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Economics agriculture project Economics agriculture project Document Transcript

  • Group MembersDHRM STUDENTS:-Anita ChopraRanjana DungariaTanaz BhesaniaPrarthana AkmanchiDFM STUDENTS:-Mitali ShahManasi Jadhav
  • Agricultural and Rural Development inIndia: A RejoinderIntroduction:- The primary focus of the present article is agricultural and rural development in India, as thetitle suggests. The article has attempted to address issues related to agricultural development, foodsecurity, poverty reduction and livelihoods generation. Keeping an area as huge as this at the center-stage of policy debates and discussion is important since a vast majority derives their livelihoods fromagriculture, and they reside in rural India. The author has touched upon various issues related toagricultural development, which include: a. Labour market in India; b. Political economy of Indianagriculture; c. Indian agriculture before and after liberalization; d. The rural farm economy; e. Agrariancrisis and ‗liberal‘ policies; f. Farmers‘ suicides and its causes; g. Sustainability of Indian agriculture;h. Recent policy measures; i. Rural livelihoods and social audits; j. Agricultural R&D; k. Right todevelopment; and, l. PDS, poverty and hunger in India. A thorough discussion from a historicalcontext along with necessary data analysis has been done to understand the reality, as it exists. Adetailed review of literature has been deemed necessary to understand the problematic .a. Labour Market in India:- ―…A free labour is one who is able to accept or reject the conditions and wages offered by theemployer. If he wishes, he may refrain altogether from working. Once having taken the job, he can decide togive notice and quit. Economic stringency may indeed compel a free labour to agree temporarily to terms hedoes not consider favourable. But his basic right to refuse work or to seek alternative employment remainsuncompromised…‖ ―…An unfree, or bond(ed) labour, by contrast, is one whose bargaining power is virtually non-existent,or has been surrendered. Such a labourer does not possess the right or has yielded the right to refuse to workunder the terms set by his master. Through customs, compulsions, or specific obligation, the bond(ed) laboureris tied to his master‘s needs. He can neither quit not take up work for another master without first receivingpermission…‖ --Daniel Thorner (1962): Employer Labour Relationships in Agriculture, in Land and Labour inIndia by Daniel and Alice Thorner. Studies on the labour market institutions, on the dynamic relationship between market forcesand market institutions, show that transactions interlocking labour, credit, land lease etc. are commoninstruments for not just reducing weather and market risks but also for land owners gaining marketcontrol through exercise of extra-economic coercion. There are three different schools, namely-theneo-classical school, the Marxian school and the neo-institutional school, who have their ownapproaches towards understanding the formation of wage labour market, labour wages and formationof other contractual arrangements involving labour. A chief phenomenon characterising exchangethat has been noted widely is what is termed as ‗interlinked markets‘ or interlocking of factor andcommodity markets. A dominant party conjointly exploits the weaker party in two or more markets byinterlinking the terms of contracts, according to the Marxian approach. The weaker party loses theoption to exercise in other markets, where his free entry is already pre-empted or terms ofparticipation pre-determined. The power of the dominant party to exploit in such interlinked markets ismuch more than in markets taken separately. PAGE 1
  • Agricultural labour constituted around 27% of the total number of workers (main plus marginal),according to the Census 2001. Almost 12.86% pf agriculture labour originated from Andhra Pradesh.Between 1964-65 and 1974-75, the flush period of India‘s Green Revolution, the number of primarilywage-dependent rural households with little or no land nearly doubled from 18 million to 25 million.The upsurge in ruralproletarianisation has arisen from a combination of three factors: a. rapidpopulation growth on a slower growing land-and-water base; b. agrarian structural changessimultaneously with population growth; and c. the push and pull effects of the increasing regionaldisparities, working through displacement and labour-market influx of the formerly self-employed.Agricultural labour is not the creation of the British economic policies alone as it has been inexistence since the inception of the caste-system. British colonial policies aggravated the problem ofland alienation to such an extent that during their rule a noticeable class of proletarian labour wasformed, whose characteristics differed from the past. In almost all regions of the country, the lowercaste agricultural labourers operated within the framework of the jajmanisystem (NCRL, 1991)1. Thepeasantry itself was highly stratified and some segments were subjected to various economic andextra-economic constraints. Angus Maddison (1971)2 found that of the total labour force in MoghulIndia, 72 percent was in the rural economy, and majority of them were landless labourers. IrfanHabib(1984)3 found that the size of the labour force would have been 20-25 percent of the total ruralpopulation. Dharma Kumar (1965)4, however, found that agricultural labour would have formedroughly around 10-15% of the entire population and 17-25% of the agricultural population of theMadras Presidency during 1800. Tom Brass (1999)5 explains that during the period 1870-1940, landholders in the area ofUnited Punjab (which includes Haryana) utilized four kinds of labour, namely, sepidars, peasantsmallholders, sirisand casual workers. All these categories of labour suffered some degree ofeconomic unfreedom. During the 1970s and 1980s, there was immigration of cheap migrant labourersfrom Bihar and Uttar Pradesh in Punjab. Labour contractors recruited tribals from North Bihar andtransported them to Punjab. Migration of rural labourers has been a feature of the Indian economy formore than a 100 years; till Independence, the British economic policy and the process of unevendevelopment influenced its character and pattern. While better employment opportunities and higherwages in economically developed regions (pull factors) attract labour, non-availability of employmentopportunities and consequent economic hardships in the underdeveloped regions act as push factorsin the migration process. Middlemen or jobbers (i.e. labour contractors) are called by different namesin the country, namely: ardas, mistry, mukddam, thekedars, lambardars etc. Workers in theunorganized sector, including migrant labourers, are denied minimum wages and female workers getlesser wages than male workers. Rural labour constitutes the most marginalized section of the Indian society. It benefited theleast during the last 60 years of development, which happened under the Indian five years planning.Dependence of rural agricultural labour on big landowners and moneylenders for consumption creditquite often results in bondage. Bonded or forced labour are called by different names in various partsof India, for e.g. gothi, vethi or bhagola in Andhra Pradesh, kamiyain Bihar, jeetha in Karnataka, haliin Rajasthan, vet or beggar in Maharastra. Rural labour markets are segmented and segmentationcould be based on gender, race or caste. Such labour market segmentation leads to differential wagerates and immobility of labour from one occupation into another (Lal, 1984) 6. The fragmentation of the PAGE 2
  • Indian labour market is considerably reinforced by caste or community identity at the local level(Rodgers, 1993)7. Wage payment system is not the only system as there can be existence of alternativecontractual arrangements like sharecropping, attached laboour system and bonded labour system.The issue of unfreedom has been expressed in the form of credit-labour linkage i.e. perpetualindebtedness of the labourers. Under the neo-institutional economic framework, inter linkages (orinterlocking) arise as a result of imperfections like uncertainty, asymmetry of information, absentmarkets or transaction cost. Within the Marxian framework,interlocked markets represent differentmodes of exploitation. The existence of a certain type of contractual arrangement is within a historicalcontext, and not based merely on rational choice.Young girls, below the age of 15 years, bear the brunt of poverty-induced child labour. Almost 86.4per cent of employed Indian women live with their families on less than US$ 2 per person per day, ascompared to 81.4 per cent of employed men (ILO, 2009)8. According to the NCEUS (2007), Reporton Conditions of Work and Promotion of Livelihoods in the Unorganised Sector: Agricultural labourers, estimated at 87 million in 2004-05, constituted 34 per cent of about 253 million agricultural workers i.e., farmers and agricultural labourers. The unemployment rate for agricultural labourers by the CDS (current daily status) is quite high in rural areas by any standard; 16 per cent for males and 17 per cent for females. The underemployment of usual status agricultural labourers by CDS rates increased during the decade 1993/94-2004/05. In fact, the CDS unemployment rate was exceptionally high at 16 per cent in 2004-05. Overall, wage levels of agricultural labourers have been very low and their growth rates decelerated through the decade 1993/94-2004/05. The Minimum Wages Act, 1948 is the only statutory legislation, which ensures minimum wages to agricultural workers. In 2004-05, about 91 per cent of the agricultural labourmandays received wage rates below the National Minimum Wage and about 64 per cent below the NCRL minimum wage norm in rural areas. The total number of agricultural workers in India has been estimated at 259 million as of 2004-05. They form 57 per cent of the workers in the total workforce. About 249 million of them are in rural areas and that works out to be 73 per cent of the total rural workforce of 343 million. Their share in total rural unorganised sector employment is 96 per cent while in unorganized agricultural sector it is 98 per cent. Nearly two-thirds of the agricultural workers (64 per cent) are self-employed, or farmers as we call them, and the remaining, a little over one-third (36 per cent), wageworkers. Almost all these wage workers (98 per cent) are casual labourers. Agricultural workers constituted 56.6 per cent of the total workers in 2004-05, down from 68.6 per cent in 1983. In rural areas, agricultural workers constituted 72.6 per cent of the total workers in 2004-05, down from 81.6 per cent in 1983. Farmers form a major share within the agricultural workforce though there has been a gradual decline in their percentage from 63.5 in 1983 to 57.8 in 1999-00. Between 1999-00 and 2004-05, the percentage of cultivators increased to 64.2, the highest level achieved in 15 years A comparison of employment growth rates between 1983/1993-94 and 1993-94/2004- 05 shows that the growth rate of agricultural employment decelerated sharply in the last decade, from 1.4 to 0.8 per cent. Although the growth of total employment also declined PAGE 3
  • from 2.1 per cent during 1983/1993-94 to 1.9 per cent during 1993-94/2004-05, this deceleration was clearly not so sharp. The proportion of households with no land possessed increased from 13 per cent in 1993-94 to 14.5 percent in 2004-05. The share of landlessness among the agricultural labourers was 19.7 per cent in 2004-05. More than 60 per cent of the agricultural labourers had sub-marginal holdings up to 0.4 hectares and that remained more or less constant over the period. Landlessness or small size of holdings forces the workers to engage as labourers to maintain their subsistence levels.b. Political economy of Indian agriculture:- Boudhayan Chattopadhyay (1991)9 finds: ―…In more than one sense, the depression anddeflation in 1929-33 was the overture to the funeral march of the Bengal peasant, fisherman and theartisan, of which the denouement was inflationary war economy of the 1942-44, with its toll of the 3million plus dead…‖ During the colonial rule until the First World War, surplus was extracted from agriculture, whichwas partly transferred to the home economy, partly invested in the military and bureaucraticmachinery to sustain, and partly to strengthen the sources of revenue through public investments inrailways, canals etc (Patnaik, 1984)10. He explains that in an underdeveloped economy, the ‗potentialeconomic surplus‘ (using Paul Baran‘s concept) is used not for productive investment but forconspicuous consumption, unproductive investment, or is simply siphoned off abroad as tribute,dividends or remittances. The zamindari system adopted in some parts of Bengal gave rise to theclass of moneylenders, traders and absentee landlords, which prevented productive investment inagriculture, unlike the case of ryotwariareas in Punjab. Commercialization of Indian agriculture duringthe British rule, comprised of two different processes: a. a shift in the agrarian economy fromproduction for consumption to production for market; and b. land started acquiring the features ofcommodity, which could be bought and sold. Demand for raw materials in order to sustain theIndustrial Revolution compelled the Indian peasantry to shift to crops that had better market value.The process of de-industrialization started since the Indian goods manufactured by the artisans couldnot compete with the cheap machine-made goods imported from England. Prior to Independence, Indian agriculture suffered from what Daniel Thorner termed as ‗built-indepressors‘. Big landlords used to extract huge rents during the days of zamindari. AfterIndependence, the Nehru-Mahalanobis Plan placed more emphasis on industrialization by treatingagriculture as ‗bargain basement‘. However, a decisive shift in agricultural policy happened after thedemise of Nehru. Agriculture became the focal point of State intervention under Agriculture MinisterMr. C Subramaniam. The miracle technologies of Green Revolution, which was backed by inputsubsidies helped the rich peasants at the expense of small and marginal farmers. The rich peasantryclass gained wealth and political powers overtime. Farmers‘ movements led by the rich farmersattracted the small and marginal farmers. Such movements demanded for higher agricultural pricesand greater subsidies from the State. The HYV (high-yielding varieties) package necessitated moreexpensive seeds, greater amount of controlled water (irrigation) and chemical fertilizers, and hence,there was demand for more subsidies. Because of the presence of Mr. Charan Singh in power during1977, farmers‘ voice directly entered the highest strata of policy formulation. The ‗new‘ agrarianmovement during the decades of 1970s and 1980s was not revolutionary but reformist in nature sinceit relied more on pressuring the State for remunerative prices, loan waivers and a better rural-urbanbalance in resource allocation instead of land and tenancy reforms in favour of small and marginalfarmers and landless labourers. Post Manda land Mandir, India saw divisions in the name of casteand class among the farming community that affected farmers‘ movements. Presently, agrarianinterest is much more marginalized in the national policy agenda. Reforms of the 1990s and shift ineconomic priorities of the Indian government led to stagnation in agriculture and more hardships for PAGE 4
