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Subject: Agriculture

  • Promotion of nutri-cereals(Millet crop) in India

    Promotion of millet crops serves the dual purpose of securing health and supporting farmers. This article explains the strategy adopted by the government to achieve the same.

    Millet crops in India

    • The three major millet crops currently growing in India are jowar (sorghum), bajra (pearl millet) and ragi (finger millet).
    • India also grows a rich array of bio-genetically diverse and indigenous varieties of “small millets” like kodo, kutki, chenna and sanwa.
    • Major producers include Rajasthan, Andhra Pradesh, Telangana, Karnataka, Tamil Nadu, Maharashtra, Gujarat and Haryana.

    Advantages of millet cultivation

    • Millets are good for the soil, have shorter cultivation cycles and require less cost-intensive cultivation.
    • These unique features make millets suited for and resilient to India’s varied agro-climatic conditions.
    • Millets are not water or input-intensive, making them a sustainable strategy for addressing climate change and building resilient agri-food systems.

    Reasons for decline in millet production in India

    • In the 1960s before the Green Revolution, millets were extensively grown and consumed in India.
    • With the Green Revolution, the focus, rightly so, shifted to food security and high-yielding varieties of wheat and rice.
    • An unintended consequence of this policy was the gradual decline in the production of millets.
    • Millets were increasingly seen as “poor person’s food”.
    • The cost incentives provided via MSPs also favoured a handful of staple grains.

    Health issues related to refined food

    • Along with declining millet production, India saw a jump in consumer demand for ultra-processed and ready-to-eat products, which are high in sodium, sugar, trans-fats and even some carcinogens.
    • This demand was again met by highly-refined grains.
    • With the intense marketing of processed foods, even the rural population started perceiving mill-processed rice and wheat as more aspirational.
    • This has lead us to the double burden of mothers and children suffering from micronutrient deficiencies and the astounding prevalence of diabetes and obesity.

    Strategy for promotion of nutri-cereals

    1) Rebranding the cereals as nutri-cereals

    • The first strategy from a consumption and trade point of view was to re-brand coarse cereals/millets as nutri-cereals.
    • As of 2018-19, millet production had been extended to over 112 districts across 14 states.

    2) Incentive through hiking MSP

    • Second, the government hiked the MSP of nutri-cereals, which came as a big price incentive for farmers.
    • From 2014-15 to 2020 MSPs for ragi has jumped by 113 per cent, by 72 per cent for bajra and by 71 per cent for jowar.
    • MSPs have been calculated so that the farmer is ensured at least a 50 per cent return on their cost of production.

    3) Providing steady markets through inclusion in PDS

    • To provide a steady market for the produce, the Modi government included millets in the public distribution system.

    4) Increasing area, production and yield

    • The Ministry of Agriculture & Farmers’ Welfare is running a Rs 600-crore scheme to increase the area, production and yield of nutri-cereals.
    • With a goal to match the cultivation of nutri-cereals with local topography and natural resources, the government is encouraging farmers to align their local cropping patterns to India’s diverse 127 agro-climatic zones.
    • Provision of seed kits and inputs to farmers, building value chains through Farmer Producer Organisations and supporting the marketability of nutri-cereals are some of the key interventions that have been put in place.

    5) Intersection of agriculture and nutrition

    • The Ministry of Women and Child Development has been working at the intersection of agriculture and nutrition by -1) setting up nutri-gardens, 2) promoting research on the interlinkages between crop diversity and dietary diversity 3) running a behaviour change campaign to generate consumer demand for nutri-cereals.

    Consider the question “What are the reasons for decline in the millet production in India? What are the steps taken by the government to encourage its production?”

    Conclusion

    As the government sets to achieve its agenda of a malnutrition-free India and doubling of farmers’ incomes, the promotion of the production and consumption of nutri-cereals seems to be a policy shift in the right direction.

  • [pib] Market Intervention Scheme

    The Union Cabinet has approved the extension of Market Intervention Scheme (MIS) for apple procurement in Jammu and Kashmir (J&K) for the current season.

    UPSC can ask a question on the difference between MSP and MIP. All the agricultural and horticultural commodities for which Minimum Support Price (MSP) are not fixed and are generally perishable in nature are covered under Market Intervention Scheme (MIS).

