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India’s chronic agri distress led to a change in political flags

December 14, 2018 / 04:08 PM IST

 

Highlights
Farmer woes repeatedly used for political mileage
- Despite productivity uptick, low profitability in agriculture
- eNAM and MSP implementation flawed
- Minimal steps taken for improving storage infrastructure and rural logistics

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Disproportionately high suicides along with migration from rural to urban areas and poor earnings are all indicative of the chronic problems of Indian agriculture sector. The change of flags in the latest elections highlights how deep this issue is. For decades, Indian farmer has been desperate and indebted and his miseries are often used for political mileage. Despite technological advancement in agriculture and uptick in productivity, agriculture has remained devoid of profitability. We analyse a few reasons which have contributed to this.

Low profitability in agriculture – Cultivation costs in the form of inputs like seeds, agrochemicals and irrigation have risen manifold but farm incomes have stagnated or declined. Due to lack of adequate uptick in selling prices of harvest for farmers there is a substantial impact on farm profitability. In abnormal years the farmer is hit due to crop damage and in bumper years the realisations remain low due to crashing prices.

 Weak rural infrastructure and logistics – Weak rural infrastructure and the lack of adequate storage provision remains the major reason for the farmer’s plight and no substantial steps have been taken by the government to address this issue. Due to lack of storage, the farmer is forced to sell his produce right after harvest which leads to crash in prices. This exposes the farmer to exploitation by the middlemen and wealthy traders who have access to private storage spaces. While consumers still continue to pay high prices for crops, the profits do not reach the farmer and are eaten away by the middlemen.

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Rural unemployment – Lack of industrial development and alternate employment opportunities especially in rural areas has led to disguised unemployment where a much higher number of members are involved in cultivation of a land piece than required. Almost 25 percent of the workforce employed in agriculture is surplus, and is in disguised unemployment. This leads to lower per capita incomes in agriculture. This has also led to fragmented and uneconomic land holdings which negatively impact the land productivity.

Lack of adequate credit facilities – Farmers, in general, have little access to the formal credit market, and this gives way to unorganised lenders. Farmers resort to raising funds from their local money lenders, who charge exorbitant interest rates. This in turn forces farmers to sell produce as soon as it is harvested even if it means lower realisations.

Poor implementation of eNAM – While eNAM was a noble initiative from the government which could empower the farmer by providing a country wide platform for the farmer to sell his produce, its implementation has been poor and the project has fallen short of promise. To enable remote buying, commodity grades would have to be set and farmers would have to produce according to those grades. But nothing of that sort has been implemented so far. Without this eNAM is just an electronification of the old methods.

 Flawed implementation of MSP – MSP announcement in the 2018 budget came out as a political stunt, with empty promises and hopes. A flawed system of cost plus 50 percent disturbs the demand supply situation with farmers producing without gauging the demand for a commodity. In addition, the government has not been able to fulfill its MSPs due to inadequate procurement. In majority of states (except rice and wheat) all crops are selling substantially below their proposed MSP prices.

Agri distress is a common theme in the electoral outcome this time. Though the government introduced some policies which could have helped the agri community, but the flawed implementation makes one wonder if it was just a political announcement.

Governments inability to provide adequate storage infrastructure, unequal allocation of water resources between crops, unmanaged imports, weak incentives for allied farm activities, low concentration of high value crops, skewed crop acreages and unjustified margins of middlemen and traders are only a few issues farmers face.

In order to move even substantially towards the target of doubling farm incomes and expanding margins, the government needs to make agriculture profitable and kickstart industrialisation to reduce the number of people who depend on agriculture or the agrarian economy. Short-term eye wash schemes are only myopic solutions and would further aggravate the issue of agrarian distress.

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Ruchi Agrawal
first published: Dec 14, 2018 04:08 pm

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