  • farmers (Posani 2009)11. According to Patnaik (2003)12, the decade of 1990s not only saw a steadydecline in the level of per capita food availability at the national-level, the absolute amount of percapita food availability during the year 2002-03 was even lower than during the years of the SecondWorld War-years when the terrible Bengal famine took place.c. Indian agriculture before and after liberalization:- There are 4 ways in which better agricultural productivity and output can contribute to aneconomy‘s development: a. by supplying foodstuffs and raw material to other expanding sectors ofthe economy; b. by providing an ‗investible surplus‘ of savings and taxes to support investment inother expanding sectors; c. by selling for cash a ‗marketable surplus‘ that will raise the demand of therural population for products of other expanding sectors; and d. by relaxing the foreign exchangeconstraint by earning foreign exchange through exports or by saving foreign exchange through importsubstitution. Before the liberalization of the Indian economy, exports and imports were controlled throughlicensing, quantitative restrictions and canalizing (by state trading boards). There were controls onexports and imports: a. for maintaining stability in domestic prices; b. to help both producers andconsumers; c. to ensure food security; d. to maintain sound balance-of-payments; e. exportables andimportables acted as wage goods or inputs for wage goods. Since majority of the poors‘ income werenot index-linked, so it was necessary to keep the prices of the agricultural goods lower; and f. toprotect and become self-reliant in production of oilseeds and sugar during the 1980s. India went fortrade liberalization for a number of reasons: a. to move domestic prices closer to international prices;b. due to comparative advantage in foodgrains production, India would gain; c. agriculture was nettaxed due to high effective rate of protection being given to the industrial sector; agricultural productswere not allowed to be exported; and, d. Indian currency was over-valued, which hampered exportsof agricultural commodities. It has been apprehended that free trade is likely to lead to greater priceinflexibility in the Indian domestic market and would lead to an increase in the relative domestic pricesof most crops, most importantly rice. World prices of rice and cotton would fall but their domesticprices would rise. If cotton prices go up, then the domestic textile industry was likely to suffer. Withthe cut in input subsidies, there would be decline in the profitability for growing sugarcane andoilseeds. However, with the cut in input subsidies, poor rice growing regions would gain. Intellectualproperty rights (IPRs) would not allow the newer varieties of seeds to be diffused to rural hinterlands.Smaller farmers would not be able to pay higher prices for genetically modified (GM) seeds (Sen andNayyar, 1994)13. The member countries of World Trade Organisation (WTO) are committed to followa set of rules embodied in Agreement on Agriculture (AoA), which covers: (i) Domestic support; (ii)Market access i.e., tariffs, and restrictions on imports and exports; and, (iii) Export subsidies. Theagreement required reduction in trade distorting domestic support like price interventions andsubsidies; reduction in export subsidies; replacing quantitative restrictions and quotas on trade withtariffs, and reduction in tariffs to encourage more and freer trade. It was predicted that tradeliberalisation and implementation of AoA would result in positive gains to the developing countries likeIndia, through improved access to the developed countries‘ markets, increased trade and betterpricing structure for tropical and other products of interest to the developing countries (NAAS,2006)14. Most of the cultivable land in India was brought under cultivation by the mid-1960s. To the totalrise in agricultural production, the contribution of area increase was around 70% and the contributionof yield increase was nearly 30%. India continued high production with the help of high pay-off inputs.Government invested in R&D of seed technology but it was irrigation dependent. Expansion of areahappened through rise in population pressure, land reforms, implementation of community PAGE 5
  • development programmes, and investment in irrigation. Land reforms in India revolved around:removal of landlordism, providing land to the tenants, putting ceilings on land, consolidation of landand co-operative farming. India went for adoption of biochemical technology (since it was a landscarce economy), which was a combination of high yielding varieties (HYVs), chemical fertilizers,insecticides, pesticides and irrigation. The technology was prone to pest and insect attacks, and wastoo much dependent on irrigation. The technology required a high working capital. Despite theincrease in cost of cultivation, increase in profit was manifold. Subsidization of agriculture has been amajor policy of the Government of India after the introduction of the new biochemical technology.Subsidy was provided to ensure quick adoption of the new technology by the farmers and to reduceuncertainties in production. Some have argued that subsidies disturbed efficient allocation ofresources. However, if subsidies were removed, then investment in agriculture would go down, smalland marginal farmers would get affected and the prices of agricultural commodities would shoot up. Government‘s investment in agricultural R&D (i.e. biochemical technology) was dependent onthe market situation, and hence its response was endogenous and not exogenous. Economicbehaviors and decision-making of not only private but also public sector suppliers of scientificknowledge and technology are treated as endogenous (induced)15 rather than exogenous to theeconomic system, according to Hayami and Ruttan (1971)16. Inducement to develop a technologydepend on economic conditions i.e. the relative availability of labour and land, which in turndetermines the relative prices of labour and land. The sources of power in traditional agriculture are:labour power, bullock/ horsepower. Mechanical technology means mechanization of irrigation,mechanization of harvesting, tractors replacing labour and bullocks etc. If the supply of labour andbullock power is higher than its demand then the traditional technology‘s cost is lower as compared tothe mechanical technology. Certain features of mechanical technology are: a. It is time saving; b. Ithas a high fixed cost but low variable cost; c. It is labour displacing; and, d. Labour productivity goesup when mechanical technology is used since it displaces labour. Mechanical technology is asubstitute for biological technology, which comprises of labour power and bullock power. Biologicalsources of technology will be preferred over mechanical technology if its prices were lower comparedto the latter. Certain features of biochemical technology are: a. It increases yield; b. It absorbs labour;c. The variable cost is high; and d. It is a substitute for land. Latin America is characterized by the presence of latifundios(very large landholdings) andminifundios(very small landholdings). There is high level of inequality in the distribution of land undercultivation. Studies show that value of output per hectare under cultivation is higher in the minifundiosas compared to the latifundios, particularly in countries like Brazil, Argentina and Chile. As opposed toLatin America, in the case of Asia, there exists too little land for too many people. Land ownership inAsian countries like India, Pakistan and Bangladesh has been affected by European rule, introductionof monetized transactions, rise in power of the moneylenders, and rapid growth of Asian populations[Todaro and Smith, (2006)]17.d. The rural farm economy:- Rural livelihoods refer to the various sets of entitlements before an individual, which can helphim or her in order to live. For too long, Indian farmers have seen rise in prices of agricultural inputssuch as fertilizers, seeds, electricity, water etc. during the decade of 1990s and 2000s. Without acorresponding rise in market prices or the minimum support prices, rise in input prices affected theprofitability of the farmers. As a result of this, farmers became interested either to leave agriculture inorder to move towards other professions or occupations, or they have fallen prey to money-lendersand middle-men so as to get loans and credits at exorbitant rates of interests. The rising cost ofproduction has made the farmers depend on informal sources of credit since the transactions costs PAGE 6
  • are too high to receive formal credit along with the problem of moral hazards. Rising input prices andfalling market prices have reduced the economic sustainability of Indian agriculture. Not enoughlivelihoods are generated in the rural non-farm economy, which can be a ray of hope for the majoritydependent on agriculture. According to de Haan and Zoomers (2005)18, ―in the household studies, increased attentionwas paid to household strategies as a means of capturing the behaviour of low-income people. Theconcentration on households was considered useful for its potential to bridge the gap between micro-economics, with its focus on the atomistic behaviour of individuals, and historical structuralism, whichfocused on the political economy oif development. The household also came into vogues in a morepractical sense; it was considered a convenient unit for the collection of empirical data‖.Graph 1: Agricultural production in India (in million tones) Rice 250.00 Wheat Coarse Cereals 200.00 Cereals Pulses Foodgrains Million tonnes 150.00 100.00 50.00 0.00 1980-81 1982-83 1984-85 1986-87 1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07 YearsSource: Handbook of Statistics on Indian Economy, RBI Rates of growth of foodgrains and cereal production have increased from 2003-04 onwards, ascould be seen from the graph 1. However, there was stagnancy in the growth rates of production ofpulses and coarse cereals over the years. Livelihood units such as the individuals, families or businesses change the composition oflivelihood ‗portfolios‘ to reflect changing opportunities, hazards, risks and constraints. Such behaviourfalls under the broad term of livelihood diversification. In the case of India, there was lesseropportunity for such diversification. The increasingly urban nature of a national economy has turnedout to be at odds with the increasingly rural nature of a particular enterprise or family strategy. Unlikethe tied patron-client labour relationship during the olden days, many jobs nowadays are temporary innature. Livelihood diversification is considered to be both a coping and a thriving mechanism–thrivingwhere it is driven by a growing and more flexible economy. But the ‗coping‘ dimension usuallydominates where diversification is an enforced response to failing agriculture, recession and PAGE 7
  • retrenchment. And, this is what has been happening in the case of India (Start and Johnson, 2004) 19.Earlier, the report by the National Commission on Rural Labour (NCRL, 1991) suggested thatlabourers and land-poor farmers have a high propensity to migrate as seasonal labourers. Thesemigrants are highly disadvantaged as they are poverty ridden with too little bargaining power. Table 1: Trend growth rate during the past three decades Trend growth rate per annum 1980-81 to 1989-90 1990-91 to 1999-2000 2000-01 to 2007-08Rice 3.55 2.00 1.86R square 0.65 0.81 0.23Wheat 3.50 3.51 1.36R square 0.73 0.92 0.34Foodgrains 2.70 2.07 1.99R square 0.67 0.82 0.34Source: Ministry of Agriculture, Government of IndiaNote: The trend growth rate in the production of rice, wheat and food grains for separate periodshave been calculated by the author From the table 1, one could make out that trend growth rate in rice production declined from3.55 percent during the period 1980-81 to 1989-90 to 2.00 percent during the period 1990-91 to 1999-2000, and further to 1.86 percent during the period 2000-01 to 2007-08. Trend growth rate in wheatproduction increased marginally from 3.50 percent during the period 1980-81 to 1989-90 to 3.51percent during the period 1990-91 to 1999-2000, but fell down sharply to 1.36 percent during theperiod 2000-01 to 2007-08. Trend growth rate in foodgrains production declined from 2.70 percentduring the period 1980-81 to 1989-90 to 2.07 percent during the period 1990-91 to 1999-2000, andfurther declined to 1.99 percent during the period 2000-01 to 2007-08. Among other things, the sustainable-livelihoods literature identifies five types of capital assetsas the basis of household livelihoods: (i) financial capital (e.g. income from employment or self-employment, pensions, credit, remittances from relatives abroad or in urban areas); (ii) human capital(e.g. skills, knowledge); (iii) natural capital (e.g. land, forests, water, genetic resources); (iv) physicalcapital (e.g. equipment); and (v) social capital (e.g. networks of social relations). Householdlivelihoods depend on diverse and evolving combinations of these different assets.e. Agrarian crisis and ‘liberal’ policies:- It is increasingly felt that Indian agriculture is currently suffering from ―technology fatigue‖, dueto which the earlier gains made during the Green Revolution has withered away. Moreover, GreenRevolution itself has been criticized for being Euro-centric, environmentally unsustainable and beingapolitical (it never addressed the issues of land and tenancy reforms, and other related institutionalreforms). Green Revolution actually tried to improve yields and production, without taking into accountthe needed change in rural and social institutions. Since it offered a high-valued package, so it helpedonly the rich farmers (owning large landholdings) from assured irrigated areas. Areas where rainfedirrigation takes place could not gain much from the Green Revolution. Green Revolution onlypromoted production of certain crops, which are agro-climatically suitable for certain regions, whichsome say have affected biodiversity. It relied excessively on major irrigations (instead of minorirrigation and rainwater harvesting), chemical fertilizers and pesticides. In order to sustain GreenRevolution, huge subsidies were given on inputs (for producers of inputs—firms, and consumer ofinputs—farmers) like electricity, fertilizers etc, thus making the entire effort economicallyunsustainable. It was the large farmers, which benefited from the subsidies provided at the cost of thesmall and the marginal farmers. The Bollgard But cottonseed and other such seeds, which have PAGE 8
  • recently been introduced, have failed to cater the needs of the rural farming community who belong tothe lower income group (as well as socially backward groups), and possess small-sized farmlandsand cropping fields. In fact, there are allegations that due to the liberalization of the Indian economy,multi-national corporations (MNCs) from the North got the opportunity of plundering the farmers of theglobal South, by patenting and giving new names to the indigenous varieties of plants (such asturmeric, basmati rice) and animals (via genetic engineering) from the South, thus leading to bio-piracy. Issues and debates surrounding bio-ethics, bio-piracy and violation of intellectual propertyrights (IPRs) have come to the forefront during the recent years, which are still needed to be resolvedat international forums like World Trade Organisation (WTO). The 59th round of the National Sample Survey states that agrarian distress is severe in AndhraPradesh, Karnataka, Maharashtra, Punjab and Rajasthan. High levels of indebtedness are alsoreported from these states. The influence of moneylenders appears to be strong in Bihar andRajasthan in terms of extending informal credit to farmers. Traders also have extended loans toindebted farmers (Ghosh and Chandrashekhar, 2005)20. The Plant Variety Protection and Farmers Rights Act (PVPFR) 2002, which was formulatedunder the sui generis option of the WTO recognises farmers rights to save, use, sow, exchange,share or sell his farm products including the seed of a variety protected. The International Union forthe Protection of New Varieties of Plants (UPOV), on the other hand, which came into being in 1961,has the scope and potential to restrict the age-old traditional right of the farmer to "plant back seeds"in order to safeguard the vested interests of western seed manufacturing corporations. Hence, onecan say that UPOV and the PVPFR cannot co-exist in the Indian context (Krishnan, 2002)21. Manyhave argued about the adverse impact of private seed manufacturing companies, which made theirinroads into the rural Indian economy, after the formulation of the National Seed Policies in 1988 and2002. The National Seeds Bill, 2004 has been criticized by the All India Kisan Sabha (AIKS) and theBharat Krishak Samaj(Saggi, 2006). PAGE 9
  • Graph 2: Yield in agriculture (kg per hectare) 3000 Rice Wheat 2500 Coarse Cereals Cereals Pulses Foodgrains 2000 kg per hectare 1500 1000 500 0 1950-51 1952-53 1954-55 1956-57 1958-59 1960-61 1962-63 1964-65 1966-67 1968-69 1970-71 1972-73 1974-75 1976-77 1978-79 1980-81 1982-83 1984-85 1986-87 1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07 AE YearsSource: Handbook of Statistics on Indian Economy, RBI Rate of growth of wheat yield has fallen down since 2001-02, as could be made out from thegraph 2. There was stagnancy in the rate of growth of pulses yield. Growth rate in rice yield hasincreased marginally during the recent years. Subsidies should be cut to step-up investments in irrigation and for increasing outlays onpoverty alleviation programmes, according to Rao (1995)22. Intensive use of inputs in limited pockets,have led to lowering the productivity of inputs, reducing employment elasticity of output throughsubstitution of capital for labour, and environmental degradation such as water logging and salinity,on one hand and lowering of water table, on the other hand. The National Agricultural Policy (NAP) (2000) announced by the Government of India, soughtto give a prominent role to contract farming. However, it is said that contract farming has led tocorporatization of Indian agriculture, which has adversely affected the small and marginal farmers.Contract farming has been criticized as being a tool for the agribusiness firms to exploit an unequalpower relationship with growers. However, advocates of contract farming view it as a way to create asynergy between agribusiness firms and small farmers that benefit both without sacrificing the rightsof either. It is seen as a mechanism to modernize small peasant holders through transfer oftechnology. PAGE 10
