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RSTV: THE BIG PICTURE- NEED FOR AGRICULTURAL REFORMS

RSTV


Introduction:

Agriculture in India faces growing challenges and also presents plenty of opportunities but successive governments have been hesitant to bring reforms fearing political ramifications. Crucial decisions needed to the sector an impetus have been delayed in the fear of losing votes. There has also been a lack of vision. The Modi government has brought about reforms, but has been met with stiff opposition from farmers. They remain firm on their demand to get the new farm laws repealed. As the protests continue, industry bodies representing Indian corporates are worried about the stalemate situation between farmers and the government as it is causing huge losses. The Associated Chambers of Commerce and Industry of India has urged the government and farmers’ organisations to resolve the impasse. Meanwhile, the CII said the new reforms will improve market access and increase income opportunities for farmers. The industry body added that the reforms are focused on the input side, introducing risk mitigation measures, reducing post-harvest losses and augmenting market opportunities.

Issues faced by agriculture sector:

Despite record production of certain major agricultural produce and rise in exports, India’s farm sector faces some underlying challenges such as low crop yield, monsoon dependency, low share of exports in global markets, lag in farm mechanisation, burden of loans and farmer suicides. All this puts a load on the already struggling industry, limiting its growth.

  • Low crop yields
    • India has reported a record foodgrain production of an estimated 296.65 million tonnes in 2019-20. Production of foodgrains has seen a rise over the last few years with India being the largest producer of pulses and the third largest producer of cereals in the world.  Likewise, yield of foodgrains has increased as well; however, it lags when compared with other agrarian economies.
    • Yield or agriculture output is measured as the yield of a crop per unit area of land cultivation.
    • For instance, India accounted for 24 percent of the world pulses production in 2017, according to the government’s Agricultural Statistics 2019 report. While in terms of yield (664 kg/hectare) it was lowest among the top 10 countries, well below the global average (1009 kg/hectare).
    • The case is the same for other crops as well. India, despite being the second-largest producer of paddy and wheat after China, reports low yield compared to other countries and below the world average.
  • Dependence on monsoon
    • Reliance on seasonal rainfall hampers productivity. Additionally, change in climatic conditions and erratic weather patterns such as cyclones and droughts can impact yields of agricultural crops.
    • The growth of India’s agriculture sector has been dependent on monsoons, and as a result, it has been volatile.
    • The government is now encouraging micro-irrigation to improve water usage/efficiency.
  • Low share in global markets
    • Another positive development amidst the pandemic for the sector has been an uptick in exports of agriculture commodities between March and September. Overall, while India has emerged as an agri-exporter nation with regards to crops such as rice, spices, tea, sugar etc., the share of India’s agricultural exports in world trade remains low (2.15 percent in 2018), according to the ministry of agriculture’s annual report 2019-20.
    • The share of agri-exports to the country’s total merchandise exports needs to improve as well. It has remained in the range of 12 percent on an average over the last five years, falling to 11.9 percent in 2018-19, from a high of 20.33 percent in 1996-97.
  • Indebtedness and farmer suicides
    • The average monthly income of an Indian agriculture household was estimated at Rs 6,426, with a wide-spread disparity across states, ranging from Rs 18,059 in Punjab to Rs 3,558 in Bihar, according to Agricultural Statistics 2019, based on the Assessment Survey of Agricultural Households (January-December 2013).
    • About 52 percent of agricultural households in India are indebted,
    • Nearly 64 percent of the marginal farmers (holding land less than one hectare) or agricultural households are indebted, followed by small (1 to 2 hectares) agricultural households (18 percent).
    • As many as 10,281 suicides were reported in the farming sector in 2019, of which 58 percent or 5,957 were farmers/cultivators and 4,324 were agricultural
    • Over 86 percent of agricultural land-holdings belong to the marginal and small farmers, according to the Agriculture Census 2015-16. Large farmers who hold more than 10 hectares of land constitute

The need for reforms:

  • As a result of these multiple challenges and issues, India’s agriculture sector is shrinking. The share of agriculture to total employment in the country has reduced from 44 percent (PLFS 2017-18) to 42.5 percent (PLFS 2018-19), while it was almost 60 percent a couple of decades ago.
  • Likewise, the share of agriculture and its allied sectors in national income has declined from 18.2 percent in 2014-15 to 16.5 percent in 2019-20, “reflecting the development process and the structural transformation taking place in the economy”, the Economic Survey 2019-20 states.
  • Thus with technological advancements in the field of agriculture like mechanisation, micro-irrigation and digital market platforms, it is time that India brings in reforms to address these challenges, refining its agricultural policies with the aim to improve productivity, self-sufficiency and doubling farmers income.

Supporting arguments regarding these acts:

  • They have the power to sell their fruits or vegetables to anyone, and anywhere.
  • It is this power which is the foundation of their growth, now the same power has been given to farmers across the country.
  • They have got the freedom to sell not only fruits and vegetables but grains, sugarcane, mustard and anything that they grow, they can now sell to anyone and anywhere they like.
  • The Centre has taken the steps to ensure that farmers get the right price for their produce.
  • Government has taken steps to ensure that the farmers get the right price for their produce. The farmers will benefit from it. But some people are trying to mislead the farmers.
  • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, seeks to give freedom to farmers to sell their produce outside the notified APMC market yards (mandis).
  • The government says this is aimed at facilitating remunerative prices through competitive alternative trading channels.
  • The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020, seeks to give farmers the right to enter into a contract with agribusiness firms, processors, wholesalers, exporters, or large retailers for the sale of future farming produce at a pre-agreed price.
  • The Essential Commodities (Amendment) Act, 2020, seeks to remove commodities like cereals, pulses, oilseeds, onion, and potato from the list of essential commodities and will do away with the imposition of stock holding limits.

MSP to be added to the legal framework :

  • The FCI was formed in 1965 as a response to a significant food shortage in the country.
  • From that point, we have made progress in food production. In the early 1990s, we were not facing food shortages.
  • That did not mean that the problem of hunger was addressed. It continues to persist because there is mal-distribution of food grain. And that is happening in spite of the PDS.
  • One has to recognise that we have a different political-economic regime than the time the FCI was set up.
  • Post-liberalisation, private players and capital have a much greater role to play in the economy, which is fine. But then you also need regulations for those players.
  • MSP question is larger, more complex, and deserves a very serious consultative process, and its own dedicated Act.
  • One suggestion was, if the APMCs were functioning as they would under the old regime, then you would ensure that all bidding starts at the MSP, which ensures that the MSP starts as a floor price.
  • We’ve lost that opportunity now because now if you say APMC has a MSP, but outside it, you can do whatever you want, then it makes no sense any more.

Concerns of farmers:

More than 86 percent of India’s cultivated farmland is controlled by smallholder farmers who own less than two hectares (five acres) of land each.

  • The new rules remove many of their safeguards. Small farmers fear that they just do not have enough bargaining power to get the kinds of prices they need for a decent standard of living when they negotiate to sell their produce to larger companies.
  • The new laws also do not make written contracts mandatory. So in the case of any violation of their terms, it can be very hard for a farmer to prove that he or she has been aggrieved, giving them little recourse.
  • The new rules do not guarantee any minimum price for any product, and farmers worry that the existing MSP will be abolished at some point.

Conclusion:

  • MSP provision should be the subject of debate.
  • Even if some experts believe that the newly passed farm bills will improve India’s agricultural sector, trusting the government seems to be the real hurdle for the country’s farmers.
  • Without strong institutional arrangements, the free market may harm lakhs of unorganised small farmers, who have been remarkably productive and shored up the economy even during a pandemic.