    Market Intervention Scheme

    • MIS is a price support mechanism implemented on the request of State Governments for the procurement of perishable and horticultural commodities in the event of a fall in market prices.
    • It is implemented when there is at least a 10% increase in production or a 10% decrease in the ruling rates over the previous normal year.
    • MIS works in a similar fashion to Minimum Support Price based procurement mechanism for food grains but is an ad-hoc mechanism.
    • Its objective is to protect the growers of these horticultural/agricultural commodities from making distress sale in the event of the bumper crop.
    • Under MIS, support can be provided in some years, for a limited but defined period, in specified critical markets and by purchasing specified quantities. The initiative has to emerge from the concerned state.

    Commodities covered

    • The MIS has been implemented in case of commodities like apples, garlic, oranges, grapes, mushrooms, clove, black pepper, pineapple, ginger, red chillies, coriander seed, chicory, onions, potatoes, cabbage, mustard seed, castor seed, copra, palm oil etc.

    Remuneration under MIS

    • MIS provides remunerative prices to the farmers in case of the glut in production and fall in prices.
    • Proposal of MIS is approved on the specific request of State/UT Government, if they are ready to bear 50% loss (25% in case of North-Eastern States), if any, incurred on its implementation.
    • Further, the extent of total amount of loss shared is restricted to 25% of the total procurement value which includes the cost of the commodity procured plus permitted overhead expenses.

    Implementation of MIS

    1) Market Intervention Price (MIP)

    • The Department of Agriculture & Cooperation is implementing the scheme.
    • Under the MIS, a pre-determined quantity at a fixed MIP is procured by NAFED as the Central agency.
    • There are other agencies designated by the state government for a fixed period or till the prices are stabilized above the MIP whichever is earlier.
    • The area of operation is restricted to the concerned state only.

    2) Funds transfer

    • Under MIS, funds are not allocated to the States.
    • Instead, central share of losses as per the guidelines of MIS is released to the State Governments/UTs, for which MIS has been approved, based on specific proposals received from them.

  • [pib] Asafoetida (Heeng) cultivation in Himalayan Region

    Farmers of the remote Lahaul valley in Himachal Pradesh are taking up cultivation of asafoetida (Heeng) to utilize vast expanses of waste land in the cold desert conditions of the region.

    Try this PYQ:
    Q.Which one of the following reflects back more sunlight as compared to other three?
    (a) Sand desert
    (b) Paddy crop land
    (c) Land covered with fresh snow
    (d) Prairie land

    Asafoetida cultivation in India

    • Asafoetida is one of the top condiments and is a high-value spice crop in India.
    • Raw asafoetida is extracted from the fleshy roots of Ferula assafoetida as an oleo-gum resin.
    • Although, there are about 130 species of Ferula found in the world, but only Ferula asafoetidais the economically important species used for the production of asafoetida.

    Why cultivate it?

    • Heeng is not cultivated in India.
    • Government data states that India imports about 1,200 tonnes of raw heeng worth Rs 600 crore from Iran, Afghanistan and Uzbekistan.

    Regions for its cultivation

    • Asafoetida best grows in dry and cold conditions.
    • The plant can withstand a maximum temperature between 35 and 40 degree, whereas during winters, it can survive in temperatures up to minus 4 degree.
    • During extreme weather, the plant can get dormant.
    • Regions with sandy soil, very little moisture and annual rainfall of not more than 200mm are considered conducive for heeng cultivation in India.

  • Farm Bills latest step in sequential freeing up of farm sector

    The recently passed agri bills seek to expand the choices and opportunities available with the farmers and will help in increasing their income.

    Diversified product segment

    • The Minimum Support Price (MSP) evolved as a mechanism to guard farmers against supply and demand shocks in the cereals segment. 
    •  Now, however, farmers and agricultural producers have diversified their product segments, cereals no longer dominate production.
    • In the last decade itself, India has witnessed tremendous change in the GVA composition of the agri-sector.
    • The share of crops has decreased from 65.4% in 2011-12 to 55.3% in 2018-19, projected to further fall to 45.6% in 2024-25.
    •  In the same period, value add of livestock and fishing & aquaculture is steadily increasing, as are the total value outputs of sub-segments like horticulture, milk and meat.
    • With differentiated production strategies that are less reliant on cereals and more on other segments, farmers are accruing better incomes.
    • By diversifying their produce, they are moving away from one-crop risks.