  • Reducing Poverty and Hunger in India : The Role of AgricultureIndia‘s strategy for reducing poverty and hunger has always placed a great deal of importance on theagricultural sector, reflecting the fact that 70 percent of the population live in rural areas and theoverwhelming majority of them depend upon agriculture as their primary source of income. The focusof attention has of course changed over time.Early Focus on Food Self Sufficiency:-In the 1960s India was deficient in foodgrain production and dependent on imports of wheat, financedby PL480 assistance from USA. Understandably, the focus of Indian policy in this period was toincrease foodgrain production with a view to ensuring food security. This objective was successfullyachieved by the spread of the Green Revolution in the 1970s, beginning with wheat and thenexpanding to rice. This achievement must count as one of the major success stories in development,considering that influential groups such as the Club of Rome, in the early 1970s, had despaired ofIndia being able to feed its growing population.Agricultural Growth for Poverty Alleviation:-In the 1980s, Indian policymakers shifted their focus from food self sufficiency to generating additionalincome in rural areas as a means of tackling the problem of poverty, which was concentrated in ruralareas. Acceleration of agricultural growth, with a special focus on improving the position of smallfarmers and extending the productivity revolution to non-irrigated areas was seen as a critical part ofthe strategy for poverty alleviation. This effort was supplemented targeted anti poverty programs toaddress the needs of vulnerable groups who may not benefit sufficiently from general agriculturalgrowth. India achieved considerable success with this approach in the 1980s. Growth of agriculturalgross domestic product (GDP) accelerated to about 4.7 percent in the 1980s, compared with only 1.4percent in the 1970s. This, agricultural growth, together with the beginning of economic reforms in thenonagricultural sector, pushed up the growth rate of overall GDP to around 5.8 percent in the period1980-81 to 1989-90 compared with about 3 percent in the 1970s.India‘s growth was disrupted at the start of the 1990s by a major balance of payments crisis which ledto the adoption of an extensive process of structural reforms. It took time to regain momentum and itwas only in 1993-94 that the economy got back on track, clocking an average growth rate of 6.8percent in the three years 1993-94 to 1995-96. This acceleration in growth in the post reform periodled policymakers to set a more ambitious GDP growth target of 8 percent a year for the Ninth Planperiod (1997-98 to 2001-2002), to be supported by a growth rate of 4 percent a year in agriculture. PAGE 11
  • The projected growth of 4 percent per year in agriculture wasclearly inline with the average growth of 3.8 percent achieved in theperiod 1990-91 to 1996-97.However, actual performance since the mid 1990s hasbeen disappointing. Agricultural growth slowed to 2 percent a yearin the Ninth Plan period, and overall economic growth wasonly 5.5 percent, well below the 8 percent target. Sinceagriculture accounted for about 25 percent of GDP, the shortfall ofmore than 2 percentage points in agricultural GDP growthcompared with the target accounts directly for a shortfall ofabout half a percentage point in GDP growth. If the indirect effectsof more rapid agricultural growth on other sectors are taken intoaccount, the total impact on GDP growth may have been as muchas one percentage point. These shortfalls were known, when the Tenth Plan (covering the period 2002-03 to 2006-07) was formulated, but it was assumed that the poor performance of agriculture was due to temporary factors such as poor monsoons and depressed agricultural commodity prices in world markets following the East Asian meltdown. The Tenth Plan therefore adopted the same targets of 8 percent growth in GDP and 4 percent growth in agriculture. Experience in the first three years of the Tenth Plan period has sounded some alarm bells. GDP growth hasaveraged about 6.5 percent, but agricultural GDP in these years (2002-03 to 2004-05) has grown byonly 1.1 percent per year. The loss of dynamism in agriculture explains most of the shortfall inaggregate GDP growth.Slower growth in agriculture also has direct implications for poverty reduction in rural areas. Officialfigures suggest that the incidence of poverty fell from 36 percent in 1993-94 to 26 percent in 1999-2000. The comparability of these numbers has been questioned because of recent changes(ostensibly improvements) in the methods for measuring consumption in household surveys, butthere is a broad consensus that if corrections are made to ensure comparability, the percentage ofthe population in poverty has declined significantly, though less than in the official figures. However,even the official figures show less decline than what had been targeted, and this is undoubtedly areflection of the slowdown in agricultural growth. Slow growth in agriculture is also at the root ofgrowing evidence of distress in the farming community. Surveys show that a large percentage offarmers want to leave farming because they find it is no longer sufficiently profitable. The uncertaintyassociated with farming has also increased and farmers lack effective means of insuring against suchrisks. There are larger market uncertainties associated with new crops and poultry because of greatervulnerability because of falling ground water levels. There is evidence of increased indebtednessarising from the inability to cope with risks. PAGE 12
  • Recognizing these problems, the Government has undertaken a comprehensive review of thestrategy for agriculture in order to come up with a new deal for agriculture and the rural economy ingeneral. Remedial action will be needed on several fronts including increased public investment inirrigation and rural roads, better management of existing irrigation systems and of water resources indry land areas, a strengthened agricultural research system and more effective extension,improvements in the production and distribution of certified seeds, improvements in the credit deliverysystem, and innovative steps in marketing andcontract farming to support the diversificationof Indian agriculture.Irrigation:-Water is a critical constraint on raisingagricultural productivity and much of the success ofthe Green Revolution came from improvedproductivity in areas of assured irrigationprovided through canals or (much moresignificant) through ground water utilization. Thescope for expanding irrigation through largeand medium scale projects has yet to be fullyexploited. Out of the total of 59 million hectares that could be irrigated through such projects only 40million hectares have been irrigated. The slow pace of exploitation of irrigation potential is due to lackof resources in state governments and the tendency to spread available resources thinly over toomany projects. Additional public investments in this area are therefore essential for early utilization ofthe potential.Effective maintenance of the existing system of canal irrigation also suffers because the irrigationdepartments of the states lack resources. This in turn is because water charges are kept too low,covering only 20-25% of the operations and maintenance cost of the system in most states. Poormaintenance leads to loss of water through seepage, with the result that water use efficiency is verylow – around 25 to 40 percent instead of 65 percent that should be attainable. Low water chargesalso encourage highly water intensive crops at the upper end of the canal network, leaving tail-endportions starved of water.The solution lies in rationalization of water rates to ensure adequate financial resources to covermaintenance and resort to participatory irrigation management to give farmers a stake in theoperation and maintenance of the system. Some interesting experiments in these have promise.Maharasthra has recently established a Water Regulatory Authority to set water charges in a non-political manner. Several states are also experimenting with involving water user associations(WUAs) in the operation of the canal systems. Ideally the WUAs should be empowered to collectwater charges and to retain a portion of the collection to maintain the portion of the distributionnetwork operating in their area.Ground water utilization played a major role in expanding irrigation in the 1980s but uncontrolledexploitation of groundwater has led to serious depletion of the water table in many parts of thecountry. Overexploitation is encouraged by the policy of massive under pricing of electricity foragricultural use, with a few states having made electricity for farmers completely free. Even where it isnot free, the charge for electricity is a fraction of the average cost, and is not based on metered use.Instead there is a fixed charge for presumed usage, based on the capacity of the pump, anarrangement which implies that the marginal cost of electricity for pumping ground water is zero.Under pricing canal water and electricity are clearly highly distortionary, given the need to conservewater use. They are also distributionally unfair because the benefits of under priced water accruedisproportionately to upper end farmers whereas under priced power enables those able to affordlarger pumps to lower the water table denying water to farmers who can only afford shallow wells. PAGE 13
  • The investment requirements of irrigation are massive. Completion of all unfinished projects alone isestimated to cost approximately US$ 20 billion. In addition, provision must be made for new irrigationprojects (large, medium and small), which together will require about US$ 45 billion. The totalrequirement is therefore about US$ 65 billion.Water Management in Rainfed Areas:-About 60 percent of India‘s cultivable area will remain dependent on dry land farming even after allirrigation potential is fully exploited. Productivity growth in these areas is obviously critical for ruralincome growth and poverty alleviation, and it depends critically upon better moisture conservationand the development of varieties suited to dealing with moisture stress.Schemes for water retention, moisture conservation and groundwater recharge have beenimplemented for many years in India but with mixed results. Experience suggests some pointers forthe future. Greater use of technology inputs can help a great deal. Satellite mapping by the IndianSpace Research Organisation (ISRO) has been particularly helpful in planning watershedmanagement schemes to achieve optimal results. It is also important to adopt a holistic approach. Forexample, if deforestation problems upstream are not tackled, water retention structures downstreamwill quickly silt up. Community participation is critical to impart ownership and ensure an acceptabledistributional outcome. In the past, these multiple factors were not effectively integrated intowatershed development schemes. Now a National Rainfed Area Authority has been proposed to helpcoordinate the work of different implementing agencies.The cost of treating rainfed areas to ensure optimum use of available water is approximatelyRs.10,000 per hectare and the untreated area is about 80 million hectares, yielding a total cost ofapproximately US$20 billion. If this amount is added to the cost of irrigation development and thetarget to be achieved over a 10-year period it would require a doubling of public investment inirrigation.Other Inputs:-Increasing agricultural productivity also depends on the efficient delivery of several other inputs. Thequality of seeds and planting material needs to be greatly improved, and this calls for strengtheningthe research effort to make it more effective. Two expert committees have recently reported on howto restructure the agricultural research system to make it more results oriented and theirrecommendations are under consideration. The system for producing and marketing certified seedsof existing varieties at reasonable prices also needs to be improved. Seed replacement rates in mostparts of the country are only one-third to one-half of what they should be, a situation which reflectspartly a lack of knowledge of the importance of seed replacement and partly also a lack of availabilityof reliable seeds.There is evidence that the use of fertilizers is at present highly imbalanced suggesting that scientificapplication of fertilizers holds potential for raising productivity. Nitrogen fertilizers are oversubsidizedcompared with phosphorus and potassium fertilizer. The structure of fertilizer subsidies should berationalized to avoid excessive and wasteful use of nitrogen fertilizers. Lack of knowledge ofmicronutrient deficiency in the soil is also a serious problem. There is need for much more extensivesoil testing to encourage balanced application of nutrients needs. Underlying these problems is thedeterioration of the extension services, which makes it difficult to disseminate best farming practices.Strengthening the extension system therefore needs special attention. PAGE 14
  • The government has also identified credit to farmers as a critical area for corrective action. The publicsector commercial banks are being pushed to provide credit to agriculture and have respondedcommendably. However, the cooperative credit system which was meant to be the backbone ofagricultural credit, has become financially weak. Part of the problem has been the politicization ofcooperative institutions as a consequence of interference by state governments. The centralgovernment is considering ways of reviving the cooperative credit system by recapitalizing thecooperative banks provided state governments agree to changes in the system of governance thatwould ensure professional management of cooperative banks without state government interference.Agricultural Diversification:-India‘s future agricultural strategy must also be oriented tothe need for agricultural diversification. India‘sfoodgrain production capacity has increased significantlyover the years and there is evidence that householdconsumption patterns are changing away from foodgraintowards higher value crops such as vegetables,fruits, milk, eggs, etc. Future growth in agriculturemust come from diversification into these non-food grainareas and this will pose a special challenge becausemarketing these perishable products is much morecomplicated than marketing food grains.Horticulture development is currently constrained bypoor marketing arrangements. The gap between pricesreceived by the farmers and those paid by urban consumers is large, reflecting inefficient marketingarrangements. Horticultural produce is typically collected from farmers by market agents, who sell itorganised markets established under the Agricultural Produce Marketing Acts. Unfortunately thesemarkets are controlled by a few traders and operate on highly non transparent basis. Facilities forgrading and handling are poor and methods of price discovery in the markets are nontransparent.Wastage is high owing to poor logistics and the absence of cold chains. The net result is much lowerrealisation by the farmer.It is necessary to amend outdated laws restricting the establishment of markets to allow cooperativesand private entrepreneurs to set up modern markets with grading facilities, cold storages andtransparent auction procedures. Half a dozen states have already amended their existing laws onagricultural marketing to allow such markets to be established and a dozen others are in the processof doing so. These changes are being resisted by those who control the existing structure but thisopposition will weaken over time.Contract farming is another innovation that has been introduced in many states and could acceleratediversification. India‘s laws on agricultural land do not allow corporate bodies to purchase land andoperate large-scale farms – a national policy to prevent displacement of a large number of smallfarmers. – but corporate buyers who know what is needed in export markets, in high end domesticmarkets or in agro-processing, can engage in contract farming to procure high quality produce.Buyers select areas suitable for the crops they are interested in and organize farmers to producethese crops under contract, while providing planting material of the right quality and technicalsupervisory. The process enables the farmer to eliminate marketing risk while allowing the corporatebuyer to ensure quality supplies by selecting planting material, and provide access to scientific adviceon disease and other types of stress. PAGE 15
