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Doubling Farmers’ Income

  • Category
    Economy
  • Published
    16th Jul, 2019

Agriculture and allied sector provides livelihood to 54.6% of the population of India (census 2011) and it contributes 14.4% to the country’s Gross Value Added (2018-19) as per Economic Survey 2019.  India ranks among the top countries in the world in production of a number of crops including rice, wheat, sugarcane, fruits and vegetables. Farmers are, and will remain the drivers of Agricultural sector.

BACKGROUND

Agriculture and allied sector provides livelihood to 54.6% of the population of India (census 2011) and it contributes 14.4% to the country’s Gross Value Added (2018-19) as per Economic Survey 2019.  India ranks among the top countries in the world in production of a number of crops including rice, wheat, sugarcane, fruits and vegetables. Farmers are, and will remain the drivers of Agricultural sector. Since the development of Farm mechanisation in India is still below the mark due to several factors like small land holdings, equipment cost and poor credit availability, the role of farmer in agriculture holds crucial importance and it is our imperative to ensure that farmers find Agriculture as a profitable economic activity.

In this backdrop, 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. Now, the government is in the process of setting up a panel to monitor the implementation of the recommendation of the Doubling Farmers’ Income (DFI) committee.

Current Status of Farmers’ Income

  • The estimates for farmers’ income are not published by CSO. The absence of adequate information makes it difficult to analyse the growth trends in farmer’s income.
  • According to NSSO survey, for the year 2012-13, the average annual income for a farm household from farm as well as non-farm source was Rs.77,112.
  • A study by Chand et al in 2015 reveals that it took 22 years (1993-94 and 2015-16) to double the farmers’ real income.
  • More than 20% of the farmers in India are Below Poverty Line.

Major Reasons behind farmer Distress in India

  • Small land holdings: As per Economic Survey 2019, the pattern of agricultural holdings reflects pre-dominance (85 per cent) of small and marginal farmers in agriculture sector. Marginal and small land holdings face a number of issues, such as problems with using mechanisation and irrigation techniques. Also, farmers cultivating smaller land holdings lands do not have formal lease agreements because of which they become ineligible for formal credit.
  • Insurance: Only about 35 per cent of farmers are covered under the Pradhan Mantri Fasal Beema Yojana. Moreover, due to inadequate and delayed claim payment, high premium rates, and poor execution, the scheme witnesses a drop of about 17% in the enrolled farmers in 2017-18.
  • Irrigation: As 60% of agriculture in India is rain-fed, so timely arrival, consistency, and sufficiency of monsoon rains is most essential. But the high variability of S-W Monsoon rain in India causes a lot of hardship to the farmers and puts an adverse impact on the economy. For example, due to lack rain, farmers have to rely more on irrigation, for which they need diesel. This further increases our oil imports and hence increases our current account deficit.
  • Credit: The access to timely credit is a critical determinant of profitability of agriculture. The regional distribution of agricultural credit in India is highly skewed. For example, the share of North Eastern States has been less than one per cent in total agricultural credit disbursement. Moreover, the informal source of credit constitutes 40% of loans. The interest demanded by them is very high and they eventually end up in losing their land. As per Union Budget 2019, only 50% of the total agricultural credit disbursedwent to SMFs.
  • Lack of knowledge among Farmers regarding use of fertilizers: An imbalanced use of fertilizers lead to a loss of fertility in the soil over a period of time, affecting productivity. While the recommended ratio of use of the NPK fertilizers is 4:2:1, this ratio in India is currently at 6.7:2.4:1
  • Procurement – Only about 1/3rd the total production of the food grains are procured due to long distances to the procurement centres, increasing cost of transportation for farmers and irregular hours of the procurement centres. In such situations, the farmers do not have any option but to sell their produce to middlemen with very little or no profit at all.
  • Poor Mechanisation - The use of agricultural machinery in agriculture enables agricultural labour to be used in other activities. But, the overall level of mechanisation in India is still less than 50%, as compared to 90% in developed countries.
  • Lack of Storage Facilities: A robust storage infrastructure is required to minimise any losses due to adverse weather conditions or in the process of transportation.
  • Issues with APMC: APMC mandis currently levy a market fee on farmers which makes it expensive for farmers to sell at APMC mandis. In transporting the produce, several intermediaries are paid a certain proportion of the price, as commissions. Thus the market price which the farmer receives for his produce is significantly lower than the price at which his produce is sold to the retailer.

Key Information about Doubling Farmer Income Initiative

  • The reference year for farmer income is 2015-16 and target year is 2022-2023.
  • The aim is to double the Real Income of farmer and not the nominal income.
  • According to NITI Aayog, farmers’ income in 2015-16 was Rs. 44027 in real terms.
  • In order t o achieve the aim, an annual growth of 10.41% is required in farmers’ income.

 Impact

Economic

  • Demand for Loan Waivers: Till now, at least 11 States have announced schemes to waive outstanding farm loans. Loan Waivers adversely affect the repayment discipline of farmers, leading to a rise in defaults in future.
  • Widening Current Account Deficit – A fall in agricultural output followed by a stagnant output from other sectors of the economy will further widen the CAD.
  • Increased NPAs – Due to lack of irrigation facilities and lack of institutional credit, farmers fall in the debt trap and are not able to repay the loan instalments. As a consequence, banks tend to reduce the flow of credit to the small and marginal farmers.
  • Hit on other Sectors - A reduced output from agricultural sector will have a direct bearing on the output of other important sectors of the economy. For example Food Processing Sector is directly dependent on Agriculture output.