    Government schemes and policies

    • Keeping farmers dependent on subsidies and restricted by APMCs, and acts like the Essential Commodities Act wasn’t in the nation’s long-term interests.
    • Recognising this, the government has been making sequential changes in the system.
    • It started with the introduction of the National Agriculture Market (e-NAM) to facilitate online trading of agri-produce.
    • Then PM-KISAN was introduced to provide minimum income support to nine crore marginal farmers, at Rs 6,000 annually.
    • The KISAN credit card with an allotment of a total of Rs 2 lakh crore credit to maintain larger workforces and implements during harvest season is helping farmers plan and organise their harvests better.
    • The Rs 1 lakh crore Agri Infrastructure Fund as part of Atmanirbhar Bharat Abhiyan will help by the creation of agri-infrastructure.

    Need for structural changes

    • The government recently passed three agri-bills, these are:-
    • 1) The Farmers’ Produce Trade and Commerce Bill.
    • 2) Farmers Agreement on Price Assurance and Farm Services Bill.
    • 3) Essential Commodities (Amendment) Bill.
    • They enable farmers the freedom to diversify their crops and produce, which reduces mono-crop dependence and increases income avenues.
    • They can also now sell their produce anywhere, to the highest bidder across the country.
    • The farmers are no longer are they required to go to the mandis where they are subject to middlemen and layers of bureaucracy.
    • Contract farming enable farmers them to boost the value-add of their products via contracts and assured procurement by the food processing industries.
    • Retaining the MSP system means the government is underwriting the whole network for certain crops to ensure farmers receive assured income for those crops.

    Focusing on the export market

    • The passage of agri bills gives India the long-awaited opportunity to orient its agriculture sector towards export markets.
    • By catering to just the Indian economy, the exposure is hardly $3 trillion ; instead, export-orientation caters to an $82 trillion global economy —a 27x expansion.
    • India’s agri exports in 2018 were at $38.5 billion.
    • India can comfortably triple this by providing infrastructure for grading, sorting, and supply chain distribution.

    Conclusion

    The farm Bills are liberating farmers at a pivotal juncture, the nation and farmers have a generational opportunity here to break out of a 70-year sectoral stagnation and aim bigger.

    Source:-

    https://www.financialexpress.com/opinion/agri-reforms-farm-bills-latest-step-in-sequential-freeing-up-of-farm-sector/2107611/

  • [pib] Rashtriya Kamdhenu Aayog

    Rashtriya Kamdhenu Aayog (RKA) has started a nationwide campaign to celebrate “Kamdhenu Deepawali Abhiyan” this year on the occasion of Deepawali festival.

    Try this PYQ:

    Q.Consider the following statements:

    1. Agricultural soils release nitrogen oxides into the environment.
    2. Cattle release ammonia into the environment.
    3. Poultry industry releases reactive nitrogen compounds into the environment.

    Which of the statements given above is/are correct?

    (a) 1 and 3 only

    (b) 2 and 3 only

    (c) 2 only

    (d) 1, 2 and 3

    Rashtriya Kamdhenu Aayog (RKA)

    • RKA has been constituted by PM for the conservation, protection and development of cows and their progeny and for giving direction to the cattle development programmes.
    • It is a high powered permanent body to formulate policy and to provide direction to the implementation of schemes related to cattle so as to give more emphasis on livelihood generation.

    Why need RKA?

    • Livestock economy sustains nearly 73 million households in rural areas.
    • Even though, the country is the largest producer of milk, the average milk yield in India is only 50% of the world average.
    • The low productivity is largely due to deterioration in genetic stock, poor nutrition and unscientific management.

  • Issues with the MSP in the age of surplus production

    The author analyses the inefficiencies in the MSP regime while comparing it with the sugar sector and the milk sector. The recent agri-reform in the opinion of the author could help to make the Indian agriculture more efficient.

    MSP system Vs. Market-driven system

    • MSP regime was the creation of the era of scarcity in the mid-1960s.
    • Indian agriculture has, since then, turned the corner from scarcity to surplus.
    • In a surplus economy, unless we make agriculture demand-driven, the MSP route can spell financial disaster.
    • This transition is about changing the pricing mix — how much of it should be state-supported and how much market-driven.
    • The new laws are trying to increase the relative role of markets without dismantling the MSP system.
    • Currently, no system is perfect, be it the one based on MSP or that led by the markets, but the MSP system is much more costly and inefficient.
    • The market-led system will be more sustainable provided we can “get the markets right”.

