Last year, around 184 farmer groups came together from Tamil Nadu, Maharashtra, Madhya Pradesh, Uttar Pradesh, Punjab and Telangana to take part in a ‘protest walk’, demanding higher prices for agricultural produce. The protest once again highlighted the plight of farmers and the extent of agrarian distress.

Over the last few weeks, across India the price of potatoes has fallen sharply after a year of bumper production caused many distressed farmers left their produce to rot on the roads, and in cold storage facilities.

What’s the problem?

The agriculture sector is characterised by instability in incomes because of various types of risks involved in production, market and prices.

The National Commission of Farmers (2006), chaired by M.S. Swaminathan, had pointed out that something “very serious and terribly wrong is happening in the countryside.”

• The agriculture growth rates have been unsteady in the recent past. While it was 1.5% in 2012-13, it rose to 5.6% in 2013-14. In 2014-15, the rate dipped to (-) 0.2%, while in 2015-16 it was 0.7%. The provisional estimate puts it at 4.9% in 2016-17. The trend reflects the distress in the agriculture sector.
• The monsoon behaviour has been very erratic and farmers have been facing the problems of severe drought for the past few years.
• Fortunately, there is a bumper crop [unusually large crop growth and harvest] this year, but farmers are not satisfied with the procurement price.
• They are, therefore, unable to repay loans they have taken, both from institutional sources and private moneylenders.
• And without doing so, they will not be eligible for fresh credit for the Rabi [winter] crop. This is one of the reasons why they have been demanding a loan waiver.

Why the crisis?

• The main reason for farm crises is the rising pressure of population on farming and land assets.
• Government data show the average farm size in India is small, at 15 hectare, and since 1970-71, there has been a steady declining trend in land holdings.
• The small and marginal land holdings (less than 2 hectares) account for 72% of land holdings, and this predominance of small operational holdings is a major limitation to reaping the benefits of economies of scale.
• Since small and marginal farmers have little marketable surplus, they are left with low bargaining power and no say over prices.
• Risk because of pests, diseases, shortage of inputs like seeds and irrigation, which could result in low productivity and declining yield; the lower remunerative price; the absence of marketing infrastructure and profiteering by middlemen adds to the financial distress of farmers.
• Also, the predominance of informal sources of credit, mainly through moneylenders, and lack of capital for short term and long term loans have resulted in the absence of stable incomes and profits.
• Farmers face price uncertainties due to fluctuations in demand and supply owing to bumper or poor crop production and speculation and hoarding by traders.
• The costs of farm inputs have increased faster than farm produce prices
• The absence of a robust market for buying and selling forward-looking contracts
• Uncertain policies and regulations such as those of the Agricultural Produce Market Committee, besides low irrigation coverage, drought, flooding and unseasonal rains, are some other factors that hit farmers hard.

Are loan waivers a solution to the agrarian crisis?

Loan waivers, though temporarily necessary for the revival of farming, do not provide conditions for a secure credit system in the long term. Such relief measures that temporarily ease the pain on farmers, however, will fail to make a significant difference to their lives in the long run.

The waiver of loans implies that banks will have to be compensated by the government for the amount involved. This means that large sums of money, which could have otherwise gone to strengthen the agricultural infrastructure and research – such as seed production, soil health enhancement and plant protection, will not be available.

Why is productivity low in a sector that employs nearly half the population?

The share of agriculture in India’s GDP has steadily declined since 1950, when it was nearly 45 percent, to 16 or 17 percent now.

In developing countries like India, agriculture occupies a dominant position in GDP since the secondary and tertiary sectors are not fully developed. As the economy gets diversified with considerable contributions from the secondary and tertiary sectors, particularly IT and service sectors, the share of agriculture has gone down.

Productivity is quite high in irrigated states like Punjab and Haryana, and in other states like coastal Andhra Pradesh or Thanjavur district of Tamil Nadu. In fact, Indian farmers practise multiple cropping (rice-wheat rotation) wherever there is water.

Low productivity is related to higher risk contexts such as droughts and pest epidemics, where farmers don’t invest in inputs like fertilisers.

Will organic farming help in mitigating the crisis?

Organic farming helps to improve soil fertility and avoids the use of pesticides, which get into the food chain. So, biologically and nutritionally organic farming confers many benefits.

The major problem is price support to organic products in order to compensate for the loss in the yield.

As far as the farmer crisis is concerned, it is largely related to economic factors and organic farming can help those farmers who are able to produce high-value organic products for the national and international market.

How can landless farmers receive better protection?

The National Commission on Farmers recommended a major non-farm initiative, on the model of the rural township programme of China. This would involve agriculture-based enterprises such as mushroom cultivation, use of bio-pesticides and fertilisers, apiculture, inland and coastal aquaculture.

This along with the National Rural Employment Guarantee Programme (MGNREGA) can provide social protection to landless farmers.

Special efforts are also being made to promote market-driven skills for rural women who contribute to about 50 percent of the agricultural work, through the involvement of the agricultural universities and the private sector.

Way foward

While the farming sector has its own set of risks, like any other economic activity, to increase and ensure stable flow of income to farmers it is vital to manage and reduce the risks by analysing, categorising and addressing them.

In rainfed areas, water security primarily depends upon rainwater harvesting and the efficient use of the available water through techniques like drip irrigation, and the appropriate choice of farming systems.

Groundwater augmentation and management is an important method of ensuring adequate and timely availability of water for crops. Fortunately, the concept of ‘more crop per drop’ is being promoted by the government.

The government must resolve to address the structural issues and there is a need to give farmers not just a better, but also more stable, return on their crops.