Insights into Editorial: Agrarian crisis – The challenge of a small farmer economy
Though agriculture now accounts for less than 15% of gross domestic product (GDP), it is still the main source of livelihood for nearly half our population. Agriculture is still the core of our food security. With over 1.3 billion mouths to feed, imports will not solve our problem if there is a severe drought and food shortage. However, the rising frequency of farmers’ agitations in Tamil Nadu, Maharashtra, Madhya Pradesh and elsewhere and the high incidence of farmer’s suicides are symptoms of a deep malaise in the sector.
What are the roots of this crisis?
Fragmentation of land: Demographic pressure has pushed down the land: man ratio to less than 0.2 hectares of cultivable land per head of rural population. It has also progressively pushed down the size structure of landholdings. Around 83% of rural households are either entirely landless or own less than 1 hectare of land. Another 14% own less than 3 hectares. At the opposite end, less than 0.25 of rural households own more than 10 hectares of land and a minuscule 0.01% own over 20 hectares.
Shortage of money: Landless or marginal farmers lack the resources to either buy or lease more land or invest in farm infrastructure—irrigation, power, farm machinery, etc.—to compensate for the scarcity of land.
Weather: The large majority of small farmers are dependent on the rains. A weak monsoon or even a delayed monsoon—timing matters—means a significant loss of output. Soil fertility, pests and plant diseases is another risk.
Price variations: Farmers are usually at the mercy of traders. The better the crop the lower would be the price. Net income sometimes collapses if there is a very good crop of perishables. The highly distorted and exploitative product market is the second most important factor responsible for the misery of the small farmer.
MSP: small farmers usually do not benefit from the government assured MSPs. It mainly benefits the large traders who sell grain to the government. Small farmers typically do not have enough marketable surplus to justify the cost of transporting the crop to government corporations in the towns. Their crop is usually sold to traders at rock bottom post-harvest prices in the village itself or the nearest mandi.
APMCs: Agricultural Produce Market Committees (APMCs), which were supposed to protect the farmer, have had the opposite effect. Farmers have to sell their produce through auctions in regulated markets controlled by cartels of licensed traders, whose licences give them oligopolistic market power. These cartels fix low purchase prices, extract large commissions, delay payments, etc. According to a study, the farmers may typically get as little as 25% of the price that consumers finally pay. A consolidated mark-up of 300%.
Migration: The rural youth, especially young males, are migrating to the towns and cities for a better future. But their dreams are quickly shattered. There is not much employment growth anyway and they lack the skills required for a decent job. What remains is a burgeoning army of unemployed, miserable and frustrated young men.
What can be done?
An idea that has gained much traction in recent days is cooperative farming. This is already popular in France, Germany, Romania, Kyrgyzstan, Nicaragua, Kenya, and Bangladesh among others. There are several variants of cooperation ranging from collective action in accessing credit, acquiring inputs and marketing to production cooperatives that also include land pooling; labour pooling; joint investment, joint water management and joint production.
Advantages of cooperative farming:
The advantages of aggregating small farms into larger, voluntary, cooperatives include greater capacity to undertake lumpy investment in irrigation and farm machinery, more efficient farming practices, greater bargaining power and better terms in the purchase or leasing of land, access to credit, purchase of inputs and the sale of produce.
The cooperative approach also has its problems, such as internal conflict, free riding, etc., but farming communities have also found institutional solutions to these problems. The conditions for success of such cooperative approaches include voluntariness, cooperative units of small groups, relative socioeconomic homogeneity of cooperating households, transparent and participatory decision-making, checks and penalties against free riding, and group control over the fair distribution of returns.
The agrarian crisis is morphing into a social nightmare. Its time for a complete overhaul. There are many lessons of successful cooperative farming in India and abroad that will have to be learned for the institutional transformation of our small farmer economy into cooperative farming systems on a national scale to address the agrarian crisis.