Wednesday, July 30, 2014

The Real Revolution Needed in Indian Agriculture

Dr. Prakash Bakshi, Former Chairman, NABARD.
None other than Prime Minister Narendra Modi has put the focus on reviving agricultural growth urgently, in his recent meetings where he pushed for ideas like ‘per drop, more crop’, and ‘less land, less time, more crop’. Dr. Prakash Bakshi, former Chairman of NABARD, and a noted expert on promotion of agriculture, writes exclusively for Seasonal Magazine on what is the real revolution Indian agricultural sector needs urgently. 

By Dr Prakash Bakshi, former Chairman, NABARD:

Indian agriculture is a strange sector of the economy – it contributes only 14% of the GDP, but directly supports more than half the country’s population, and all of us as consumers. Experts have been telling us for a decade that if the country’s economy has to grow in double digits, agriculture must grow at least at 4%.

This is the real role and power of agriculture. And for this reason alone, agriculture deserves some serious attention.

Unfortunately, the fairly stable food-grains production levels of around 250 MT – good and drought years now make a difference of + or – 5% only – has made everyone complacent, and we have started believing that everything is or would be gung-ho in agriculture.

This is simply not true. The fact is that Indian agriculture is under severe stress and needs radical policy reforms.

Let us disaggregate our agriculture a bit. From 123 million hectares (mHa) in early 1950’s our net sown area (NSA) increased to about 140 mHa by 1971, and has remained around this level for the last 40 years. Obviously, urbanisation and other needs have put limits on how much land we can use for agriculture.

Irrigation helps increase productivity per hectare and it also helps cultivate the same land in more than one season, and net irrigated area (NIA) increased from 21 mHa in 1950’s to about 55 mHa by 2001, and has increased at a snail’s pace since then. The result is that our gross sown area (GSA) which includes NSA + area sown more than once has also remained fairly stable at around 196 mHa in the last decade.

It is also well known that even if all surface and ground water irrigation is tapped, more than half the cultivated land will remain dependent only on rains. The simple conclusion we draw is that any higher production will have to come from increased yields as more land cannot be brought under cultivation.

Post two consecutive most severe droughts of the century in 1966 and 1967, sincere efforts to increase area and production of food-grains were undertaken – these efforts later got christened as the Green revolution – and resulted in the sharp growth witnessed from 1970’s until the beginning of this century in both area under wheat and rice (coupled with decrease in low paying coarse grains like bajra, jowar, etc.) and their production. But the harsh fact is that this fast increasing trend is now absent for the last 15 years, and the production levels are now crawling up and not jumping up. In other words, a technology fatigue has gripped grains yields as seed research has been an important casualty.

The growth for area and production of pulses is so flat over all these years – any wonder then why prices of pulses are rocketing upwards ? A similar trend is also seen in oilseeds – another important commodity in our cooking.

During this period, however, other small and almost un-noticed positive changes in the commodity mix of our agriculture have also been taking place – we have very quietly become the largest producer of milk, and one of the largest producers of eggs. The area under fruits and vegetables is continuously increasing, though at a snail’s pace, and at around 15 mHa (just 8%) of the GSA) is in no competition with the traditional grains dominated agriculture. The production of fruits and vegetables has however increased at a faster pace, and we now produce around 230 MT of them, quite close to volumes of cereals production.

What does that mean for all of us, and especially for the farmers? The 8% area devoted to fruits and vegetables produces almost the same quantity, both in terms of weight in Metric tons as well as value in Rupees, as the 64% area under cereals and pulses. Given that area under agriculture, for various crops, will not, and perhaps cannot, increase, more fruits and vegetables for the country’s ever increasing population can be met by decreasing the area under cereals, pulses and oilseeds. But that may also reduce the production of these commodities which millions need. We can however strike a fine balance fairly easily, and actually increase the production of both substantially if yields per hectare for all the crops increase significantly, just as they increased in the 1970’s, 80’s, and 90’s.

The green revolution mantra was using better technology – better seeds (we have already mentioned seed research has become a casualty), appropriate and adequate fertilisers (let us check the disproportionate use of urea because it is heavily subsidised), better water-use (irrigated or otherwise), and proper ploughing, weeding, and harvesting (appropriate technology).

It is here that a silent structural change in our agriculture which is eating away the profitability and viability of agriculture as a deadly virus needs to be checked and reversed. And this deadly virus is fragmentation of farm holdings.

We have seen that from 1970-71 onwards, the NSA has been fairly stagnant at 140 mHa (add another about 20 mHa for lands that remain fallow due to a variety of reasons, to get to area operated by farmers). The difference is that in 1971, this 160 mHa operated area was shared by 70 million farmers, and now the same area is shared by 140 million farmers. We are adding 10 million small and marginal farmers who operate less than 2 hectares of land every five years. In other words, in 1971, 50 million small (< 2 ha) and marginal farmers (< 1 ha) out of the 70 million total number of farmers cultivated 35 mHa, or one fourth of the cultivated area. Their number has swelled to over 125 million now, and they cultivate almost 80 mHa, or half of the total operated area. Conversely, in 1971, 20 million farmers operating more than 4 ha of land operated 125 mHa (or 78% of the total), and now almost the same number of these > 4ha farmers operate less than 90 mHa.

