Some Reassuring Tweaks

Context: Government should set up a few institutions, like a contract farming regulator, to allay farmers’ fears.

Issues with Agriculture Sector:

• Low Income: Small and marginal farmers account for 85% of all farmers and contribute 51% of the agriculture output but still have poor incomes and even get crowded out of benefits.
  • Per capita agricultural GDP was at ?45,000 while non-agricultural was ?2.48 lakh in FY2020.
• Regional Disparity: Average agricultural income in Punjab at ?2.8 lakh per annum, is 1.1 times higher than per capita non-agricultural income and six times higher than India’s per capita agricultural GDP.
  • West Bengal and UP, top producers of rice and wheat respectively, have the lowest average procurement and usage of warehouse capacity (12%) by Food Corporation of India.
• Exposure to the competition: Shift towards consumer-driven markets means the small farmer will increasingly compete in domestic and foreign markets.
• Agricultural Loans under stress: Due to factors like crop losses, unremunerative prices, debt waivers and rigidity in Kisan Credit Card scheme, agricultural loans are coming under stress.
• Unsustained successes in contract farming: Large firms initially attract small growers by offering them favourable conditions, but later ‘tighten’ these conditions.

Way Forward:

• A contract farming regulator: to provide small and marginal farmers with the power to deal with large buyers and make contract farming sustainable.
  • E.g. in Malaysia, the Federal Land Development Authority was set up to manage contract farming made Malaysia most successful nation in South Asia.
• Revamping Kisan Credit Card: Bring operational flexibility in KCC structure such as a mix of revolving credit and term loan and loans to agricultural start-ups and dairy farming to boost supply chains.
• Quantity Guarantee instead of MSP for a limited period: Procurement to production percentage of procured crops should at least be equal to the previous year’s percentage, ensuring assured market.
  • Safeguards during exceptional events, push farmers to sell outside APMCs to avail higher prices.
• Strengthen the Agriculture Produce and Marketing Committee (APMC) infrastructure: to reduce losses for food grains which are up to 16% (lower than often quoted at 40%)