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Resource centre on India's rural distress
 
 

Farmers' Woes by SL Rao

A meticulously researched book by A. Vaidyanathan, Agricultural Growth in India: Role of Technology, Incentives and Institutions, is an illuminating scholarly work. Thinking about it one realizes the dismal and declining state of Indian agriculture and the poor governance at both Central and state government levels that has brought it to this sorry pass. A valuable compendium of data and analysis of Indian agriculture since Independence, it is a valuable reference to the policies and resultant developments in agriculture. Vaidyanathan is among the most distinguished of Indian researchers. His range of work is wide and covers empirical and conceptual research, policy formulations and governance and socio-economic research. This book puts together his wide spectrum of work on Indian agriculture.

My observations draw on this book and other data. Governments at the Centre and the states have long followed populist, short-sighted agricultural policies that have not benefited agriculture. Declining productivity, destruction of the underground water table in large parts of the country, growing salinity and damage to limited land resources have kept the rural population in poverty, and dependent on agriculture. “Bharat” is the nomenclature given to this agricultural India while marketers use “India” for the much better-off urban India.

After Independence and in the first five-year plan, the emphasis was on agriculture. Land reforms, big dams, irrigation projects, canals, mechanisms to get scientific research to the farmer, minimum support prices to ensure that the farmer got a remunerative price for his produce were some major policy instruments that led to faster agricultural growth. Concurrently, a food procurement and public distribution system was introduced, primarily to give the urban industrial worker protection through food and other necessities at below-market prices. The industrial unions exercised political clout and agitated for low prices for workers’ essential foods. Low retail prices on ration cards meant low prices for the farmer.

When working on the extent of subsidy in Indian agriculture in the early 1990s, Ashok Gulati compared international and domestic prices. He concluded that Indian agriculture was negatively subsidized. Insulating domestic from international prices minimized the burden on government budgets caused by public distribution. The Indian farmer could have earned more if he had sold his produce, especially foodgrains, abroad.

Restriction on exports and imports of agricultural products was said to be in the interests of the Indian farmer. It resulted in distortions and inefficiencies. Thus, the policy of self-sufficiency for edible oils like groundnut and coconut diverted some unsuitable Indian farmlands to oilseeds. Other crops might have been more efficient. Neighbouring Southeast Asian countries produced groundnut, coconut and palm oil more efficiently and sold them cheaper — at a profit for their farmers. They could have met any shortfalls in India’s production.

The concept of minimum support prices was extended to even commercial crops. Cotton was a good example, with State procurement agencies piling up large stocks and making huge losses in order to ensure higher prices to farmers. Sugarcane mills, controlled in states like Maharashtra by politicians, also exploited the sugarcane grower for the benefit of the sugar factories.

The Lyndon Johnson administration that gave foodgrain loans to India under PL 480 was criticized for insisting that India focus on agriculture and food production. To avoid an annual begging pilgrimage, India mounted a Green Revolution, which for years gave self-sufficiency and even surpluses in foodgrains. Recently, the government has permitted vested interests to export grains even when local supplies were short and prices were rising.

Minimum support prices to guarantee sales soon became procurement prices for grains for the PDS, adding to government costs. Government procurement and distribution involved vast logistics and coordination to move grain from farm to retail ration shops across India. Huge corruption and waste at all levels was proven. Many of the really needy did not even get ration cards, while the cheap grains went to the better-off or were diverted for sale in the market or for processing.

During the late 1960s and early 1970s, the Green Revolution was made possible because agricultural research reached the farmer. Later, the number of extension personnel did not match the demand for the services. After the 1980s, agricultural research did not reach the farmer on many occasions. Advice on soil conditions, fertilizer balancing, good seeds, the careful use of water, and relating them to crops, was not available to most farmers.

Worse, the government adopted a populist fertilizer pricing policy. Urea was priced low while phosphatic and potassic fertilizers were priced disproportionately high. So, the government paid high subsidy costs to fertilizer factories which kept raising costs of production. The farmer used unbalanced and excessive quantities of urea, to the detriment of land productivity.

According to Indian law, underground minerals belong to the State, but water belongs to the landowner. No restrictions exist on groundwater extraction. Poor farmers with shallow wells see them dry as neighbours use pumps. Shortsighted politicians seek votes by underpricing electricity for pump sets or even giving them free. This has changed cropping patterns. Many dry lands now grow wet land crops, resulting in depleted groundwater in many parts of India. In many states, it has made land saline and unusable.

Water has been very poorly managed by governments. Irrigation water is grossly underpriced. Operation and maintenance costs of dams and canals are only fractionally met by water tariffs. Small irrigation projects like check dams and other watershed management exercises were rarely invested in. Government funds went to pay for subsidies on fertilizer, grains, cotton, writing off farmer loans, and so on, apart from electricity subsidies. This money, if it had been invested in creating assets for water conservation, irrigation, storage, roads, transport, would have improved agricultural productivity, cut wastage and given more remunerative prices to the farmer.

The rural credit survey committee of A.D. Shroff had in the late 1950s identified the need for easy rural credit. Despite many committees since then, rural credit remains inadequate. Instead, governments, by periodically writing off unpaid farmer loans, encourage the inefficient and penalize the efficient, as well as discourage lending institutions from lending to farmers.

However, the farmer has changed crops for his survival. Wheat and rice now account only for 20.8 per cent of “agriculture and allied activities” in the country’s gross domestic product. Milk and horticulture each accounts for 17.6 per cent of agriculture, and receives little or no government support. Nor do coarse grains like pulses that account for 6.6 per cent of agriculture (versus wheat at 8.1 per cent). Government policies are fixated on rice and wheat (and to an extent on sugar and cotton). These two crops contribute 3.3 per cent of GDP and receive two per cent or so of GDP as subsidies. This has preempted government funds from creating assets, institutions, helping other agricultural production, and diminished social sector expenditures.

Contract farming for large corporations and farmers has also led to changes in crops, farming practices, and more remunerative incomes for farm owners. Similarly, genetic modification appears to have given a boost to productivity of cotton.

Indian agriculture has been planned for by urban economists with ideological predilections favouring industrial labour and trade, not farmers and farm labour. They have sacrificed the essentials for the marginal and populist policies. In the process, agricultural productivity has declined. The nation, the farmer, and the consumer have not benefited. The inefficient public procurement and distribution have slowed and even stopped the agricultural clock. Public investment for asset creation has been declining, as has necessary legislation to improve returns on agriculture.