Sunday, March 6, 2011

Union Budget and Agricultural Sector- Required a change in Perception

Farming in India

In every budget (no matter whether it is Union or State) there will be something for farmers. Some sort of assurance that, the system still care about you. At the same time it is also an indication at you need help, you need low cost loans, you need fertilizer and kerosene subsidies; a discomforting message is passed - If you want to go forward, you need our help, you need subsidies. Another endless piece of exemplery sympathy.

But the question is how these farmers end up in the receiving end of sympaty? Its indeed a wonderful anomaly, not quitely fit in the demand and supply theorem of economics. There is no shortage of demand for agricultural products, whether it is Rice, Wheat, Ragi etc. These prodcuts are always in demand not only in India but in many other countries also. It not longtime back when the food riots rocked the stability of governments accross the continents. And the governments are ready to spend millions of dollors for importing these products in the situation of domestic shortage. So demand is there.

As the quesstion for the demand is over, we can quickly check for other reasons. Do these farmers really produce enough products? Are they able to live a life with dignity and earn a good profit from this enterprise?

These questions are indeed difficult to answer. Let us take a look at the the first question - about productivity. There is no doubt that productivity in India is often very low as compared to other countries. Let us take an example, there was a time when many people in my village went for pepper cultivation(they stil do). In the early years return was very good. At the end of each pepper season they used to get a good profit. But after some years prices started to show a declining trend. The reason was indeed an interesting one- Vietnam (not only Vietnam but many other nations also). Yes Vietnam was able to produce the pepper and sell it in international market for much lower price than that of Indina. A small country in SE Asia (whose forests and agricultural lands were devastated by the use of Agent Orange) was eating up the market share of one of the old and profitable item from Kerala.

Another question is about returns. Returns are tightly lined to efficiency- maximum production at lower cost. In a practical scenario we can form the question in this way - How far we are ready/able to use machines in the fields? There is no doubts that the use of machines will eliminate many manual jobs; but it is going to be eliminated anyway, isnt it? If the farm is not profitable for some time, then the reasons tell us that farmers will no longer be in a position to give the salaries to the workers. If we are using machines then the efficiency will be much higher and a good percentage of the people can be absorbed in to this area after some training.In this way they will be able to move up in the value chain and earn more money.So the current productivity/acre is indeed a problem.

Now lets come to the core part of the second question, do these farmers make enough profit? The answer is yes and no,profitability various from products to produts. Many products like rubber people are making enough profits, but many others are not. Let me tell you another example. I still remember the time when we plaed cricket in the rice fields in the summer season, after the harvest but not anymore.Some year back most of the people realised that rice is not profitable any more, so they switched to banana, ginger etc. In the last year when i went to the samw places it was covered with babana leaves. And as we cant eat banana for breakfast, lunch and dinner traders are importing rice from other states.But what will happen when other states also the experience the same? If people are able to generate a rasonable profit from agricultural activity then Wynad and Vidarba may have some different stories to tell.bIf this is the case will we saw that much suicides in Wynand and Viderbha?

The problem is quite complex here. Today I just went to the market and bought one kg of potato at 20Rs/kg. Some two to three days back the the price was around 16Rs/kg. In the case of Onion some months back it sky rocketted to 90 and slowly come back to 80  then to 50 then to 30 and today evening it is 20. Well I am not sure, how much money farmers will get for these potatos and onions. There prices are an indication that these items are in demand and people are paying for it? But the real question is, do the farmers are able to stand in the receiving end of this profit or simply observers?

Now come back to this year's Union budget. One of the new announcement in the budget is "government on Monday announced loans at interest rate of four per cent -- three per cent less than market rate -- for farmers who pay their dues in time and raised the credit target for farm sector by Rs 1 lakh target for the agriculture sector has been increased by Rs one lakh crore to Rs 4,75,000 crore."