    Issues with the MSP

    • A perusal of the MSP dominated system of rice and wheat shows that the stocks with the government are way above the buffer stock norms.
    • The economic cost (to FCI) of procured rice comes to about Rs 37/kg and that of wheat is around Rs 27/kg.
    • No wonder, market prices of rice and wheat are much lower than the economic cost incurred by the FCI.
    • So, grain stocks with the FCI cannot be exported without a subsidy[i.e. export below the cost], which invites WTO’s objections.
    • The FCI’s burden is touching Rs 3 lakh crore which is not reflected in the Central budget as the FCI is asked to borrow more and more.
    • The FCI can reduce costs if it uses policy instruments like “put options”.

    2 Lessons: from sugarcane and milk pricing

    1) Populism resulted in making sugar industry globally non-competitive

    • In the case of sugarcane, the government announces a “fair and remunerative price” (FRP) [not MSP]to be paid by sugar factories [not paid by the Government].
    • While some states like Uttar Pradesh announces its own “state advised price” (SAP).
    • The sheer populism of SAP has resulted in cane arrears amounting to more than Rs 8,000 crore, with large surpluses of sugar that can’t be exported.
    • This sector has, consequently, become globally non-competitive.
    • Unless sugarcane pricing follows the C Rangarajan Committee’s recommendations the problems of the sugar sector will not go away.

    2) Success story of milk sector

    • In the case of milk co-operatives, pricing is done by the company in consultation with milk federations.
    • It is more in the nature of a contract price.
    • It competes with private companies, be it Nestle, Hatsun or Schreiber Dynamix dairies.
    • The milk sector has been growing at a rate two to three times higher than rice, wheat and sugarcane.
    • Today, India is the largest producer of milk — 187 million tonnes annually.

    So, how the recent reforms will help the farmers

    •  As a result of changes in farm laws in the next three to five years companies will be encouraged to build efficient supply lines somewhat on the lines of milk.
    • These supply lines — be it with farmers producer organisations (FPOs) or through aggregators — will, of course, be created in states where these companies find the right investment climate.
    • These companies will help raise productivity, similar to what has happened in the poultry sector.
    • Milk and poultry don’t have MSP and farmers do not have to go through the mandi system paying high commissions, market fees and cess.

    Conclusion

    The pricing system has its limits in raising farmers’ incomes. More sustainable solutions lie in augmenting productivity, diversifying to high-value crops, and shifting people out of agriculture to high productivity jobs elsewhere, the recent reforms are the steps in this direction.

    Back2Basic: What is MSP

    • Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.
    • The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
    • The minimum support prices are a guarantee price for their produce from the Government.
    • The major objectives are to support the farmers from distress sales and to procure food grains for public distribution.
    • In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price.

    What are ‘put options’

    • Put options give holders of the option the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time frame.
    • Put options are available on a wide range of assets, including stocks, indexes, commodities, and currencies.
    • Put option prices are impacted by changes in the price of the underlying asset, the option strike price, time decay, interest rates, and volatility.
    • Put options increase in value as the underlying asset falls in price, as volatility of the underlying asset price increases, and as interest rates decline.
    • They lose value as the underlying asset increases in price, as volatility of the underlying asset price decreases, as interest rates rise, and as the time to expiration nears.

     

  • [pib] Kasturi Cotton

    Now India’s premium Cotton would be known as ‘Kasturi Cotton’ in the world cotton trade.

    Kasturi Cotton

    • It is the first-ever Brand and Logo for Indian Cotton on Second World Cotton Day.
    • The Kasturi Cotton brand will represent Whiteness, Brightness, Softness, Purity, Luster, Uniqueness and Indianness.

    Do you know?

    1. Cotton is one of the principal commercial crops of India and it provides livelihood to about 6.00 million cotton farmers.
    2. India is the 2nd largest cotton producer and the largest consumer of cotton in the world.
    3. India produces about 6.00 Million tons of cotton every year which is about 23% of the world cotton.
    4. India produces about 51% of the total organic cotton production of the world, which demonstrates India’s effort towards sustainability.

  • Lessons from Bihar’s abolition of its APMC system for farmers

    The article analyses the results of complete abolition of APMC in Bihar in the context of current protest against the agri bills.

    Context

    • Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 has been a source of anger among farmers.
    • By allowing unregulated trading areas beyond APMC mandis, the law seeks to remove intermediaries from agricultural trade and raise price realization for farmers.

    Excessive politicization of APMCs

    • APMC’s excessive politicization has resulted in cartelization and price-fixing.
    • For this reason, there have been several attempts at reforming their functioning.
    • Easier licensing norms, the removal of entry and exit barriers and computerization and transparency have been introduced in most APMC markets.
    • However, the Bihar government decided to abolish the APMC system altogether in 2006.