  • The development of agro-processing will be a spur agricultural diversification and the government ispaying special attention to this area. At present, the proportion of India‘s agricultural output that isprocessed is very small compared with that in most developing countries and the demand forprocessed food is bound to increase as incomes rise. There are several obstacles to the more rapiddevelopment of food processing. Taxation structures often discriminate against food processingbecause processed food is the first stage for application of indirect taxes and the absence of taxrebate on taxes paid on inputs means the effective tax on value added is very high. Anotherimpediment is the reservation of certain categories of products for small scale production. Theabsence of a modern food processing law has meant that this sector is governed by multiple laws,making it difficult to operate effectively. An Integrated Food Processing Law has been introduced inParliament to replace and the passage expected in the current year will make a qualitative differenceto the operating environment.Targeted anti-Poverty Programs:- While efforts to increase agricultural productivity and thereby increase farm incomes and employment are a major instrument for poverty alleviation, they will need to be supplemented by special targeted program aimed at improving the welfare of vulnerable groups in rural areas. Employment programs in rural areas have been the most important of these anti poverty programs and India has a long history of such programs. Building on this tradition, aRural Employment Guarantee Act has been enacted which provides assurance of up to 100 days ofemployment at the minimum wage to each household in rural areas wishing to make use of it. Theemployment would be provided on projects chosen by the elected village councils and the guidelinesspecify that top priority should be given to irrigation and water management schemes. Unlike earlieremployment programs, this scheme includes a guarantee in the sense that if employment cannot beprovided, unemployment compensation will be provided at least 25 percent of the wage. Although theprogram open to each household, actual demand for employment is expected to be limited tohouseholds below the poverty line. The coverage of the Act will initially be implemented to 200 of themost backward districts (about one-third of the total districts in the country). Together with otherspecial programs relating to provision of housing for the poor, old age insurance, and schemes forsupporting self employment, this program will provide an element of social security that should help toreduce poverty. PAGE 16
  • The Role of Public Investment:-An important implication of the new agricultural strategy is that it involves a substantial increase inpublic investment. This is an area where past trends need to be reversed. Public investment inagriculture began to decline in the 1980s, but initially the decline was offset by the fact that privateinvestment in agriculture was increasing. Since the mid 1990s private investment in agriculture hasstagnated while public investment has continued to decline. It is essential to reverse these trends,especially for public investment in irrigation and water resource management. It is also essential toincrease public investment in rural roads and rural electrification. Success in these areas willstimulate private investment and contribute to a revival of growth momentum in agriculture. NATIONAL AGRICULTURAL POLICY 2000INTRODUCTION :-The Government of India announced a National Agricultural Policy on 28 th July, 2000, with theobjectives of establishing an appropriate and ideal environment to achieve a higher growth rate. Thepolicy seeks to tap the vast potential of Indian agriculture, strengthen rural infrastructure, ensure foodand nutrition to the country‘s billion people, accelerate the growth of agro-based industries byensuring regular supply of raw materials, create employment in rural areas and secure fairremuneration to the farming community. Thus, the NAP aims to achieve the following objectives : 1) A growth rate of over 4% per annum in agriculture. 2) Efficient use of resources that conserves our soil, water and biodiversity. 3) Growth with equity, i.e. growth which is wide spread across regions and farmers. 4) Growth that is demand driven and caters to domestic market. 5) Maximize benefits from exports of agricultural goods. 6) Encourage investments in agriculture – both public & private. 7) Growth that is sustainable technologically, environmentally and economically.FEATURES OF NAP 2000 :- 1) Sustainable Agriculture : To promote sustainable agriculture, the following measures are suggested : (a) To reduce the pressure of population on land. (b) To control unnecessary diversion of land for non-agricultural uses. (c) To use wastelands for agriculture and afforestation. PAGE 17
  • (d) To increase cropping intensity through multiple cropping and inter-cropping. (e) To follow a long term policy of rain fed agriculture through water shed approach. (f) To rationalize the use of surface and groundwater and also to popularize drip and sprinkler irrigation. (g) To involve farmers and labourers in development of pastures, forestry programmes. 2) Food & Nutritional Security : Special efforts will be made to raise productivity of crops to meet the demand for food. New crop varieties with higher nutritional values will be given special attention. A major thrust will be given to development of rain fed irrigation, horticulture, floriculture, roots & tubers, plantation crops, aromatic & medicinal plants, bee keeping and sericulture. Development of animal husbandry, poultry, dairying and aquaculture will receive high priority. Efforts to increase animal protein availability in food basket will be increased. Cultivation of fodder crops and fodder trees will be encouraged to meet the growing need for feed and fodder requirements.3) Generation & Transfer of Technology : The Government will promote application of biotechnology, pre and post harvest technologies, energy saving technology and technology for environment protection. Private sector investment is also to be encouraged in agricultural research, human resource development and post harvest management and marketing.4) Credit Facilities : The policy provides for easy availability of credit to the sector. It seeks progressive institutionalization of rural and farm credit to ensure timely and adequate credit to farmers. Credit should be made available on the pledge of farmer‘s produce.5) Incentives For Agriculture : The government will make efforts to get better prices for agricultural raw materials. At the same time the farm sector machines and equipments will be made available at lower rates. The taxes on food grains and other crops will be removed. The Agriculture Minister promised to keep agriculture outside the purview of taxes. The present regime of agriculture subsidies will be continued. The excise duty on equipments, farm machinery and fertilizers will be rationalized.6) Investment In Agriculture : Public investment will be stepped up for narrowing regional imbalances and accelerating development of agricultural infrastructure. PAGE 18
  • 7) Land Reforms : (a) Consolidation of holdings all over the country. (b) Redistribution of surplus lands and waste lands among the landless farmers and unemployed youth. (c) Speeding up tenancy reforms to recognize the rights of tenants and share croppers. (d) Updating and improvement of land records and issue of land pass books to farmers.LIMITATIONS OF NAP 2000 :-1) Impossible Target of Growth Rate : It must be emphasized that the aim of achieving a rate of 4% for a period of 20 years is almost impossible. During the 1990s the growth rate of agricultural production averaged 2.1% and that of food grains production, 1.8% per annum. This is almost equal to the rate of growth of population in the country.2) Fails to Identify States : The policy talks of growth with equity covering all regions. But it has failed to identify the states which have lagged behind in the utilization of their agricultural potential.3) Private Sector Involvement : There is no doubt that private investment in the form of tube wells, agricultural implements, human resource development are very helpful, but the small farmers who constitute the bulk of Indian farming community are unable to undertake private investment in a major way. They need the support of public investment in the form of water shed facilities, irrigation facilities, storage and warehousing etc.4) Problems of Contract Farming : The policy seeks to involve the corporate sector through contract farming by land leasing arrangements. This will definitely increase production but will result in contraction of employment.5) Lack of Machinery for Implementation : The policy has not outlined any machinery for the implementation of the various suggestions. Agriculture is a state subject and the role of state governments is very critical in implementing the various projects and programmes. If the centre intends the states to implement it, it must provide for schemes of sharing programmes between the centre and the state governments.To sum up, the policy is very appropriate in several aspects but it is also wanting in some importantways. PAGE 19
  • CRITICAL EVALUATION OF NAP 2000 :- 1) Laudable Aims : The policy with a time frame of two decades has set before itself tasks that are necessary to be achieved. The aims of a high rate of growth of agriculture (over 4%), a strengthened infrastructure, large value additions in production, faster growth of agro business, more employment, better standard of living for cultivators and facing challenges of globalization and liberalization are very commendable. 2) Reform Oriented : The policy provides for the much needed reforms in the agricultural sector. Removal of controls and regulations and restriction on the movement of agricultural goods are good signs. The private sector participation in the agricultural sector can also help in improving the conditions. They can bring in the much needed capital for investment in research and technology, skill formation and extension services like agricultural clinics. 3) Very Comprehensive : The policy covers almost all the aspects which need to be attended. It covers farming, animal husbandry and agro business activities. The crucial aspects of better credit and speedier land reforms have been covered. New Agriculture PolicyAgriculture is a way of life, a tradition, which, for centuries, has shaped the thought, the outlook, theculture and the economic life of the people of India. Agriculture, therefore, is and will continue to becentral to all strategies for planned socio-economic development of the country. Rapid growth ofagriculture is essential not only to achieve self-reliance at national level but also for household foodsecurity and to bring about equity in distribution of income and wealth resulting in rapid reduction inpoverty levels. PAGE 20
  • Indian agriculture has, since Independence, made rapid strides. In taking the annual foodgrainsproduction from 51 million tonnes in early fifties to 206 million tonnes at the turn of the century, it hascontributed significantly in achieving self-sufficiency in food and in avoiding food shortages.Over 200 million Indian farmers and farm workers have been the backbone of India‘s agriculture.Despite having achieved national food security the well being of the farming community continues tobe a matter of grave concern for planners and policy makers. The establishment of an agrarianeconomy which ensures food and nutrition to India‘s billion people, rawmaterials for its expandingindustrial base and surpluses for exports, and a fair and equitable reward system for the farmingcommunity for the services they provide to the society, will be the mainstay of reforms in theagriculture sector.The National Policy on Agriculture seeks to actualise the vast untapped growth potential of Indianagriculture, strengthen rural infrastructure to support faster agricultural development, promote valueaddition, accelerate the growth of agro business, create employment in rural areas, secure a fairstandard of living for the farmers and agricultural workers and their families, discourage migration tourban areas and face the challenges arising out of economic liberalization and globalisation. Over thenext two decades, it aims to attain:The salient features of the new agricultural policy are:  Over 4 per cent annual growth rate aimed over next two decades..  Greater private sector participation through contract farming.  Price protection for farmers.  National agricultural insurance scheme to be launched.  Dismantling of restrictions on movement of agricultural commodities throughout the country.  Rational utilization of countrys water resources for optimum use of irrigation potential.  High priority to development of animal husbandry, poultry, dairy and aquaculture.  Capital inflow and assured markets for crop production.  Exemption from payment of capital gains tax on compulsory acquisition of agricultural land.  Minimize fluctuations in commodity prices.  Continuous monitoring of international prices.  Plant varieties to be protected through legislation.  Adequate and timely supply of quality inputs to farmers.  High priority to rural electrification.  Setting up of agro-processing units and creation of off-farm employment in rural areas.Sustainable AgricultureThe policy will seek to promote technically sound, economically viable, environmentally non-degrading, and socially acceptable use of country‘s natural resources – land, water and geneticendowment to promote sustainable development of agriculture. Measures will be taken to containbiotic pressures on land and to control indiscriminate diversion of agricultural lands for non-agricultural purposes. The unutilized wastelands will be put to use for agriculture and afforestation.Particular attention will be given for increasing cropping intensity through multiple-cropping and inter-cropping. PAGE 21
  • Rational utilization and conservation of the country‘s abundant water resources will be promoted.Conjunctive use of surface and ground water will receive highest priority. Special attention will befocused on water quality and the problem of receding ground-water levels in certain areas as a resultof over-exploitation of underground aquifers. Proper on-farm management of water resources for theoptimum use of irrigation potential will be promoted.Erosion and narrowing of the base of India‘s plant and animal genetic resources in the last fewdecades has been affecting the food security of the country. Survey and evaluation of geneticresources and safe conservation of both indigenous and exogenously introduced genetic variability incrop plants, animals and their wild relatives will receive particular attention. The use of bio-technologies will be promoted for evolving plants which consume less water, are drought resistant,pest resistant, contain more nutrition, give higher yields and are environmentally safe. Conservationof bio-resources through their ex situ preservation in Gene Banks, as also in situ conservation in theirnatural habitats through bio-diversity parks, etc., will receive a high priority to prevent their extinction.Specificmeasures will also be taken to conserve indigenous breeds facing extinction. There will be atime bound programme to list, catalogue and classify country‘s vast agro bio-diversity.Sensitization of the farming community with the environmental concerns will receive high priority.Balanced and conjunctive use of bio-mass, organic and inorganic fertilizers and controlled use of agrochemicals through integrated nutrients and pest management (INM & IPM) will be promoted toachieve the sustainable increases in agricultural production. A nation-wide programme for utilizationof rural and urban garbage, farm residues and organic waste for organic matter repletion andpollution control will be worked out.Agro-forestry and social forestry are prime requisites for maintenance of ecological balance andaugmentation of bio-mass production in agricultural systems. Agro-forestry will receive a major thrustfor efficient nutrient cycling, nitrogen fixation, organic matter addition and for improving drainage.Farmers will be encouraged to take up farm/agro-forestry for higher income generation by evolvingtechnology, extension and credit support packages and removing constraints to development of agroand farm forestry. Involvement of farmers and landless labourers will be sought in the development ofpastures/forestry programmes on public wastelands by giving financial incentives and entitlements tothe usufructs of trees and pastures.The history and traditional knowledge of agriculture, particularly of tribal communities, relating toorganic farming and preservation and processing of food for nutritional and medicinal purposes is oneof the oldest in the world. Concerted efforts will be made to pool, distil and evaluate traditionalpractices, knowledge and wisdom and to harness them for sustainable agricultural growth.Food and Nutritional SecuritySpecial efforts will be made to raise the productivity and production of crops to meet the increasingdemand for food generated by unabated demographic pressures and raw materials for expandingagro-based industries. A regionally differentiated strategy will be pursued, taking into account theagronomic, climatic and environmental conditions to realize the full growth potential of every region.Special attention will be given to development of new crop varieties, particularly of food crops, withhigher nutritional value through adoption of bio-technology particularly genetic modification, whileaddressing bio-safety concerns. PAGE 22
