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Notice (8): Undefined variable: urlPrefix [APP/Template/Layout/printlayout.ctp, line 8]latest-news-updates/fixing-indias-farm-failures-4677268.html"/> LATEST NEWS UPDATES | Fixing India’s farm failures | Im4change.org
Resource centre on India's rural distress
 
 

Fixing India’s farm failures
-Livemint.com

India needs to invest more in developing rural infrastructure

The script is familiar. After borrowing heavily for inputs such as seeds, fertilizers and pesticides, farmers in most parts of India wait for the monsoon. When the rain fails, the farmers’ agony begins. Forced migration to cities in search of manual work, distress sales of land and, in extreme cases, suicides are the way out.

This kharif season has a distressingly familiar ring to it. In the Marathwada region of Maharashtra, there’s been hardly any rain. Increasingly, it is clear that Karnataka, too, is in the grip of an adverse monsoon. The net of poor rains is wider. In peninsular India, 28% of districts in Telangana, Tamil Nadu, Karnataka and Kerala have received deficit or scanty rainfall. For the country as a whole, rainfall until the beginning of September has been 15% below average. This is well into distress territory.

This will be the third continuous cropping season—since the kharif cycle in 2014—that India has seen poor weather conditions hitting agriculture. These are not the only episodes of weather-induced distress; even a cursory look at monsoon data and output failures shows the country’s experience on this score is pretty regular. Yet, when trouble strikes, there are few worthwhile tools in the government’s policy toolkit. In the end, cheap diesel, higher minimum support prices (MSPs), easier availability of inputs and, more controversially, debt waivers, are the only responses. These crisis answers don’t help farmers in the long run. Some of them sow the seeds for future trouble—higher MSPs and debt waivers fall in this class.

These crises merit a different response. They should be seen against the background of two troubling developments. One, the rate of agricultural growth has fallen from 4% in the 11th five-year plan (2007-12) to an expected 2% in the 12th plan (2012-17). Two, most farmers have an adverse land size to input mix. Small farmers are unable to muster working capital even if they are located in regions with irrigation; relatively large farmers (with lands in the 10-15 acre range) located in rainfed areas are totally at the mercy of the weather for survival. Price interventions alone in these situations are unlikely to be anything more than a sugar rush for a small run.

Three steps come to mind. The toughest response, but one which promises the best results, will be to cut the fat layer of intermediaries between farmers and the bulk or industrial consumers of farm produce.

At one time, when agricultural markets were underdeveloped, these intermediaries played an important role in price discovery by matching buyers with sellers. Over time, as demand for agricultural output has grown, these intermediaries have turned into no more than special interests, skimming off a significant portion of the returns that should justly accrue to the farmers. If one has to look at the reason for India’s underdeveloped farm markets, one need not look far: their political heft has ensured that no worthwhile market reforms occur in the states.

Two, India needs to invest more in developing rural infrastructure, beginning with roads connecting villages to market towns. Instead of spending money on illusory welfare schemes, a much better option is to develop the transport and post-harvest crop storage infrastructure for farmers.

Three, price interventions need to be organized better. Higher MSPs are of no use if the government cannot procure crops. The government certainly cannot buy every last grain offered by the farmers. In an interview to Mint last week, newly-appointed NITI Aayog member Ramesh Chand recognized the truth behind this: the logical end of this sort of government-buying will be the nationalization of agricultural trade. A more effective way to ensure a price floor is to pay farmers the gap between the rate at which they sell and the average price of the crop in the local market.

There are other, far more pressing, questions that need resolution. Water scarcity—both due to poor rains and depleted aquifers—is now a reality in large parts of India. Mechanisms for better allocation between farmers and other users, and between farmers themselves, now need urgent attention. Soon, water will determine what crops India can produce and how much. Instead of quibbling over farm prices, it is water pricing that needs resolution.