the food chain. Even smaller countries like Malaysia and Indonesia markets processed food products across the globe.

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