Social

  • Farmer Suicides: India has witnessed a sharp rise in the number of farmer’s suicides during 1995 to 2004. Due to this, the financial burden on other family members increase and they fall below the poverty line.
  • Demographic Dividend: More and more young cultivators are leaving farming as a profession because it is not profitable for them. In a scenario, where unemployment rate is at an all time high, it will be difficult to absorb these young cultivators in other jobs.
  • Food Insecurity: India has been one of the worst performers in the Global Hunger Index. Due to large scale wastage of food grains due to lack of storage infrastructure, India’s food security further falls into threat.

Environmental

  • Excessive groundwater usage: In India, according to the Asian Water Development Outlook, 2016, almost 89 percent of groundwater extracted is for irrigation. As per this trend, by 2050, India will be in the global hot spot for ‘water insecurity’.
  • Water Pollution: Water pollution from agriculture has a direct negative impacts on human health. Aquatic ecosystems are also affected by agricultural pollution; for example, eutrophication caused by the accumulation of nutrients in lakes and coastal waters
  • Climate Change: Agriculture is directly responsible for 14 per cent of total greenhouse gas emissions, and broader rural land use decisions have an even larger impact.

Initiatives

  • Improving Productivity: Due to stagnancy in quantum of agricultural land, it is imperative to increase productivity over the same amount of land.
    • Pradhan Mantri Krishi Sinchai Yojana (PMKSY) provides for more crop, per drop.
    • Soil Heath Card scheme aims at promoting soil test based and balanced use of fertilisers to enable farmers to realise higher yields at lower cost.
  • Improving Total Factor Productivity: TFP is an important source of output growth which directly contributes into the cost saving and thus increase the income. TFP growth represents the effect of technological change, skill, infrastructure etc.
    • National Agriculture Market (e-NAM) aims to form a unified national market for agricultural products by making a network for the markets related to the existing Agricultural Product Marketing Committee (APMC).
    • Direct Benefit Transfer: The NITI Aayog has suggested that all subsidies for agriculture, including fertiliser, electricity, crop insurance, irrigation and interest subvention be replaced by income transfer because it eliminates the leakages of resources in the system.
  • Diversification of Crops: When farmers go for single crop type they are exposed to high risks in the event of unforeseen climate events, such as emergence of pests and the sudden onset of frost or drought.
    • Crop Diversification Programme (CDP) being implemented which aims to diversify area from water guzzling crop like paddy to alternate crops like maize, pulses, oilseeds, cotton & agro-forestry plantation.
  • Financial Assistance: There are several initiatives taken up by the government like:
    • The Union Budget 2019-20 has made the highest ever allocation to Ministry of Agriculture and Farmers’ Welfare: Rs 1,30,485 crore, a 140 per cent jump over the ’18-19 budget estimate of Rs 57,600 crore.
    • Pradhan Mantri Fasal Bima Yojna has been launched to provide relief to the farmers inflicted with the loss of crop damage.
    • Kisan Credit Card Scheme aims to provide direct benefit to farmers and ease the pressure on them.
    • Micro Irrigation Fund created with NABARD has been approved for encouraging public and private investments.
    • Implementation of Swaminathan Report - Recently, the Government has increased the MSP for all Kharif and Rabi crops and other commercial crops for the season 2018-19 with a return of at least 50 percent over cost of production.
    • The Government has decided to implement a new Central Sector Scheme for providing old age pension of Rs.3000/- to the eligible small and marginal farmers as they have minimal or no savings.
    • PM KISAN - This central sector scheme aims to supplement the financial needs of the SMFs in procuring various inputs to ensure proper crop health and appropriate yields, commensurate with the anticipated farm income at the end of the each crop cycle.
  • Other Initiatives:
    • The Government has been promoting organic farming in the country through the schemes such as Paramparagat Krishi Vikas Yojana (PKVY) and Rashtriya Krishi Vikas Yojana (RKVY).
    • Coffee Board has launched block-chain based coffee e-marketplace. It will to help integrate the farmers with markets in a transparent manner.
    • NITI Aayog launched in 2016 an index to rank States and UTs based on implementation of seven provisions proposed under model APMC Act.
    • The Mega Food Parks scheme aims to create a mechanism of linking agricultural production to the markets, by involving farmers, processors and retailers together in a cluster-based approach

Recommendations

  • NITI Aayog’s Model Land Leasing Act must be adopted by all the states and UTs in a time bound manner. It will bring the futile land into much needed use for operational efficiency.
  • Apart from food and nutrition security, Agriculture should also be mandated to generate resources as raw materials to feed and support industrial enterprises. Such incorporation will provide greater elasticity to the markets now circumscribed by consumption as food and fodder.
  • Public investment in agriculture must be raised to 4% of the GDP, which is currently only 2.76%
  • Modern machinery such as laser land leveller, direct seeded rice, zero tillage, raised bed plantation and ridge plantation allow high efficient farming
  • The insurance sector should design a simple natural catastrophe product with affordable premium and simple claim payment methodology
  • Micro-irrigation systems (MI) is one of the possible ways to improve water use efficiency, it can be seen that the States with penetration of MI systems and improved adoption of micro irrigation systems have almost 40 to 50 per cent savings in energy and fertiliser consumption
  • There is need to promote use of environment friendly automated farm machinery tools suited to small scale operations. The Custom Hiring Centres (CHCs) can be set up to promote use of high-tech machinery for the mechanization of small and marginal farm holding.
  • The improvement in fertilizer use efficiency requires farmers’ knowledge regarding the right product, dosage, time and method of application. Some of the suggested measures are the use of optimal dose based .
  • A combination of enhancing rural infrastructure to improve connectivity, Information, Communication Technology (ICT) to provide timely information about prices, aggregation and storage facilities can help small and marginal farmers in overcoming the marketing bottlenecks.

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