Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

How to exit farming risk trap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Agriculture reforms to reduce the risk in agriculture in India

Context

The farmers’ protest against farm laws brings into focus the factors afflicting agriculture in India.

Issues of Indian agriculture

  • Some 50 years after the Green Revolution, an all-India agricultural landscape is characterized by relatively low productivity levels that co-exist with high levels of variation in crop yields across our farming districts.
  • Excessive control: Various government agencies have a say on all aspects of the farmer’s livelihood — the latest count includes 13 central and countless state ministries and agencies.
  • These agencies oversee rural property rights, land use, and land ceilings; commodity prices, input subsidies, and taxes, infrastructure, production, credit, marketing and procurement, public distribution, research, education, trade policy, etc.
  • Poor policies: The result has been a mix of arbitrary and conflicting policy interventions by both the central and state government agencies.
  • Poor provision of basic public goods: This, combined with poor and varying levels of provision of basic public goods, including irrigation explains the poor state of Indian agriculture.

Risk-to-return in agriculture

  • The following figures indicate the median (typical) district-level yield (in tonnes-per-hectare) for four major crops — rice, wheat, maize, and cotton — along with the geographic variability of this yield (risk) across all reporting districts for each year from 1966 to 2018.
  • Combining these two values — median district yield and its geographic variability across all farming districts — provides us a measure of the all-India level of risk-to-return, in percentage terms.

Lessons from risk-to-return profile

  • One, the large gap in rice and wheat yields that opened up between Punjab and Haryana and the farm districts in the rest of the country remains far from being closed.
  • Limited mobility of ideas: There is severe unevenness in the provision of common goods across districts — irrigation, roads, power, etc.
  • There is also the absence of well-functioning markets for agricultural land, crops, and inputs, the slow labour reform, and the poor quality of education.
  • These two factors have worked to reduce overall resource mobility within and across our farming districts.
  • Most importantly, they have limited the mobility of ideas and technology needed to increase productivity and reduce the variation of yield across districts.
  • Decentralization failed: As a result of lack of mobility, the real promise of a decentralized system — of experimentation, of learning from each other, and the adoption of best practices and policies — has failed to materialize.
  • Distortion due to subsidies: Various input subsidies and minimum price guarantee procurement schemes provided by the state have worked to worsen the overall levels of productivity and the risk in agriculture, generating adverse effects for all of us, through the degradation of our water resources, soil, health, and climate.
  • At the same time, these policies have tightened the trap our farm households find themselves in.
  • Thus, as is evident in the next chart, outside of rice and wheat, the risk-to-return levels are even higher in the case of maize and cotton, including for Punjab.
  • As a result, the farm households of Punjab and Haryana fear both, the loss of state support for rice and wheat and the higher risks implied by a switch to other crops.

Way forward

  • Minimize risk: The guiding principle for three farm laws must be to create conditions that allow farm households to maximize their income while minimizing the overall level of risk in Indian agriculture.
  • Freedom of choice: Farmers must be made free to determine the best mix of resources, land, inputs, technology, and organizational forms for their farms.
  • More freedom: Farmers, just as entrepreneurs in the non-farm sector, must be allowed to enter and exit agriculture, on their own terms and contract with whomever they wish.
  • Allow entry of corporates: Entry of the large or small private corporates in the Indian agricultural stream will help the Indian farmer, along with the rest of us, move to a low-risk, high-return path of progress.

Conclusion

The more we delay the needed reforms, the more difficult it will prove to be for all of us to extract ourselves out of these risk-laden currents of agriculture.

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