Farmer agitations point to a deeper problem in our agricultural system

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By Prakash Bakshi

With loan waivers granted on Sunday to farmers in Maharashtra, and to farmers in Uttar Pradesh in April, Madhya Pradesh’s agriculturalists continue to demand waivers and the revision of the minimum support price even after protesting farmers in Mandsaur were shot dead by the police. While such turmoil appears to have immediate causes, their sources are rooted in problems that lie deeper.

Today’s level of food grain production is around 260 million tonnes, more than double than that 45 years ago. This may create the impression that agriculture in India has become quite profitable. A closer look points to a worrying landscape. A critical threat to this production level — and agricultural income — comes from continued fragmentation of agricultural holdings. In 1970-71, there were 70 million holdings or farms operating across 160 million hectares of land. 49 million of these farms were small and marginal farms (SFMF), operating on land up to 2 hectares. They comprised 70% of total farms, but only 20% of the aggregate operated area was cultivated.

By 2010-11, the number of farms had almost doubled to 138 million. The number of SFMF had, however, swelled to 117 million — 85% of operating farms. Now, cultivated land was 44% of the operated area. We are now adding almost 10 million SFMFs to the agricultural system every five years. Projecting this trend, we will have 186 million farms by 2040. The average farm will then be smaller than even a hectare.

Farming Out
Among these 186 million farms, SFMFs will increase from 117 million in 2011to 166 million, comprising 89% of total farms. They will cultivate almost 60% of the aggregate operated area, as compared to 44% in 2011and 20% in 1971. SFMFs will have an average holding size of just 0.6 hectare or 1.5 acres. 70%, or 131 million, would be marginal farms operating an average of just 0.4 hectare or an acre of land. This will have three major impacts on agriculture:

1. With ever decreasing farm size, most SFMFs won’t be able to own and maintain bullocks, farm equipment, or an irrigation system. They will have to depend on the larger farms to hire these. But the number of even these farms is shrinking, thus making every stage of agricultural production on SFMFs more uncertain, impacting yields negatively.

2. The input requirement of an SFMF is very small. This, ironically, reduces its bargaining power. The suppliers of inputs like electricity, extensions, or bank loans also find their supply costs multiplying when supplying to an increasing number of SMFS. Meanwhile, the total input quantity actually remains the same, as the aggregate operated area remains almost same. The result is that the landed input cost on the SFMF increases significantly.

3. The individual output of an SFMF is too small to reap the benefit of markets. This forces the farmer to sell his produce on the farm itself at discounted prices, thus reducing his revenue and income.

Agriculture on SFMFs, therefore, becomes increasingly less profitable. With incomes shrinking, when SFMF farmers are projected to operate over 60% of the operated area in 2040, the entire agricultural system could fall into a severe crisis. Most states don’t allow leasing of agricultural land. So, the small farmer remains marooned on his low income farm and can’t even move in search of an alternative income.

Social Implications
The social implications on farmer families facing such a scenario are immense. The agitations in various states, including Madhya Pradesh, are only indicators of this structural crisis. So what is the solution?

India must urgently rethink its agricultural land lease policy. It should ensure that land tenancy laws are immediately transformed, allowing farmers to lease out their land even for long periods without the fear of losing ownership. Easy-to-use administrative mechanisms can be used to restore the land to the owner on termination of the tenancy.

Linking land records to Aadhaar could make such mechanisms transparent and easy to administer. Once land leasing is made legal and systems easily enforceable, enterprising farmers would ‘lease in’ to make their ‘operational’ holdings larger and bring in scale economies, with the owners of the land having the comfort of retaining their land.

Also, a well thought-out programme providing alternative skills and employment to those who will no longer be active in agriculture, even if temporarily, must be chalked out. Agriculture cannot — and will never be able to — provide enough employment and sustenance to the increasing rural population. Suitable employment will have to be found for a large portion of the rural population outside agriculture.

A more definitive correction would be to ensure that farm land does not get fragmented below a certain viable minimum. The next step would have to be a change in inheritance laws, making agricultural land to be inherited by only one descendant, and not fragmented among all the siblings.

The writer is former chairman, National Bank for Agriculture and Rural Development (Nabard)

Source: Economic Times (blog)

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