  • A major thrust will be given to development of rainfed and irrigated horticulture, floriculture, roots andtubers, plantation crops, aromatic and medicinal plants, bee-keeping and sericulture, for augmentingfood supply, exports and generating employment in rural areas. Availability of hybrid seeds anddisease-free planting materials of improved varieties, supported by a network of regional nurseries,tissue culture laboratories, seed farms will be promoted to support systematic development ofhorticulture having emphasis on increased production, post-harvest management, precision farming,bio-control of pests and quality regulation mechanism and exports.Animal husbandry and fisheries also generate wealth and employment in agriculture sector.Development of animal husbandry, poultry, dairying and aqua-culture will receive a high priority in theefforts for diversifying agriculture, increasing animal protein availability in the food basket and forgenerating exportable surpluses. A national livestock breeding strategy will be evolved to meet therequirements of milk, meat, egg and livestock products and to enhance the role of draught animals asa source of energy for farming operations and transport. Major thrust will be on genetic upgradation ofindigenous/native cattle and buffaloes using proven semen and high quality pedigreed bulls and byexpanding artificial insemination network to provide services at the farmer‘s doorstep.Generation and dissemination of appropriate technologies in the field of animal production as alsohealth care to enhance production and productivity levels will be given greater attention. Cultivation offodder crops and fodder trees will be encouraged to meet the feed and fodder requirements and toimprove animal nutrition and welfare. Priority will also be given to improve the processing, marketingand transport facilities, with emphasis on modernization of abattoirs, carcass utilization and valueaddition thereon. Since animal disease eradication and quarantine is critical to exports, animal healthsystem will be strengthened and disease-free zones created. The involvement of cooperatives andprivate sector will be encouraged for development of animal husbandry, poultry and dairy. Incentivesfor livestock and fisheries production activities will be brought at par with incentives for cropproduction.An integrated approach to marine and inland fisheries, designed to promote sustainable aquaculturepractices, will be adopted. Biotechnological application in the field of genetics and breeding, harmonalapplications, immunology and disease control will receive particular attention for increasedaquaculture production. Development of sustainable technologies for fin and shell fish culture as alsopearl-culture, their yield optimization, harvest and post-harvest operations, mechanization of fishingboats, strengthening of infrastructure for production of fish seed, berthing and landing facilities forfishing vessels and development of marketing infrastructure will be accorded high priority. Deep seafishing industry will be developed to take advantage of the vast potential of country‘s exclusiveeconomic zone. PAGE 23
  • Generation and Transfer of TechnologyA very high priority will be accorded to evolving new location-specific and economically viableimproved varieties of agricultural and horticultural crops, livestock species and aquaculture as alsoconservation and judicious use of germplasm and other bio-diversity resources. The regionalization ofagricultural research, based on identified agro-climatic zones, will be accorded high priority.Application of frontier sciences like bio-technology, remote sensing technologies, pre and post-harvest technologies, energy saving technologies, technology for environmental protection throughnational research system as well as proprietary research will be encouraged. The endeavour will beto build a well organized, efficient and result-oriented agriculture research and education system tointroduce technological change in Indian agriculture. Upgradation of agricultural education and itsorientation towards uniformity in education standards, women empowerment, user-orientation,vocationalization and promotion of excellence will be the hallmark of the new policy.The research and extension linkages will be strengthened to improve quality and effectiveness ofresearch and extension system. The extension system will be broad-based and revitalized. Innovativeand decentralized institutional changes will be introduced to make the extension system farmer-responsible and farmer-accountable. Role of Krishi Vigyan Kendras (KVKs), Non-GovernmentalOrganizations (NGOs), Farmers Organizations, Cooperatives, corporate sector and para-techniciansin agricultural extension will be encouraged for organizing demand-driven production systems.Development of human resources through capacity building and skill upgradation of public extensionfunctionaries and other extension functionaries will be accorded a high priority. The Government willendeavour to move towards a regime of financial sustainability of extension services through effectingin a phased manner, a more realistic cost recovery of extension services and inputs, whilesimultaneously safeguarding the interests of the poor and the vulnerable groups.Mainstreaming gender concerns in agriculture will receive particular attention. Appropriate structural,functional and institutional measures will be initiated to empower women and build their capabilitiesand improve their access to inputs, technology and other farming resources.Inputs ManagementAdequate and timely supply of quality inputs such as seeds, fertilizers, plant protection chemicals,bio-pesticides, agricultural machinery and credit at reasonable rates to farmers will be the endeavourof the Government. Soil testing and quality testing of fertilisers and seeds will be ensured and supplyof spurious inputs will be checked. Balanced and optimum use of fertilizers will be promoted togetherwith use of organic manures and bio-fertilizers to optimize the efficiency of nutrient use.Development, production and distribution of improved varieties of seeds and planting materials andstrengthening and expansion of seed and plant certification system with private sector participationwill receive a high priority. A National Seed Grid will be established to ensure supply of seedsespecially to areas affected by natural calamities. The National Seeds Corporation (NSC) and StateFarms Corporation of India (SFCI) will be restructured for efficient utilization of investment andmanpower. PAGE 24
  • Protection to plant varieties through a sui generis legislation, will be granted to encourage researchand breeding of new varieties particularly in the private sector in line with India‘s obligations underTRIPS Agreement. The farmers will, however, be allowed their traditional rights to save, use,exchange, share and sell their farm saved seeds except as branded seeds of protected varieties forcommercial purpose. The interests of the researchers will also be safeguarded in carrying outresearch on proprietary varieties to develop new varieties.Integrated pest management and use of biotic agents in order to minimize the indiscriminate andinjudicious use of chemical pesticides will be the cardinal principle covering plant protection. Selectiveand eco-friendly farm mechanization through appropriate technology will be promoted, with specialreference to rainfed farming to reduce arduous work and to make agriculture efficient and competitiveas also to increase crop productivity.Incentives for AgricultureThe Government will endeavour to create a favourable economic environment for increasing capitalformation and farmer‘s own investments by removal of distortions in the incentive regime foragriculture, improving the terms of trade with manufacturing sectors and bringing about external anddomestic market reforms backed by rationalization of domestic tax structure. It will seek to bestow onthe agriculture sector in as many respects as possible benefits similar to those obtaining in themanufacturing sector, such as easy availability of credit and other inputs, and infrastructure facilitiesfor development of agri-business industries and development of effective delivery systems and freedmovement of agro produce.Consequent upon dismantling of Quantitative Restrictions on imports as per WTO Agreement onAgriculture, commodity-wise strategies and arrangements for protecting the grower from adverseimpact of undue price fluctuations in world markets and for promoting exports will be formulated.Apart from price competition, other aspects of marketing such as quality, choice, health and bio-safety will be promoted. Exports of horticultural produce and marine products will receive particularemphasis. A two-fold long term strategy of diversification of agricultural produce and value additionenabling the production system to respond to external environment and creating export demand forthe commodities produced in the country will be evolved with a view to providing the farmersincremental income from export earnings. A favourable economic environment and supportive publicmanagementsystem will be created for promotion of agricultural exports. Quarantine, both of exportsand imports, will be given particular attention so that Indian agriculture is protected from the ingress ofexotic pests and diseases.In order to protect the interest of farmers in context of removal of Quantitative Restrictions,continuous monitoring of international prices will be undertaken and appropriate tariffs protection willbe provided. Import duties on manufactured commodities used in agriculture will be rationalized. Thedomestic agricultural market will be liberalized and all controls and regulations hindering increase infarmers‘ income will be reviewed and abolished to ensure that agriculturists receive pricescommensurate with their efforts, investment. Restrictions on the movement of agriculturalcommodities throughout the country will be progressively dismantled. PAGE 25
  • The structure of taxes on foodgrains and other commercial crops will be reviewed and rationalized.Similarly, the excise duty on materials such as farm machinery and implements, fertilizers, etc., usedas inputs in agricultural production, post harvest storage and processing will be reviewed. Appropriatemeasures will be adopted to ensure that agriculturists by and large remain outside the regulatory andtax collection systems. Farmers will be exempted from payment of capital gains tax on compulsoryacquisition of agricultural land.Investments in AgricultureThe agriculture sector has been starved of capital. There has been a decline in the public sectorinvestment in the agriculture sector. Public investment for narrowing regional imbalances,accelerating development of supportive infrastructure for agriculture and rural developmentparticularly rural connectivity will be stepped up. A time-bound strategy for rationalisation andtransparent pricing of inputs will be formulated to encourage judicious input use and to generateresources for agriculture. Input subsidy reforms will be pursued as a combination of price andinstitutional reforms to cut down costs of these inputs for agriculture. Resource allocation regime willbe reviewed with a view to rechannelizing the available resources from support measures towardsassets formation in rural sector.A conducive climate will be created through a favourable price and trade regime to promote farmers‘own investments as also investments by industries producing inputs for agriculture and agro-basedindustries. Private sector investments in agriculture will also be encouraged more particularly in areaslike agricultural research, human resource development, post-harvest management and marketing.Rural electrification will be given a high priority as the prime mover for agricultural development. Thequality and availability of electricity supply will be improved and the demand of the agriculture sectorwill be met adequately in a reliable and cost effective manner. The use of new and renewablesources of energy for irrigation and other agricultural purposes will also be encouraged.Bridging the gap between irrigation potential created and utilized, completion of all on-going projects,restoration and modernization of irrigation infrastructure including drainage, evolving andimplementing an integrated plan of augmentation and management of national water resources willreceive special attention for augmenting the availability and use of irrigation water.Emphasis will be laid on development of marketing infrastructure and techniques of preservation,storage and transportation with a view to reducing post-harvest losses and ensuring a better return tothe grower. The weekly periodic markets under the direct control of Panchayat Raj institutions will beupgraded and strengthened. Direct marketing and pledge financing will be promoted. Producersmarkets on the lines of Ryatu Bazars will be encouraged throughout the width and breadth of thecountry. Storage facilities for different kinds of agriculturalproducts will be created in the productionareas or nearby places particularly in the rural areas so that the farmers can transport their produceto these places immediately after harvest in shortest possible time. The establishment of cold chains,provision of pre-cooling facilities to farmers as a service and cold storage in the terminal markets andimproving the retail marketing arrangements in urban areas, will be given priority. Upgradation anddissemination of market intelligence will receive particular attention. PAGE 26
  • Setting up of agro-processing units in the producing areas to reduce wastage, especially ofhorticultural produce, increased value addition and creation of off-farm employment in rural areas willbe encouraged. Collaboration between the producer cooperatives and the corporate sector will beencouraged to promote agro-processing industry. An interactive coupling between technology,economy, environment and society will be promoted for speedy development of food and agro-processing industries and building up a substantial base for production of value added agro-productsfor domestic and export markets with a strong emphasis on food safety and quality. The SmallFarmers Agro Business Consortium (SFAC) will be energized to cater to the needs of farmerentrepreneurs and promote public and private investments in agri-business.Institutional StructureIndian agriculture is characterized by pre-dominance of small and marginal farmers. Institutionalreforms will be so pursued as to channelize their energies for achieving greater productivity andproduction. The approach to rural development and land reforms will focus on the following areas: Consolidation of holdings all over the country on the pattern of north-western States; Redistribution of ceiling surplus lands and waste lands among the landless farmers, unemployed youth with initial start-up capital; Tenancy reforms to recognize the rights of the tenants and share croppers; Development of lease markets for increasing the size of holdings by making legal provisions for giving private lands on lease for cultivation and agri-business; Updating and improvement of land records, computerization and issue of land pass-books to the farmers, and Recognition of women‘s rights in land.The rural poor will be increasingly involved in the implementation of land reforms with the help ofPanchayati Raj Institutions, Voluntary Groups, Social Activists and Community Leaders.Private sector participation will be promoted through contract farming and land leasing arrangementsto allow accelerated technology transfer, capital inflow and assured markets for crop production,especially of oilseeds, cotton and horticultural crops.Progressive institutionalization of rural and farm credit will be continued for providing timely andadequate credit to farmers. The rural credit institutions will be geared to promote savings,investments and risk management. Particular attention will be paid to removal of distortions in thepriority sector lending by commercial banks for agriculture and rural sectors. Special measures will betaken for revamping of cooperatives to remove institutional and financial weaknesses and evolvingsimplified procedure for sanction and disbursement of agriculture credit. The endeavour will be toensure distribution equity in the disbursement of credit. Micro-credit will be promoted as an effectivetool for alleviating poverty. Self Help Group – Bank linkage system, suited to Indian rural sector, willbe developed as a supplementary mechanism for bringing the rural poor into the formal bankingsystem, thereby improving banks outreach and the credit flows to the poor in an effective andsustainable manner.The basic support to agriculture has been provided by cooperative sector assiduously built over theyears. The Government will provide active support for promotion of cooperative-form of enterpriseand ensure greater autonomy and operational freedom to them to improve their functioning. Thethrust will be on: PAGE 27