Machine aided Farming
1. 300 crore for vegitables, nutri-cerals
2. promotion of edible oil
3. national protein mission
4. accelerated fodder development programme
5. boosting the pulses production
6. 400 crore for second green revolution (in Assam, WB, Orrissa, Bhihar, Jharkhand, Eastern UP, Chattisgarh)
7. 15 more mega foodparks to cut the wastage
8. Removal of bottlenecks in the production and distribution of items like fruits,vegetables, milk, meat paultry and fish.

Apart from this "... To ensure greater cost efficiency and better delivery for both kerosene and fertilizer, the government will move toward direct transfer of cash subsidy for people below poverty line (BPL) in a phased manner," Mukherjee said during his presentation of the Budget 2011-12". Considering the wide spread corruption in India the real question is how much amount will reach in the hands of farmers?

Well it is good to put money on some development scheme, but the condition is we should understand what we are doing. Is there any need for the government to promote adible oil? People will use it, if they want, and edible oil are part of everyone's life like salt.

Its make sense to invest money for a second green revolution. But how far we are investing in research for new seed verities and methods? We went for Green Revolution at a time when India was experencing severe shortage of food items. Do we have to wait for the repeatation of that to happen before investing in research for high performance seed verities? and what is going on in the genetic research sector, is it going anywhere?

Will the creation of 15 more mega food park to cut the wastage is going to work? considering the fact that arond 106.88 mn tonnes of damaged foodgrains are there in the godowns of FCI on January last year? Removing the bottlenecks are good, but how we are going to do it? If the fresh fish and other vegitables can reach gulf markets with in a short time, then why it is a problem for us to keep it fresh, in India?

Indeed Mr Pranab Kumar Mukerjeem, idetified and allocated funds to solve some of the key issues like availability of low interest loans etc. But what we need is a total overhaul of Agricultural sector. We should spend more in Agricultural research sector, introdue machinery in the fields, create the groups of farmers to form agricultural socities, which will be able to negotiate more strongly with wholesalers, cold storage to store and distribute perishable items etc. And please create a good supply chain like that of Wall Mart in FCI, no more damaged food items please - There are hundreads of thousands of people in India who are still not able to get two means a day. The efforts should make the country self sufficient and make a difference in the life of the people.



  1. You started this blog raising some fundamental questions about farming but missed the key point: patterns of land ownership. It all starts here.

    - 116 million farms in India
    - farms are privately owned i.e. effectively "mom and pop" shops
    - in any given area, all farms produce the same product(s), harvest and and take to market at the same time
    - each farm will ultimately be divided when passing it to next generation
    - tendency towards fragmentation and consequent family conflicts over land and water rights

    You mention Vietnam. It went from collective farm ownership in the mid-1950s to private ownership i.e. the collective farm system was dismantled in the mid-1980s and land was allocated back to farmers. This tends to work for 1 or 2 generations and then the fragmentation - and resulting conflict - starts in earnest.

    In China, all farmland is owned by the state and farms are allocated to the farmer based on family size. There is no issue of fragmentation of conflicts over property/ water rights.

  2. I agree with the problem on fragmentation and land ownership.That is why i prefer the method of co-op farming and corporate farming.This will increase the efficiency of land use.

    But is it a good idea that the state will dictate - what? how much? when to farm? In a planned, centralized and commanding economy it may help in regulating the production and distribution. But what i often noticed is that, the productivity is much higher when people work for their own company instead of a state enterprise.

    For example; Here we have mammoth state companies, which once dominated certain sectors - for example telecom. people feared that if this sector was opened to private sector, poor people from the villages will cutoff from the main stream. Instead what happened is these companies penetrated deep in to villages, which were once cutoff from the telecommunication facilities and started providing services at much cheaper rate.

    Even the success story of Amul (milk society) is a wonderful example on how far we can go if we are employing co-op and corporate farming.

    I still believe that the government should act as a platform provider, regulator and engage in policy research and implementation by providing guidelines, leaving the rest to the common people. If there is a demand from the market and enough incentives in engaging then people will go for it.