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Agriculture marketing is really the key

PK Joshi

Recent state elections have made it very clear that the key agenda of the coming Lok Sabha elections will revolve around the farm sector. It appears that farm loan waiving scored more weight than numerous productivity enhancement and risk reduction schemes (such as higher minimum support prices, soil health cards, irrigation schemes, e-NAM, agricultural insurance, and many others). This is despite of the fact that, at the all-India level, as high as 48% of farmers are non-borrowers, and only 23% borrow from formal sources (Situation Assessment Survey 2012-13).

More strangely, 55% of marginal farmers and 48% of small farmers have no access to farm credit; and only 14% of marginal farmers and 24% of small farmers borrowed from formal sources. The puzzle is why farmers responded more to loan waiving than various programmes and reform measures. It appears that various reforms and schemes are not directly reaching most of the farmers, while loan waiving is viewed as a direct benefit that creates a ripple in favour of the farming community. Apparently, loan waiving is not a solution to solve farm problems but a psychological quick fix of the agrarian crisis.

The need is to make farm sector reforms more inclusive to empower farmers, especially the marginal and smallholders. Though the aim of all the programmes is to raise farm incomes and reduce risks, it seems that these have not converged but are disjointed, function in different silos, and reach only a select few. Therefore, these need to be packaged into one with more focus on following:
n Consolidate farming: One of the main causes of farm distress is the nature of smallholder agriculture in India. Majority of framers in India are marginal and small. These are not only tiny holdings but also fragmented. At the all-India level, the average size of holding is a mere 1.5 acres. Such a tiny holding is not enough to generate sufficient incomes to meet the aspirations of the farming community. In the long-run, a large number of farmers need to move out from agriculture for better employment opportunities. This will call for more employment opportunities outside agriculture.This will also help in expanding per capita landholding to generate decent income. This was exactly the way agriculture in developed countries evolved and we need to learn lessons from there. In the short-term, there is a need to consolidate landholdings for farming and marketing together. The role of farmer producer organisations is important to take advantage of economies-of-scale in production and marketing. There are many successful farmer producer organisations but many more are needed to increase farmers incomes.

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– Improve efficiency: The government has announced higher minimum support prices of agricultural commodities by accepting the recommendations of the National Commission on Farmers. The research, however, reveals that price-led growth is not sustainable as only those framers gain who have enough marketable surplus and who can reach the market yards. Majority of small and marginal farmers have a tiny marketable surplus and they largely trade within villages at a time when the bulk of produce is harvested, resulting in a fall in prices. The focus should be to improve efficiency through improved technologies that result in higher yields and reduce input costs. During the green revolution period, productivity gains were responsible for raising farmers income. The real prices were falling during that period. The research institutes of Indian Council of Agricultural Research have a plethora of improved technologies for different agro-ecoregions, which are paying high dividends wherever adopted. The need is to strengthen the technology delivery system by evolving mechanisms to link research centres with last-mile extensions to workers. The role of state governments is immense in strengthening the agricultural extension system, which is starved of human and financial resources.

– Make agri-business a powerhouse: India has a comparative advantage in agriculture with the rest of the world with respect to various seasons and different agro-ecoregions. Most of the farmers are doing agriculture and they now need to move towards agri-business. They need to respond to changing demand for food. But, at present, they are responding to government-driven schemes and prices. For example, rice and wheat are getting excessive support from the government but demand for more remunerative and high-value commodities (such as fruits, vegetables, dairy products, meat, eggs, fish, etc) is growing at a fast rate. These commodities give higher, quicker and more regular returns to the farmers and suit the needs of smallholder agriculture. Earlier studies have shown a positive association between high-value agriculture and poverty reduction. To promote these commodities, the conditions for success are: (i) effective and efficient development of value chains, (ii) improved and need-based infrastructure, such as cold chains, cold storage, transportation, logistics, etc, and (iii) removing policy barriers in promoting organised wholesale and retail trade. Role of private sector will be critical in developing the required agri-infrastructure, including markets, and effective value chains of these commodities. Incentives to the private sector and stable policies will facilitate the promotion of agri-business which will eventually augment farmers incomes.

– Surplus management: Last year, Indian agriculture witnessed a record production of most of the commodities. This has led to a glut that has resulted in a steep fall in their prices. Such a scenario was also responsible for farmers distress. India has now achieved food self-sufficiency and, therefore, we need a different strategy to manage the surplus and stabilise food prices at farm as well as retail level. This can be done through promoting warehouse receipts, agro-processing and exports. It will require need-based institutional reforms, infrastructure development and policy support. Warehouse receipts will help framers defer their sale immediately post harvest, when prices are at their lowest level. This will require a consolidation of farm produce, which can be successfully done through farmer-producer organisations. Agro-processing and trade will require investment in developing infrastructure. Existing agri-export zones need to be revisited and strengthened in this changing
scenario.

– Income support programme: Telangana has successfully implemented the agriculture income support programme. Odisha and West Bengal are also starting such a programme to directly support farmers to improve their livelihood. Like loan waiving, this will spread to all the states. Central government may develop a comprehensive pan-India scheme to support farmers by gradually withdrawing some of the existing schemes and subsidies to cover their expenses. The state and Centre may share the burden equally.

It is high time to facilitate the consolidating of farmers, improvements in efficiency, promoting of agri-business and strengthening of institutions that will contribute in subsiding farmers distress. Loan waiving and income support programmes are temporary solutions towards overcoming farmers problems. In the long-run, employment opportunities need to be created outside farming to expand farm size and increase farmers income.

(Director-South Asia, International Food Policy Research Institute, New Delhi . Views are personal.)