How to exit farming risk trap

Context: The recent farmer agitations against the entry of the corporates in farming makes the entry of the private sector unwilling. The day private firms show a greater willingness to enter agriculture, the Indian farmer will move to a low-risk, high return path.

Issues with Indian agriculture

• Arbitrary and conflicting political interventions by both the state and Central government:
  • There are 13 central and countless state ministries and agencies that 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 and extension services; trade policy; agri-business and research.
  • We have bought “food security” at the cost of an agricultural sector that threatens all of us — farmers, households, consumers, traders, firms, and the state — with lower levels of individual welfare and higher levels of overall risk.
• Large inter-state gaps in crop yields: Rice and wheat yields in Punjab and Haryana have been significantly higher than in the rest of the country, even after five decades after the Green Revolution took root in these two states.
• Severe unevenness in the provision of common goods across districts: Including irrigation, roads, power, etc. 
  • Combined with the absence of well-functioning markets for agricultural land, crops, and inputs,
  •  Slow, if any, progress achieved on labour reform and the poor quality of education has worked to reduce overall resource mobility within and across our farming districts. 
  • This has limited the mobility of ideas and technology needed to increase productivity and reduce the variation of yield across districts.
• Failure of decentralisation: Instead, Indian agriculture since Independence has remained a highly fragmented effort. We seem to have a different “agricultural model” for each of the 734 farming districts in the country.
  • Issues with subsidies: Subsidies 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 - outside of rice and wheat, the risk-to-return levels are even higher in the case of maize and cotton, including for Punjab.
  • Thus, 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:

• Allowing for greater mobility of farmers: Within a true decentralised polity, a farmer in Assam ought to benefit as much from the “Punjab model” as do farmers in Punjab, and vice-versa.
• Guiding principle of the farm laws should be to maximise the income and minimising the risks:
  • Farmers must be made free to determine the best mix of resources, land, inputs, technology, and organisational forms for their farms. 
  • 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.
  • Allowing the private sector will lead to a low-risk, high return path of progress.