    Analysing the impact of abolition of APMC in Bihar

    • It was hoped that abolition would ensure better prices for farmers of the state and attract large sums of private investment.
    • Before their abolition, Bihar had 95 market yards, of which 54 had infrastructure such as covered yards, godowns and administrative buildings, weighbridges, and processing as well as grading units.
    •  With no revenue to maintain it, that infrastructure is now in a dilapidated condition.
    •  A study by the National Council for Applied Economic Research reported increased volatility in grain prices after 2006.
    • Most of the farmers surveyed reported high storage costs at private warehouses.
    • Farmers this year in Bihar received lower price for maize compared to the farmers in states with APMC.

    Lessons from Bihar

    • The Bihar experiment has important lessons for future marketing reforms in agriculture.
    • The benefits of these reforms will only accrue to farmers if they are accompanied by private investment in creating the physical infrastructure and institutional mechanisms needed to allow for greater participation of farmers.
    • The record of states on attracting private investment isn’t much better.

    Conclusion

    By only attempting to shift trade away from APMC to non-APMC areas, without a regulatory framework, the new law is unlikely to ensure better price realization for farmers.

  • Explained: How is MSP fixed?

    The recently enacted Farmers bill seeks to dismantle the monopoly of APMC mandis, thereby allowing sale and purchase of crops outside these state government-regulated market yards. This has prompted many fears regarding the continuance of the existing minimum support price (MSP)-based procurement regime.

    Try this PYQ:

    Q.There is also a point of view that agriculture produce market committees (APMCs) set up under the state acts have not only impeded the development of agriculture but also have been the cause of food inflation in India. Critically examine. (UPSC 2014)

    What does the law say about MSP?

    • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill does not give any statutory backing to MSP.
    • There is not even a single mention of either “MSP” or “procurement” in the Bill passed by both Houses of Parliament last week.

    Is there any legal backing for MSP?

    • MSP, by contrast, is devoid of any legal backing. Access to it, unlike subsidised grains through the PDS, isn’t an entitlement for farmers.
    • They cannot demand it as a matter of right.

    What is the basis of MSP then?

    • It is only a government policy that is part of administrative decision-making.
    • The government declares MSPs for crops, but there’s no law mandating their implementation.
    • The Centre currently fixes MSPs for 23 farm commodities based on the Commission for Agricultural Costs and Prices (CACP) recommendations:
    1. 7 cereals (paddy, wheat, maize, bajra, jowar, ragi and barley)
    2. 5 pulses (chana, arhar/tur, urad, moong and masur)
    3. 7 oilseeds (rapeseed-mustard, groundnut, soyabean, sunflower, sesamum, safflower and nigerseed) and
    4. 4 commercial crops (cotton, sugarcane, copra and raw jute) —

    What about CACP?

    • The CACP come to existence in 1965 and MSPs are being announced since the time of the Green Revolution, starting with wheat in 1966-67.
    • The CACP is simply an attached office of the Ministry of Agriculture and Farmers Welfare.
    • It can recommend MSPs, but the decision on fixing (or even not fixing) and enforcement rest finally with the government.
    • The government can procure at the MSPs if it wants to. There is no legal compulsion. Nor can it force others (private traders, organised retailers, processors or exporters) to pay.

    Exceptions to MSP: Fair and remunerative price (FRP)

    • The only crop where MSP payment has some statutory element is sugarcane.
    • This is due to its pricing being governed by the Sugarcane (Control) Order, 1966 issued under the Essential Commodities Act.
    • That order, in turn, provides for the fixation of an FRP for cane during every sugar year (October-September).
    • But even the FRP — which, incidentally, was until 2008-09 called the ‘statutory minimum price’ or SMP — is payable not by the government.
    • The responsibility to make FRP payment to farmers within 14 days of cane purchase lies solely with the sugar mills.

    Has there been any move to give MSP legislative backing?

    • The CACP, in its price policy report for the 2018-19 Kharif marketing season, had suggested enactment of legislation conferring on farmers ‘The Right to Sell at MSP’.
    • This, it felt, was necessary “to instil confidence among farmers for procurement of their produce”. That advice, predictably, wasn’t accepted.