  • Structural reforms for promoting greater efficiency and viability by freeing them from excessive bureaucratic control and political interference; Creation of infrastructure and human resource development; Improvement in financial viability and organizational sustainability of cooperatives; Democratisation of management and increased professionalism in their operations, and Creating a viable inter-face with other grass-root Organizations.The Legislative and regulatory framework will be appropriately amended and strengthened to achievethese objectives.Risk ManagementDespite technological and economic advancements, the condition of farmers continues to be unstabledue to natural calamities and price fluctuations. National Agriculture Insurance Scheme covering allfarmers and all crops throughout the country with built-in provisions for insulating farmers fromfinancial distress caused by natural disasters and making agriculture financially viable will be mademore farmer-specific and effective. Endeavour will be made to provide a package insurance policy forfarmers, right from sowing of crops to post-harvest operations, including market fluctuations in theprices of agricultural produce.In order to reduce risk in and impart greater resilience to Indian agriculture against droughts andfloods, efforts will be made for achieving greater flood-proofing of flood prone agriculture and drought-proofing of rainfed agriculture for protecting farmers from vagaries of nature. For this purpose,contingency agriculture planning, development of drought and flood resistant crop varieties,watershed development programmes, drought prone areas and desert development programmes andrural infrastructure development programmes, will receive particular attention.The Central Government will continue to discharge its responsibility to ensure remunerative prices foragricultural produce through announcement of Minimum Support Prices policy for major agriculturalcommodities. The food, nutrition and other domestic and exports requirements of the country will bekept in view while determining the support prices of different commodities. The price structure andtrade mechanism will be continuously reviewed to ensure a favourable economic environment for theagriculture sector and to bring about an equitable balance between rural and urban incomes. Themethodology used by the Commission on Agricultural Costs and Prices (CACP) in arriving atestimates of cost of production will be periodically reviewed. The price structure of both inputs andoutputs will be monitored to ensure higher returns to the farmers and bring about cost effectivenessthroughout the economy. Domestic market prices will be closely monitored to prevent distress salesby farmers. Public and cooperative agencies undertaking marketing operations, will be strengthened.The Government will enlarge the coverage of futures markets to minimize the wide fluctuations incommodity prices as also for hedging their risks. The endeavour will be to cover all importantagricultural products under futures trading in course of time. PAGE 28
  • Management ReformsEffective implementation of policy initiatives will call for comprehensive reforms in the management ofagriculture by Central and State Governments. Central Government will supplement/complement theState Governments‘ through regionally differentiated Work Plans, comprising crop/area/target groupefforts specific interventions, formulated in an inter-active mode and implemented in a spirit ofpartnership with States. Central Government will move away from schematic approach to Macro-Management mode and assume a role of advocacy, articulation and facilitation to help States in theirefforts towards achieving accelerated agricultural development.The Government will focus on quality aspects at all stages of farm operations from sowing to primaryprocessing. The quality of inputs and other support services to farmers will be improved. Qualityconsciousness amongst farmers and agro-processors will be created. Grading and standardization ofagricultural products will be promoted for export enhancement. Application of science and technologyin agriculture will be promoted through a regular system of interface between S&T institutions andusers/potential users, to make the sector globally competitive.The database for agriculture sector will be strengthened to ensure greater reliability of estimates andforecasting which will help in the process of planning and policy making. Efforts will be made tosignificantly improve and harness latest remote sensing and information technology to capture data,collate it, add value and disseminate it to appropriate destinations for managing the risk and inaccelerating the growth process. The objective will be to engage in a meaningful continuous dialoguewith the external environment in the changing scenario and to have on-line and real time system of‗Agriculture on-line‘ capacity to analyze signals emanating from the farms and markets for the benefitof farmers. PAGE 29
  • Agriculture StrategyIndian agriculture is constrained by weak linkages between agricultural training and extension, cropproduction, credit, processing, marketing, and insurance. The report presents an integrated strategyfor bringing together all these elements in a synergistic manner by Establishment of village-based Farm Schools to demonstrate and impart advanced technology to farmers on their own lands. Establishment of a network of sophisticated soil test laboratories capable of high volume precision analysis of 13 essential plant nutrients coupled with development of expert computer systems to interpret soil test results and recommend individualized packages of cultivation practices for each crop, location and soil profile. Establishment of Rural Information Centers to act as a medium for transmission of soil test data and recommended practices, access to current input and market prices, and other essential information for upgrading agriculture. Policy and legal measures to encourage contract farming arrangements between agri-business firms and self-help groups in order to increase small farmers access to advanced technology, quality inputs, bank credit, processing, marketing and crop insurance. Measures to strengthen farm credit and insurance programmes, including creation of linkages between crop insurance, crop loans, and farm school training to encourage farmers who seek credit and crop insurance to adopt improved cultivation practices.5. In order to ensure ready markets for the crops that are produced, the report focuses on thepotential for linking crop production with huge untapped markets and specific agro-industries,including energy plantations to fuel biomass power plants, bio-diesel from jathropa, ethanol fromsugarcane and sugar-beet, edible oil from Paradise Tree, horticulture crops and cotton. PAGE 30
  • 6. The report argues that the India labour force suffers from a severe shortage of employable skills atall levels and that intensive development of vocational skills will act as a powerful stimulus foremployment and self-employment generation. In addition to Farm Schools to impart advanced skillsin production agriculture, the report recommends establishing a network of government-certified, ruralvocational institutes providing training and certification in hundreds of vocational skills not covered bythe ITIs. In order to offset the shortage of qualified trainers and the costs of replicating institutionsthroughout the country, the report advocates creation of a national network of Job Shops linked tothe Rural Information Centres and offering televised multimedia training programmes andcomputerized vocational training programmes.7. The report recommends that the National Commission on Farmers arrange for employmentsurveys to provide accurate information on the growing demand for different occupational categories,the natural rate of employment generation by category and skill level, and other issues required topromote full employment in the country. The first Prime Minister of India, Shri Jawaharlal Nehruhad said that ―Everything else can wait but agriculture cannot wait‖. Agriculture continues to be thelifeline of the Indian economy and central to our economic development in the long term. Indeed, thelast six decades have seen the dramatic transformation of Indian agriculture from shortages tosurpluses. This has happened simultaneously with a decrease in the share of agriculture in the GDPfrom over 50 per cent at the time of independence to around 15 per cent today.The nation has achieved food grain self sufficiency by enhancing production from around 50 milliontonnes in 1950 to over 230 million tonnes today. This was achieved through the Green Revolutionthat brought about through strong political will and environment of favourable infrastructure, newtechnology induction, policy support and energized agricultural extension system. PAGE 31
  • Yet, recent trends of the last fifteen years are a cause of concern. After improving steadily from 1980to 1997, the terms of trade turned against agriculture since 1999. The Eleventh Five Year Plandocuments the problems as:Ø A deceleration in agricultural growth and widening economic disparities between irrigated and rain-fed areas;Ø Increased vulnerability to world commodity price volatility following trade liberalization;Ø Uneven and slow development of technology, and inefficient use of available technology andinputs;Ø Lack of adequate incentives and appropriate institutions;Ø Degradation of available natural resource base, including decline in ground water table withadverse impact on small farmers;Ø Increased non-agricultural demand for land and water due to urbanization and economic growthØ Aggravated social distress due to cumulative impact of all these factors leading to upsurge infarmer suicides.To counter this trend, the Eleventh Five Year Plan has suggested measures for a ―more efficient,sustainable and inclusive‖ growth in Indian agriculture that addresses the ‗technology fatigue‘,sustainability question and the ‗yield gap‘, with a sharp focus on rain-fed areas and 85 per cent offarmers who are small and marginal farmers, and increasingly, women. It also recommendedincreasing systems support while rationalizing subsidies, encouraging diversification while protectingagainst food security concerns, and fostering a group approach to ensure that the poor are able toaccess land, credit, skills and scale.The Plan targeted a 4 per cent growth per annum in GDP from Agriculture and Allied Sectors, in theknowledge that agriculture-related GDP growth is twice as effective in alleviating poverty ascompared to GDP growth from other sectors. The Government of India had also announced a ―NewDeal to Rural India‖ focused on reversing the declining trend in public investment in agriculture with aspecial emphasis on irrigation, waste-land development, agricultural research and extension.The Mid Term Appraisal of the Eleventh Five Year Plan has some disturbing facts andconclusions:1. It notes that ―it would be safer to assume that agricultural growth in the Eleventh Plan may fall shortof the 4 per cent per annum target‖ in view of the severe drought in 2009.2. Not all aspects of the Plan strategy are doing well and much more needs to be done on the supplyside. The current high GDP growth is increasing demand for agricultural products and puttingpressure on food prices, especially in the ‗hottest and driest decade‘.3. Farm income variability rose after agricultural trade was opened up under WTO since this endedthe negative correlation between output and prices, and existing price stabilization measures wereinadequate to cope with volatile global prices of agri-commodities. PAGE 32
  • These results must be seen in a larger socio-economic context that is characterized by thefollowing:First, according to FAO, over 250 million Indians are chronically undernourished, constituting 22 percent of our population. This is anomalous looking at record food grain production in recent years.What is becoming clear is that food security and self-sufficiency should be measured not just in termsof production, but in terms of access to, and actual consumption of, food grains.Second, agriculture provides employment to around 52 per cent of our workforce. Around half of allthose engaged in agriculture are illiterate and a miniscule 5 per cent of them have completed highersecondary education. It thus has a disproportionately important role in achieving a higher andinclusive GDP growth, food security, employment expansion and poverty alleviation.Third, it is now well recognized that the Indian growth story is driven by the strong, entrepreneurialand innovative private sector. Private sector investment in agriculture in the last decade in real termshas only increased by 48 per cent, in comparison to public sector investment which has witnessed180 percent increase. As the Economic Survey 2009-10 notes: ―Consistent decline in the share ofprivate sector investment in the agriculture sector is a matter of concern.‖The broad policy and implementation challenges that we need to face to transform Indian agricultureare well etched. State Agricultural Universities have an important role to play in agricultural research.The Eleventh Plan speaks of these State Universities as ―the key to regionally relevant research andfor generating quality human resources‖. It calls upon state governments to substantially fund theirresearch expenses, in addition to salary and establishment costs, to bring their work in line with localagricultural concerns and needs.Orissa is blessed with a diverse range of agro-climatic conditions, flora and fauna. At the same time,the state is also vulnerable to natural calamities such as drought, floods and cyclones, which havehad an adverse impact on agricultural productivity. The role of this University in developing viableadaptation and mitigation measures to deal with this and to capitalize on the rich bio-diversity is thusof prime importance.University‘s role in the areas of crop improvement, crop production, natural resource management,crop protection, post-harvest technology and extension education would always be remembered. It isparticularly notable that it has developed 127 high yielding crop varieties including 50 rice varietiessuitable for different agro-ecological situationsof the State. It has also developed technologies relatedto livestock, fish, mechanized farming and management of land and water.Agriculture Sector Policy for the 11th Plan The transition towards faster and more inclusive growth calls for significant new initiatives in many sectors. In some we need to build on policies that are working well but need further strengthening in critical areas to build the additional momentum needed. In others we need a more comprehensive restructuring since it is evident that business as usual will not do. PAGE 33
  •  Accelerating Agricultural Growth:- The crisis of stagnation in agriculture needs urgent attention. This sector still provides livelihood to nearly 60 percent of our people and remains vital for food security. To ensure a better life for women and men engaged in agriculture, it is necessary to double the growth rate achieved in 10th plan and put agriculture on a growth path of around 4 percent. To do this and at the same time maintain prices and profitability, a corresponding increase in demand for agricultural output matched with the supply side response based on productivity improvements is required. As pointed out by the National Commission on Farmers, we need a new deal that rebuilds hope about farming. Apart from larger public resources that this requires, state level policy makers need to identify critical areas of support and reform that will instill confidence in farmers to undertake more investment. Increasing Demand for Agricultural Output:-  In recent years our farmers have been hesitant in expanding production because (a) per capita domestic food consumption has stagnated in recent years and (b) world prices turned weak for many crops. Consequently agricultural product prices received have failed to keep pace with overall inflation and production costs, thus reducing farm profitability. Various models suggest that even with 8 to 9 percent GDP growth a 4% growth in agriculture will not be sustainable from the demand side unless agricultural exports pick up or consumption by the poor grows beyond what is likely as a result of GDP growth alone.  This means that, although more rapid agricultural growth is the key to more inclusive growth, this in itself requires that other initiatives be in place to ensure that the poor are able to improve their nutrition and contribute to growth of agricultural demand. The recently introduced National Rural Employment Guarantee Programme, will help increase income of the poor directly and reduce expenses incurred on distress migration. The emphasis on expanding access and improving quality of public sector schools and health facilities may also help by reducing the need to pay privately for these services. Improved rural connectivity envisaged through the Bharat Nirmanprogramme can also trigger growth of an integrated national market where rural people are more able to meet each others‘ demand. In its sheer size and scope, the broad based expansion of such rural-rural trade is likely to be much more important in the initial years than other efforts to create demand support such as promoting agricultural exports or support to domestic processing for agricultural diversification. Over time, importance of diversification is likely to grow as infrastructure is put in place, with added advantage of being able to attract private corporate investment into rural areas. PAGE 34