What implication does this trend have on production, productivity and profitability of agriculture ?

Let us see some examples to understand the issues.

Farmers need good seeds. In 1971, if all farmers were to use good seeds, seeds had to be distributed to 70 million farmers, and now for the same cultivated area of 140 mHa NSA, seeds will have to be distributed to 140 million farmers. Does this have an implication on distribution costs? Yes, the costs of taking the same quantity of seeds for the same cultivated area would now be higher, all other things remaining same. The logic would hold true for all other inputs and services. For example, if good cultivation practices were to be initiated through any training, one would have trained 70 million farmers in 1971, and one has to now train 140 million farmers for covering the same cultivated area. Would the total costs of training increase? Yes. Does that increased cost result in more area under better practices ? No. The net result ? Delivery of services has become costlier.

Let us take another example. Farmers need to plough their land for sowing. It is clear that most of the small and marginal farmers operating less than 2 ha of land cannot afford to own a pair of bullocks or a tractor or a power-tiller and so on. But the larger ones perhaps can, and do, and the smaller ones can perhaps hire the bullocks or tractors from the larger ones. But, as the number of small and marginal farmers swells and that of the larger ones reduces, even this possibility becomes more and more difficult. So how does the small farmer ensure even beginning of his farm operations if he cannot plough his fields in time and at a cost he can afford? And does he have to remain dependent on or even be at the mercy of the larger ones for all his needs?

Another similar aspect – farmers do not get anything at their door-steps. From seeds to fertilisers, to bank credit, they have to go to the outlets wherever these outlets are. What cost implications does this have ? In 1971, 70 million farmers had to travel and spend their time, energy, and money, to reach these outlets to get their inputs. Now 140 million do the same for the same operated area. Does this increase the costs ? Yes.

A farmer also does not get his income just by producing something. He gets his income only when he sells his produce. So what implication has this on the farmers ? Suppose a 4 ha farm produces 80 quintals of wheat. When the same area is divided into 4 marginal farms of one ha each, each farmer produces 20 quintals. Therefore, to sell the same 80 quintals, 4 instead of one farmer now travel and spend their time, energy and money to reach the market. As finding transport for such small quantities may not be easy (he cannot afford to own such transport), he would most often not even visit the market but sell it to a local trader at a throwaway price, thereby further reducing his income or profitability.

I have illustrated these simple examples only to show how fragmentation of land is making agriculture more and more unprofitable and unviable, not only from the farmers’ point of view, but also from the point of view of input and service providers, including the government.

No wonder then that the 59th Round of the NSSO survey (2003) says that 27% farmers did not think that farming is profitable, and 40% said that if they had a choice, they would quit farming. Ten years down the line, the situation has only worsened due to the reasons mentioned above.

This certainly is not a desirable situation. What is the solution then?

Can we stop fragmentation that is taking place, primarily due to inheritance? Certainly not. People cannot be denied their inheritance and resulting ownership rights. But why should ownership come in the way of operations? If a minimum viable operating area in a given context is 20 ha., and the area has only marginal farmers, each owning, say, 1 ha, should we all not ensure that 20 hectares owned by 20 different people is cultivated as one single profitable unit of 20 ha, without any of the 20 owners having any threat to their ownership?

This requires a fundamental change in the land legislations as they exist today. Progressive states like Punjab and Haryana have solved this issue by amending their land legislations and making leasing in and leasing out agricultural land totally legal. In a limited way, this can be done in Rajasthan also. In Andhra Pradesh also, land leasing is legal, but so are the conventions and apprehensions of farmers that they prefer to give and take oral lease without recording anything on paper so that the threat of losing ownership is somehow averted. Such oral lessees however lose all benefits of bank loans, crop insurance, and any other governmental benefits as they go to legal cultivator, which, ironically, is the absentee owner.

Let us face the fact – in the absence of protection of ownership, the unviable marginal farmer continues to stick to his land, carries out unviable operations and remains poor. If he was given an assurance through legislation that he will not lose his rights irrespective of who cultivates his land, the land will be more profitably cultivated and he will have the option of using his time and energy in other vocations as well.

The answer also lies in using one of the 4 C’s – Cooperative, Collective, Corporate, or Contract. These are the only possible ways of aggregation that are critically needed for making Indian agriculture profitable – both in production as well as in post-production activities including marketing, processing, and retailing. Which “C” will work better will depend on a whole lot of local contexts, and therefore, legislation must allow all of them.

This is the first reform required in Indian agriculture, and will be the key to all subsequent reforms required, including market reforms.