    A cause for farmers fury

    • The ongoing farmer protests essentially reflect a loss of that very confidence.
    • Is the dismantling of the monopoly of APMC mandis in wholesale trading of farm produce the first step at ending even the present MSP-based procurement programme, largely limited to wheat and paddy?
    • If APMCs were to turn unviable due to the trades moving outside, how will government agencies undertake procurement that now takes place in mandis?
    • These questions are playing in the minds of farmers, particularly in states such as Punjab, Haryana and MP that have well-established systems of governmental MSP purchases.
    • For them, freedom to sell to anyone, anywhere and anytime has little value compared to the comfort of assured procurement at MSP.

    Govt’s response

    • PM has tweeted that the “system of MSP will remain” and “government procurement will continue”.
    • The Agriculture Minister, too, has pointed out that past governments never thought it necessary to introduce a law for MSP.

  • Explained: How remunerative is farming in India?

    The government’s push to reform India’s agriculture sector has divided opinions and triggered a debate about the state of Indian agriculture.

    Try this PYQ:

    Q.In view of the declining average size of land holdings in India which has made agriculture nonviable for a majority of farmers, should contract farming and land leasing be promoted in agriculture? Critically evaluate the pros and cons. (UPSC 2015)

    Features of Indian Agriculture

    In the context of this debate, two long-standing characteristics of Indian agriculture are noteworthy:

    1. Indian agriculture is highly unremunerative
    2. It has been heavily regulated by the government and protected from the free play of market forces

    Why are the new legislation introduced?

    • According to the government, the new Bills passed by Parliament attempt to make it easier for farmers to sell to and produce for the private sector.
    • The hope is that liberalizing the sector and allowing greater play for market forces will make Indian agriculture more efficient and more remunerative for the farmers.
    • In this context, it is important to understand some of the basics of Indian agriculture.

    Basics of Indian agriculture

    (1) Workforce engaged

    • At the time of Independence, about 70% of India’s workforce (a little less than 100 million) was employed in the agriculture sector.
    • Even at that time, agriculture and allied activities accounted for around 54% of India’s national income.
    • Over the years, agriculture’s contribution to national output declined sharply. As of 2019-20, it was less than 17% (in gross value added terms).
    • And yet, the proportion of Indians engaged in agriculture has fallen from 70% to just 55% (Chart 1).
    • As the Committee on Doubling Farmers’ Income (2017) observes, “the dependence of the rural workforce on agriculture for employment has not declined in proportion to the falling contribution of agriculture to GDP”.

    (2) Land holdings

    • While the number of people dependent on agriculture has been burgeoning over the years, the average size of landholdings has become reduced sharply — even to the extent of being unviable for efficient production.
    • Data shows that 86% of all landholdings in India are small (between 1 and 2 hectares) and marginal (less than 1 hectare — roughly half a football field).
    • The average size among marginal holdings is just 0.37 ha which hardly provides enough income to stay above the poverty line.

    (3) Debts

    • The combined result of several such inefficiencies is that most Indian farmers are heavily indebted (Chart 2).
    • The data shows that 40% of the 24 lakh households that operate on landholdings smaller than 0.01 ha are indebted. The average amount is Rs 31,000.
    • A good reason why such a high proportion of farmers is so indebted is that Indian agriculture — for the most part — is unremunerative.
    • Chart 3 provides the monthly income estimates for an agriculture household in four very different states as well as the all-India number.
    • Some of the most populous states like Bihar, West Bengal and Uttar Pradesh have very low levels of income and very high proportions of indebtedness.

    (4) Buying & selling

    • Another way of understanding the plight of the farmers relative to the rest of the economy is to look at the Terms of Trade between farmers and non-farmers.
    • Terms of Trade is the ratio between the prices paid by the farmers for their inputs and the prices received by the farmers for their output.
    • As such, 100 is the benchmark. If the ToT is less than 100, it means farmers are worse off.
    • As Chart 4 shows, ToT rapidly improved between 2004-05 and 2010-11 to breach the 100-mark but since then it has worsened for farmers.

    (5) MSP

    • A key variable in the debate is the role of minimum support prices. Many protesters fear governments will roll back the system of MSPs.
    • MSPs provide “guaranteed prices” and an “assured market” to farmers, and save them from price fluctuations. This is crucial because most farmers are not adequately informed.
    • But although MSPs are announced for around 23 crops, actual procurement happens for very few crops such as wheat and rice.
    • Moreover, the percentage of procurement varies sharply across states (Chart 5). As a result, actual market prices — what the farmers get — are often below MSPs.