  •  The demand side also requires renewed focus on the Minimum Support Price (MSP) policy and the need for a supportive tariff policy to deal with import price variability. Implementation of MSP policy is very weak except for a few crops in a few regions, and has often failed when farmers were most in need. There have also been too many cases in recent years when world prices have declined very sharply and compensating changes in tariffs have been unduly delayed. All this has lent credence to the view that WTO and globalization are against farmers‘ interests and that the government is no longer committed to supporting farm prices though, on the contrary, our tariff bindings in WTO are in most cases adequate to prevent prices falling below costs of production through WTO- compatible interventions. We need to consider ways of strengthening the MSP policy especially ensuring coverage of relevant crops and of new areas where production increases are likely to take place. We also need to evolve clearer understanding of how best to adjust import tariff to insulate farmers from collapses in international prices. This may require an internal mechanism that includes the Commission for Agricultural Costs and Prices for signaling automatic tariff revision. This will buoy farmer confidence without precluding longer term reform. Strategy to Increase Supply:-  The supply side challenge of doubling agricultural growth is even more formidable. No dramatic technological breakthrough comparable to the first green revolution is presently in sight. And yet the target requires that we achieve higher agricultural growth than has ever been attained in the past, starting at a point where agricultural price cost ratios are lower than in earlier periods of relatively rapid growth. Moreover, the world oil price scenario could turn price-cost ratio further adverse since higher oil prices not only increase costs of production but also push farm output prices further below consumer prices by increasing transport margins.  Sustained long-run growth depends critically upon technological progress and steps are therefore needed to strengthen research in agriculture. However, research has long time legs and it must be recognized that most of the gains realizable during the 11th plan will have to come by exploiting the potential of existing technology. There is enough scope for increasing productivity using existing technology, particularly since Bharat Nirman should ease infrastructure constraints significantly. PAGE 35
  • Most of the growth required in cereals, pulses, and oilseeds is possible merely by narrowing the gap between actual yields and those obtained in trials. But further region-wise, crop-wise analysis is necessary to identify the specific constraints and policy distortions that have resulted in these yield gaps. Development of appropriate strategies for different agro-climatic zones requires a strong data base with regard to soil characteristics, soil health, water availability, weather parameters etc. Improvement in land and water management, much enhanced extension support, quality planting material, and better animal breeds etc., are also required to overcome the yield gaps. Supply or quality problems with fertilizers and pesticides, or higher costs of inputs requires that cannot be met due to insufficient credit may also have to be addressed. In effect, it is necessary to revive and improve the whole range ofsystems support that a small farm economy requires, but which appears to have deteriorated because State governments have cut-back in the course of fiscal consolidation. There must be informed advice on farm practices and recommended inputs, particularly seeds, must be easily available and affordable. The quality of all inputs should also be regularly monitored. In some cases, the private sector may be able to provide superior support, for example, through PPPs to revive sick State seeds farms or contract farming, but for most part this is a responsibility that State governments must fulfill. Further, because the basic strategy is to exploit existing technology more intensively, it will require either much more effort from farmers or more labour saving machinery. Mechanization has accelerated during the last decade despite slow agricultural growth (for example tractor numbers went up to 70% between 1997 and 2003 Livestock Censuses) and this trend will normally intensify if growth increases, particularly because young males in relatively better off farm families now prefer off-farm work. But while higher labour productivity is desirable, and so is voluntary exit from farming to better non-farm alternatives, NSS reports a rapid rise in involuntary unemployment among agricultural wage workers due to large absolute decline in days of agricultural wage employment. There is evidence too of increase in unrecorded tenancy. Despite this more land is being left fallow. Current land distribution and laws governing tenancy need to be re-examined. Taking all the above into account, the 11th Plan strategy to raise agricultural output will be based on the following elements: Double the rate of growth of irrigated area; Improve water management, rain water harvesting and watershed development; Reclaim degraded land and focus on soil quality; Bridge the knowledge gap through effective extension; Diversify into high value outputs such as fruits, vegetables, flowers, herbs and spices, medicinal plants, bamboo, bio-diesel etc, but with adequate measures to ensure food security; Promote animal husbandry and fishery; Provide easy access to credit at affordable rated; Improve the incentive structure and functioning of markets; Refocus on land reforms issues. PAGE 36
  • Water Management and irrigation Water is a critical input for agricultural and this calls for more effective utilization of existing irrigation potential, expansion of irrigation where it is possible at an economic cost and better water management in rainfed areas where assured irrigation is not possible. This is clearly an area where past policies have been inadequate. Performance in expanding irrigation has been disappointing with resources being spread thinly over many projects and a large number of irrigation projects remaining under construction for many years. At the same time, flood forecasting, control and management are also vitally important for many parts of the country. The Bharat Nirman programme envisages creation of 10 million hectares additional assured irrigation during the 4 years period (2005-2009). To achieve this, the pace of potential creation will have to increase from 1.42 million hectares per year in recent years to 2.5 million hectares per year. Of the new potential envisaged under Bharat Nirman, about half is planned for 2007-08 and 2008-09 that is first 2 years of the 11th plan. Assuming the same rate continues thereafter, a total of about 11 million hectares of new potential can be expected in the 11 th plan consisting of 5.5 million hectares in major & medium irrigation, 3.5 million hectares through minor irrigation and about 2.0 million hectares through ground water development. In addition, another 3-4 million hectares of land is to be restored through modernization of major, medium, and minor projects and restoration of tanks. Investments in the major and medium irrigation sector will require large resources from the state governments supported by Central Assistance under AIBP. However, prioritization by proper cost-benefit analysis and timely implementation of these projects by state governments is also important. Besides regular monitoring by Central Water Commission, it is proposed to expand usage of remote sensing techniques for this purpose which has been initiated on a pilot basis in the 10th plan. Along with expansion of irrigation facilities, it should be ensured that water is distributed equitably and used efficiently. The pattern observed in the past where tail-enders are denied water because upper end-users appropriate it for highly water intensive crops must be avoided. Participatory Irrigation Management (PIM) by democratically organized water user associations empowered to set and collect water charges, and retain a substantial part of the collection, would help to maintain field channels, expand irrigated area, distribute water equitably and provide the tail enders their just share of water. Experience in Andhra Pradesh and Gujarat has shown the effectiveness of such PIM. The 11th plan must expand reliance on PIM on a large scale. PAGE 37
  •  Water is also critical for rain fed as well as unirrigated land which accounts for more than 60% of cultivable area. Water conservation and ground water management is critical for these areas and will therefore need much more focused attention. In some regions, particularly the lower Gangetic plains and Assam, there is vast scope to utilize the abundant ground water which can quickly add to output. Tapping this potential must be an essential part of 11 th plan strategy. In other regions, the urgent need is for discipline on groundwater use to avoid the deepening agricultural crisis in dry land areas. Some policies being followed by state governments encourage wasteful use of water. As the NCF has pointed out, having access to cheap power use almost doubles the amount of water per unit of crop compared to farmers using diesel pump sets. Continued provision of free power by some states, and highly subsidized power by all states, encourages excessive use of ground water. This reflected in the fact that semi-critical, critical and over exploited areas of groundwater use are increasing and already cover 29% of the blocks in the country. Watershed management, rainwater harvesting, and ground water recharge can help augment water availability in rainfed areas. Micro irrigation is also important to improve water use efficiency. Building structures for water management and managing them provides immediate opportunities for employment generation in rural areas. The enhanced productivity of land will generate further sustainable demand for labour in rural areas. The National Rainfed Areas Authority, which will be set up shortly would provide for developing concerted action plans for rainfed areas in close consultation with state governments. Serious efforts at addressing water management issues will require a substantial commitment of public resources. With an estimated 80 million hectares needing treatment, and average expenditure of Rs. 10,000 per hectare, the total requirement of funds is about Rs. 80,000 crore. For this magnitude of funds to be available during the 11th Plan, it is essential that these programmes be converged with or at least supplemented by the Employment Guarantee Programme Funding.Reclaim Degraded land and focus on soil quality Due to expansion of urban areas net sown area has reduced significantly in recent years. While conversion of agricultural to non-agricultural land in an unavoidable concomitant of the development process, we need to ensure that this does not put undue pressure on agriculture or lead to inefficient land- use, for example loss of water bodies and speculative land purchase that reduces cultivation without any productive use for several years. Existing regulatory procedures need to be reexamined since delay in converting land from farm use to more productive non-farm use does have costs. But this must go hand-in-hand with the creation of a new regulatory framework governing such conversion, based transparently on principles of sound land-use planning. PAGE 38
  • Since land-use patterns will change, it is necessary to offset the loss of agricultural land by bringing more land under cultivation. As noted above, there is a large amount of degraded land that can be reclaimed through watershed development. There is also a considerable amount of saline and sodic land, which can be brought back to cultivation with treatment. Although schemes exist, these have so far suffered from lack of funding. As with watershed development, state governments should upscale using all the scope for convergence with other rural development programmes including, where possible, National Rural Employment Guarantee Programme (NREGP). The scope for improving the quality of land that is currently being cultivated also needs further exploitation. Vast areas of cultivated land are acidic, where significant yield increases are possible through treatment using waste material from industry. There is sulphur deficiency in large parts of the country, but this can be treated effectively, resulting in better yield, particularly for pulses and oilseeds. More generally, Indian soils are relatively deficient in organic matter and are suffering inadequate manuring and composting, aggravated in many regions by unbalanced use of chemical fertilizers, especially excessive application of nitrogen. This raises serious issues of long-term sustainability, but also offers the possibility that fairly large yield increases can be obtained in the short-run by applying the other nutrients, including micro-nutrients, that have been seriously depleted. Subsidies are, to a considerable extent, responsible for excessive use of some fertilizers, for example, Urea. Fertilizer pricing therefore requires urgent reform to end the present irrational discrimination across nutrients.Bridging theKnowledgeGap The National Commission on Farmers (NCF) has drawn attention to the knowledge deficit that exists at present and explains much of the difference between yields realized in experiments and what farmers actually get. One reason for this is the virtual collapse of extension services in most states, with 30-40% of positions remaining vacant. Farmers are not fully aware of the adverse consequences of unbalanced fertilizer use or of benefits of micronutrient application and soil testing to determine optimal nutrient requirements is hardly practiced on a regular basis even by State Agriculture Departments. Similarly, although many new varieties of seeds and pesticides have entered the market during the last decade and farmers are using these, they do not appear to have significantly higher productivity and there are frequent complaints about quality. A problem is that input dealers, who have narrow commercial interests have emerged as the main vehicle for technology diffusion and farmers do not have access to reliable third-party advice which an effective and knowledgeable extension service should be able to provide. Lack of credit also pushes farmers to purchase inputs from local suppliers who often provide sub-standard inputs. PAGE 39
  •  To overcome information gaps and for advice in contingencies such as pest-attacks, it is necessary to revitalize the extension system in a manner that links universities and best practices effectively to farmers. States need to take urgent steps in this area. Central initiatives on this also need to be strengthened. Krishi Vigyan Kendras set up by Indian Council of Agricultural Research (ICAR) ,have very little interaction with the Agricultural Technology Management Agency (ATMA) model extension being promoted by the Department of Agriculture & Cooperation (DAC). Due to this lack of coordination not only are farming practices in large parts of the country sub-optimal, our plans and programmes are failing to converge technical and development aspects even across Centrally Sponsored Schemes (CSS) of the Ministry of Agriculture (MoA), let alone converging effectively with those of other central ministries, such as on watershed development. The lack of synergy between different public efforts must be addressed urgently to multiply returns to plan expenditure. The NFC has suggested ways to synergize at the village level, for example, through Farmer Knowledge Centres, which is already being implemented in some places with PRI and NGO help. Since synergies between line departments and CSS can be derived best through district plans, the Planning Commission and Ministry of Panchayati Raj have begun strengthening the process of district planning. The recent MoA initiative to set up technical bodies such as the National Fisheries Board and the National Rainfed Areas Authority should help to improve synergy. The nature of technical constraints and crop/livestock development possibilities vary considerably across different agro-climatic zones and the agricultural strategy for the 11 th Plan will have to aim at evolving packages specific to zones. In this context, there is a need to bring a much more regionally focused technical content into all CSS of MoA. However, while strategies can emerge through consultation between the Centre and the states, the task of implementing these on the ground falls almost wholly on the state governments. Administrative structures need to be optimized for region-specific implementation. One approach could be that MoA delegated many of the existing powers from Delhi by appointing Regional Production Commissioners based alongside ICAR Regional Co-ordinators.Diversification to High Value Output While Ensuring Food Security Faster agricultural growth will require diversification into higher value output, for example horticulture, floriculture etc. This is partly because demand patterns are shifting in that direction and also because in many cases this is the most efficient way to increase incomes of farmers from their limited land and water resources. Recognizing this, the newly launched National Horticulture Mission (NHM) is already the largest single plan scheme of MoA, which is even larger than the macro – management in agriculture (MMA) scheme that provides main support from the centre to almost all other crop activity. The NHM allocation is large because apart from including significant new interventions for ensuring availability of quality planting material; crop and regions-wise, the programme also provides for structural changes in the relationship between agriculture and non – agricultural sectors. Horticulture products are perishable commodities and therefore very efficient linkages need to be put in place between farms and final buyers. This requires modern methods of grading, post- harvest management, cold chains, etc. For this purpose, besides providing for direct public investment in marketing infrastructure, NHM incentives amendment of APMC Acts to enable larger private sector participation in marketing and processing. Many states have begun this process, which should be accelerated. PAGE 40
