Hard decisions and reforms are needed to improve farm productivity

India ranks among the top three producers of a number of agricultural crops globally. Despite this impressive feat, farm productivity for most crops grown in the country remains strikingly low, often falling below the global average. Thus, India’s average soyabean yield is 1.2 tonnes/hectare which is 58 percent lower than the global average. Similarly, the average maize yield here is 2.7 tonnes/hectare, which is 52 percent lower than the global average. The story is similar in cases of other crops.

Low farm productivity makes farmers vulnerable to market fluctuations. Besides, they fail to produce enough to meet steadily growing market demand and end up with lower incomes. A little wonder that the average monthly income per farmer’s family stood at Rs 10,218 in 2019 (the latest data available) as against Rs 6,214 in 2014. Such low income caps the rural demand for manufactured goods such as chemical fertilisers, tractors, bikes and cars, or FMCG products.

Successive governments have relied on hiking minimum support prices and increased procurement by government or private agencies to boost farmers’ income. Yet, farmers remain dissatisfied in most parts of the country due to low and decreasing profit margins resulting from low crop yields and increased input costs including wages, even though subsidies on chemical fertilisers, electricity and government procurement management have reached unsustainable levels.

Dependence on Subsidies

What’s more worrying is that there is a clear bias towards input subsidies. That leads to lower spending on agricultural research and development (R&D) even though incremental returns from investments in R&D could be 5-10 times higher when it comes to boosting farm productivity.

Yet, to deal with increasing uncertainties due to changing weather patterns, and price and marketing risk, farmers are demanding an extension of the market-distorting system of the minimum support prices (MSPs) and assured procurement – which is currently available for a few crops such as rice, wheat, and sugarcane – to all major crops. However, extending procurement support to all crops in a country as large and diverse as India will be impractical, if not foolish, and worse, fiscally ruinous.

Moreover, that conflicts with any serious attempt to introduce pro-market reforms that could limit the role of government intervention in agriculture and expose it to price or market risks. It is not surprising that the government had to withdraw its 2020 farm reform legislation, given the strong resistance from farm lobbies. These lobbies have also been successful in blocking the Electricity (Amendment) Bill, 2022, which they believe will lead to the end of government subsidies on electricity.

Raising Productivity

Nevertheless, a non-inflationary, and environmentally and fiscally sustainable way to boost the income of Indian farmers is to focus on raising farm productivity which is not only low but varies from region to region due to a combination of factors, including variations in climatic conditions, soil qualities, and farm practices as well as excessive dependence upon monsoon rains. Crops such as rice, sugarcane, and banana can grow well in areas with ample rainfall and humidity while wheat and mustard prefer cooler temperatures and drier conditions. Yet, water-deficient regions such as Marathwada in the state of Maharashtra are promoting the cultivation of cane leading to sub-optimal utilisation of the state’s limited water, and wild swings in crop yields and recoveries.

To address the problem of low farm productivity and crop yields, the following five measures can help:

First, replacing the system of MSP-based procurement with a crop-neutral income scheme will remove the prevalent bias towards wheat and rice, and encourage farmers to cultivate crops suitable to local climatic conditions and demand patterns.

Second, the outlay on input subsidies needs to be pruned down and that for R&D increased to fund the development of high-yielding crop varieties suited to specific regions that can also withstand adverse swings in weather and/or are pest resistant. For instance, the Co 0238 crop variety has helped the cane grower of Uttar Pradesh to significantly improve yields and recoveries. Similarly, Arka Rakshak is a high-yielding hybrid tomato variety which is resistant to a wide range of tomato diseases and is well-suited to the hot and humid growing conditions in southern India. More such crop varieties catering to specific regions and climatic conditions are needed to increase productivity and boost farmers’ income.

Third, agricultural technologies such as precision farming that relies on sensors and drones to monitor soil moisture and pest or disease outbreaks that can affect crop yields have been successfully used by grape farmers in Maharashtra and Karnataka and for mango cultivation in Andhra Pradesh and Telangana. The government can and should incentivise its use in the plantation and horticultural sector to give a boost to farm productivity.

Fourth, bringing urea under a less market-distorting nutrient-based subsidy (NBS) regime will encourage a balanced use of chemical fertilisers, and help improve soil health and in turn crop yields.

Fifth, improved crop yields or better agricultural techniques will not help much if that doesn’t also lead to improved profit margins and in turn, improved income. That calls for sourcing inputs at competitive prices, cutting post-harvest losses to a minimum as well as a clear improvement in the bargaining power of the farmers. Farmers producers organisations (FPO) can play a contributory role as the experience of Maharashtra and Karnataka shows.

Thus, Sahyadri FPC operating in the Western Ghats has been helping small and marginal farmers to source inputs and access bank credit and markets leading to better produce prices and incomes. It has also enabled farmers to adopt sustainable farming practices, leading to better soil health and higher yields. There are many others such as Prayatna in Rajasthan or Sahaja Samruddha in Karnataka that are helping farmers in sourcing quality inputs and improving crop yields. This is a model that needs wider adoption, especially in poorer states such as Bihar and Uttar Pradesh.

Prerna Sharma Singh is a director on the board of Indonomics Consulting Private Limited, a policy research and advisory startup, and heads its agriculture, food and retail practice. She tweets at @AgriFoodRetail. Views are personal, and do not represent the stand of this publication.