Under the Indian Constitution, agriculture is in the concurrent list. The states have a significant say in framing agricultural policy and implementation. This is often not in sync with national policies and requirements. The federal government allocates considerable resources and massive subsidies for food production and consumption. It also has a robust research network through the Department of Agriculture Research and numerous institutions under the Indian Council of Agriculture Research (ICAR). Several of these units have impressive results in expanding crop production.
Potato research by ICAR units, has helped expand potato production from a small base of a couple of million tonnes at the time of independence to over 50 million tonnes of annual production now. Yet there have been difficulties in evolving and implementing policies that are uniform pan India. This is understandable in the light of vast differences in agro-climatic conditions, traditional practices and considerable variations in the cost of cultivation. Thus, we have been witnessing substantial departures in and modifications to Centre’s dictats and states’ implementation. eg. The minimum support price for sugarcane arrived at the Centre after detailed analysis of costs and prices, is not acceptable to several states; several of these announce state-advised prices which are resisted by the sugar producers, resulting in disputes between industry and cane growers and also in prolonged litigation.
Large allocations…
The Centre has massively stepped up allocation for the agriculture sector. The Union budget 2018 provides for Rs 14 lakh crore. There is also the food subsidy of Rs 1.7 lakh crore provided in the budget. Recently to address farm distress, the government has hiked the minimum support price substantially on 15 agriculture commodities including Rs 200 per quintal on paddy and increase up to 52 per cent on several other kharif crops. Yet there has been widespread dissatisfaction among farmers. 201 farmer organisations led by the All India Kisan Sangarsh Coordination Committee led a massive protest delegation to the Parliament on 20 July and passed a no-confidence motion against the government.
Cooperative FederALISM in Agriculture
In this background, the suggestion of Union Minister Arun Jaitley for cooperative federalism in the agriculture sector deserves close attention. Like the GST such an exercise to build consensus on agricultural policies in a coordinated, structured manner will be beneficial to the largest segment of the population. Jaitley, who has built such a consensus for the complicated GST issue that required prolonged discussions and reconciling disparate state interests, is among the fittest persons to take up this more complicated task. The sector is stuck with centuries of tradition and practices that vary from region to region and resist change.
Unviable smallholdings…
Though science and technology for productivity improvements, crop protection techniques, processing, preservation and marketing are available, access to these and affording the costs are not uniform. The sector is dominated by small holdings that have resulted from unrelenting fragmentation of family properties over generations. Production levels continue to be low and average farm incomes modest to poor. There has been widespread poverty among the owners of small landholdings and, more importantly, among the much more significant number of agriculture labourers. These resulted in relentless migration to cities leaving the small holdings fallow or sold at distress prices. The average size of a farm in Tamil Nadu is just two acres and despite the periodical revision of minimum support prices, incomes continue to be low. For most crops including paddy, the annual income per acre net of expenses could be in the region of Rs 40,000 or around Rs 3500 per month. Thus the small landowner is unable to spend on nourishing the soil, expanding irrigation and accessing science and technology for achieving higher yields. Most villages have little or no use for the thousands of agriculture graduates due to the small-sized land holdings and low incomes that deny them the opportunity to engage these.
Cooperative farming advocated in the first few decades of independence failed due to corruption and lack of leadership. The only shining example was in milk thanks to Verghese Kurien. Even here he succeeded mainly in Gujarat and the model failed despite Kurien’s efforts in states like Tamil Nadu.
Farmer Producer Organisations
The recent efforts in forming Farmer Producer Organisations (FPO) are yet to make a significant impact. While this measure is welcome in bringing together a large number of farmers of small holdings to build viable farm sizes the progress is slow. The government has recently announced that NABARD will promote another 5000 FPOs over the next two years.
“Farmers of small and marginal sized land holdings, being unorganiaed, are unable to realise the desired value for their produce. Organising them into FPOs will benefit them from economies of scale in the purchase of inputs, processing, and marketing of their produce,” Jaitley said.
The latest Union Budget has allowed tax exemption to FPOs with a turnover up to Rs 100 crore. The government has committed to extend support to FPOs for their promotion and growth.
NABARD has supported around 4000 FPOs across the country at the end of FY’18 of which over 2000 are registered entities actively doing business in agricultural activities. As many as 507 FPOs are engaged in bulk input procurement and distribution while 223 FPOs are involved in aggregation and marketing of fruits and vegetables. Agro-processing, government procurement scheme, dairy, organic farming, seed production and marketing, fishery and other allied activities are also undertaken by the FPOs.
Permit lease for long periods of 15 years and more
IE has been suggesting agglomeration of small land holdings to viable sizes that will lend for application of science, technology, and modern management. A farm size of 50-100 acres will help in this effort. It should be easier to access funding to upgrade the quality of the soil and infrastructure; go for mechanisation; access and utilise information available with the government, universities, corporates; take to processing and value addition to avoid wastages; to access markets for better prices… The farm owners can be paid lease rentals over a minimum period of 15 years and also provided wage employment.
Such a system calls for laws that would permit lease over a long period and also ensure sanctity and enforceability of contracts.
The Indian experience proved the latter as the weakest, the Achilles Heel. In Tamil Nadu, from the 1950s when new tenancy acts were introduced, the contracts between the landowner and the tenant made little sense. In my own experience, for close to four decades I didn’t receive any rent agreed upon by the tenant. Even after court decrees on payment of arrears and promise of regular future payments, I found these unenforceable. In most cases, the tenant illegally sublets the lease. All these lead to distress sales or leaving the farm fallow or in an impoverished state.
Unless this issue of agglomeration is addressed, there is little hope for achieving quantum jumps in productivity and hence production.
Agri growth at 2 per cent…
At the best of times, agriculture growth has been low, averaging around 3 per cent per annum. In the last four years, production suffered due to successive droughts and growth was less than 2 per cent. With low levels of output and weak growth, the clamour for reliefs and higher prices would continue. Government support and subsidies can be palliatives but will not cure the system of its ills. Strong structural shifts are called to end decades of stagnation and low growth. But the issue is tightly intertwined with politics.
It is in this background Minister Jaitley’s call for cooperative federalism for the agriculture sector deserves consideration.
IE has also been advocating the selection of crops by different states most suited to their agro-climatic endowments. As early as 1988, IE suggested Tamil Nadu move away from water-intensive crops of sugarcane and rice. Since then IE has consistently been advocating a shift from these water guzzlers. Unfortunately, these are sustained and expanded over the last three decades by providing power free for agriculture. Sugar producers are continuously crying over the high cost of sugarcane further induced by the state recommending prices higher than fixed by the Centre. Despite this, sugar production in the state has been falling steeply – from the peak of around 25 lakh tonnes to 6 lakh tonnes last year. A simple common sense observation made by this author at a meeting at the Madras Institute of Development Studies (MIDS) presided over by renowned economist, Dr. Malcolm Adiseshiah, on Tamil Nadu vacating water-intensive crops, is recently recommended by a study by Columbia University and Indian School of Business, Hyderabad sponsored by NABARD at a high cost.
As in the US, there is an urgent need to focus on raising crops in states related to the agro-climatic endowments. The cooperative federalism model proposed by Minister Jaitley would help the Centre nudge the states towards this aim.