  •  Diversification also means that the produce must meet the specific requirements of the different markets being serviced, and these requirements vary depending on whether the market is domestic consumption, agro- processing or exports. Producer‘ co-operatives are one way of achieving these linkages. Contract farming is another way of attracting corporate investors to help establish these linkages and also provide farmers with necessary in puts, extensions, and other advice. Many states have taken steps to facilitate contract farming as a way of assisting the process of diversification. A much greater focus is also necessary on enabling small farmer participation by encouraging group formation and providing suitable and effective regulatory frameworks. Entrenched interests dominating traditional trade channels often oppose change. But such opposition, if it seeks simply to restrict market competition or to hinder the growth of co-operation among the farmers, is against the interest of both farmers and consumers. In a mission so demanding of public resources and with a scope that can alter how agriculture is carried out and how it relates to the rest of the economy, there are also bound to be genuine concerns. Some experts believe subsidizing shift of land from food grains to horticulture can be uneconomical and at the cost of food security. Such fears are somewhat exaggerated, but have become more relevant now that our food stocks have depleted to the point where large and high cost wheat imports have become necessary again. It is important that encouragement to diversification is not driven purely by subsidy but reflects a logical shift towards higher sustainable productivity. There is need to exploit fully the scope for co- operation between different agencies. The guidelines of NHM are silent on NREGP despite very large possibility of convergence. Also, horticulture involves greater female participation then in case of other crops, but there has been no follow –up on lessons from a UNDP- financed pilot that had demonstrated success with women‘s co-operatives. The 11th plan provides an occasion to re-examine policies to deal with these issues. The broad principle that will have to be followed is the one that was stated in the Mid-Term Appraisal of 10th Five year Plan: that priority must be on technology to improve yields and on post-harvest management, infrastructure and processing. The objective is not to attain any particular level of production for a particular horticultural crop but to enable farmers to earn the highest possible sustainable income. Therefore, as far as possible, subsidies should be neutral across crops, whether covered by NHM or other programmes such as MMA with this, food security will not be endangered by diversification if food grain yields grow at around 3% per annum. This rate of yield increase had actually been achieved during the 1980s and should be a specific 11th plan target. With a focus on east and central India, this can be achieved by tapping available ground water, better land and water management, and bridging the large yield gaps that exist. This region will get very sizeable additional resources through NREGP, Bharat Nirman, and Backward Area Grant Fund which if used properly can not only reduce costs of land and water development and improve village electrification and connectivity, but also create demand and allow PRI level capacity building. The main tasks on the side of agriculture proper will be to; (a) converge effectively with these programmes of other departments; (b) massively step up technology demonstration; (c) ensure regular and timely provision of credit and of quality inputs (primarily suitable seeds and fertilizers); (d) and build up the presently almost non – existent price support system. A potential obstacle will be the semi – feudal land relations that exist in some parts of this region. PAGE 41
  • Animal Husbandry and Fishery The livestock and fisheries sectors together account for about 30% of the output of Agriculture & allied sector and provide full time and part time employment to 5.5% of the total working population, the majority of whom are women. The 11th plan must evolve viable strategies for these sectors to expand rapidly. India continues to be the largest producer of milk in the world with a total production of 91 million tonnes in 2005-06 and the contribution of milk was higher than paddy, wheat, and sugarcane in the year 2003-04. Yet the per capita availability of milk at 231 gm. per day during 2003-04 is still very low compared to nutritional requirement suggesting scope for further expansion. Matters are even worse regarding meat, with abattoir conditions pathetic and utilization of by-products inefficient. Poultry development in the country has shown better progress over the years, primarily because research and development schemes of the government have been complemented with effective management and marketing by an organized private sector. The fisheries sector has also performed well but vast potential exists, particularly in inland fishery. The setting up of the National Fisheries Board should bring better technical focus. The survival of pastoralism is crucial for sustainable land use. Besides conserving domestic biodiversity, it is a means of producing food in dry lands without depleting groundwater resources. However, there are many constraints on expansion in this area. Grazing permits are denied in traditional grazing sites that have been converted into protected areas/wildlife sanctuaries, national parks/Joint Forest Management (JFM) programme. Original pasture lands or stipulated animal drinking water ponds are encroached upon or used for other purpose. Bio-diesel (Jatropha) planting is being promoted through state agencies without seeing all the consequences such as blocking the migration routes of animals and encroaching upon herd-passing pathways. It is vital to ensure that the commons are protected and women, who make up a substantial portion of the workforce in this sector, are given control over them. This will prevent their use for other purposes.Some of the important initiatives that are needed are: Promotion of appropriate crossbreeds while conserving indigenous breeds of livestock. Establishment of livestock marketing system. Promotion of rural backyard poultry in a cooperative marketing setup. Development of cooperative diary firms. Enhancing livestock extension services. Encouraging private veterinary clinic. Institutionalizing a framework for utilizing synergy between restoration and creation of water bodies for water harvesting and fishery. Provision of an insurance package to avoid distress. PAGE 42
  • Access to Credit and Risk Management1.2.31 Access to financial resources enables the poor to exploit investment opportunities, reducestheir vulnerability to shocks, and promotes economic growth. But lack of credit at reasonable rates isa persistent problem, in large part, reflecting the collapse of the cooperative credit system. The failureof the organized credit system in extending credit has led to excessive dependence on informalsources usually at exorbitant interest rates. This is at the root of farmer distress reflected inexcessive indebtedness. There are of course some recent positive developments, for example, theacceptance by the government of the Vaidyanathan Committee report on co-operatives and thesuccess of commercial banks to almost double the flow of agricultural credit after 2003. Nonetheless,problems still persist. Implementation of the Vaidyanathan report has been slow because of thereluctance of states to cede control over co-operatives. Problems of the long-term credit structurehave hardly been addressed, and the large increase in commercial bank credit does not appear tohave significantly improved access in either regions with poor banking support or for small/marginalfarmers and tenants. There is evidence that farm debt is increasing much faster than farm incomes and the larger issue ofthe overhanging dept stock, as distinct from credit flow, has not even been on the agenda except of afew state governments. Admittedly, there are limits to the extent that banks can be expected to playa purely social role in today‘s more competitive environment. However, too conservative an approachon settling debt that has turned bad due to contingencies of poor weather or prices is not evenprudential banking if this serves only to show bank balance sheets to be better than they are, andprevents profitable new lending. There are several suggestions, ranging from a Stabilization Fund tobe run by the Centre for automatic write-off under some specified conditions, to the setting up, bystates, of standing professional Debt Commissions to examine individual debt (including to non-institutional sources) on a case-by-case basis for one time settlement. The 11 th Plan will examine indetail the impediments which now stand in the way of social and developmental banking and suggestinnovations that can Improve access and speed up one-time settlements while maintaining creditdiscipline and financial prudence. As farmers adopt new and untried technology and increase inputintensities, they also face larger risks. These risks are often not well understood owing to lack ofknowledge of the specific requirements of new seeds and other new technology for achievingproductivity gains. All farmers do not have the ability to bear downside risks and this is evident fromthe spate of farmer suicides when new seeds fail to deliver expected output, or expenditure on borewells proves infructuous, or when market prices collapse unexpectedly. Farmers should be protectedagainst such risks by appropriate measures. Insurance is one way of doing this, but only 4% offarmers are currently covered by any crop insurance. The financial cost of existing and proposed cropinsurance schemes is considerable, as well as recurring. Moreover, current crop insurance is onlyagainst yield loss and does not cover price risk. Farmers also lack cover against other risks, forexample accidents which can also prove crippling. These and related issues of risk management areagain largely non-Plan areas but need to be addressed during the 11 th Plan. This should ideally bedone by concentrating on innovations in design which could help expand insurance in a manner thatis financially viable without excessive subsidy. PAGE 43
  • Land ReformsLand relations can have a major impact on agricultural productivity and production. Inequality in landdistribution and insecurity of tenure etc., are often at the bottom of many forms of social discriminationand domination based on gender, caste, minority and tribal affiliations. The National Commission onFarmers has placed the unfinished agenda in land reform first in its list of five factors central to thepresent agrarian crisis, and states ―the first and foremost task of the National Policy for Farmersshould be in the area of land reform with particular reference to tenancy laws, distribution of ceilingsurplus land, attention to common property and wasteland resources and the consolidation ofholdings. Following the conferment of land rights to women under the Hindu Succession AmendmentAct (2005), the provision of appropriate support services to women farmers has become urgent. JointPattas are essential for women to get access to credit. Also, there should be stringent restrictions onthe diversion of prime farmland for non-farm purposes.‖Since migration and feminization are increasing trends, land reforms that make tenancy legal andgive well defined rights to tenants and to women are now more necessary than ever not only toreduce distress but also to increase agricultural growth. Facilitating Leasing of land for cultivation isnecessary to prevent cultivated land from turning fallow due to migration of owners to urban areas.Lack of recognized tenancy rights makes it difficult for de facto tenants to get credit from formalsources. Tenants without legal rights do not have proper incentive to develop the land and thisexplains part of the yield gap. Similarly, a woman without property title is unable to get credit whenthe male member is away. Giving access to land and homesteads not only reduces poverty but is themost powerful way to bring dignity in the lives of today‘s excluded. This, along with the more generalneed to record land titles properly where these are weak, is also one way to deal effectively withencroachment and non-participation that plague watershed and wasteland development programmes.With EGA in place, such programmes can be stepped up very substantially to address naturalresource regeneration but the incentive issues related to land will have to be addressed.Agricultural Research Since the green revolution in the sixties there has been no major technological innovationwhich could give fresh impetus to agricultural productivity. The absence of productive technologywhich also reduces risks is particularly serious for rain fed, dry land situations. In the longer run,growth in agricultural productivity can be sustained only through continuous technological progress.This calls for a well considered strategy for prioritized basic research, which is now all the moreurgent in view of mounting pressure on scarce natural resources, climate change and also theshrinking availability of spill-overs from international public research. For ushering in a second greenrevolution, a strategy that frees us from the past binds is called for. The strategy should beoperationalized in the form of challenge programmes in which central institutes and the stateagricultural universities work with organic integration.The 11th Plan must energise the National Agricultural Research System and improve its capacity todevelop and deliver innovative and effective technologies relevant to the current context and needs.We should not only undertake strategic research to tackle well identified problems in a good directedway but also strengthen basic research that may contribute to growth. The recently established fundfor National Strategic Agricultural Research must be expanded in the 11 th Plan and oriented tostimulate research that responds to newer and more formidable challenges and provides region-specific problem solving capacity. A delivery-targeted operational mechanism will have to bedesigned for its meaningful operation. Clearly business as usual has no place whatsoever in thisframework. The agricultural system also needs to be thoroughly revamped and restructured in thelight of the recommendations of the high powered committees chaired respectively by Dr. M.S.Swaminathan and Dr.R.A. Mashelkar. PAGE 44
  • The initiatives discussed above can, with sufficient effort and funding, raise the agricultural growthrate from 2 percent to 4 percent during the 11th Plan. About half of this, that is, 1 percent additionalgrowth, is expected as a direct result of the new Plan programmes, including Bharat Nirman, thathave been initiated since 2004 and which have already increased the combined Plan expenditure ofCentre and states on agriculture and irrigation by over 60% in real terms as compared to the first twoyears of the 10th Plan. The remaining 1% additional growth would need to come mainly from betterresource utilization and larger private investment, although of course some additional Planexpenditure may be required to facilitate this. Overall agricultural investment would need to be about16% of the agricultural GDP, with public investment contributing 4 to 5%, during the 11th Plan. Case StudyTHE DEATH TRAPFaced with mounting debt, a failed crop for the second year and government indifference,cotton farmers in the Vidarbha region of Maharashtra are resorting to suicide as a way out ofmisery.BALKRISHNA AJABRAO SAWAI, a farmer of Jagona village in Hinghanghat district in the Vidarbharegion of Maharashtra, cultivated cotton on his eight acres (3.2 hectares) of land, and the returnswere good until a couple of years ago. On October 30, he was found dead in his field. A visceralexamination indicated the presence of a pesticide. He had apparently taken the step unable to facethe local bankers and moneylenders who had loaned him money. Two successive failed monsoons,coupled with the non-payment of dues by an apathetic State government, left him with barely enoughto feed his family and repay a debt of Rs.50,000. It is a situation that thousands of farmers in thecotton belt of Maharashtra are familiar with, and increasingly they are reaching for the pesticide canas a way out of the misery. At the procurement centre in Wardha. Procurement has not yet begun and farmers wait for private traders who grade the cotton and bid among themselves. PAGE 45
  • More than 80 suicides have been reported since May 2001 in 12 districts, primarily in the Vidarbharegion of eastern Maharashtra. A large number of deaths have been reported this year than last yearafter a second crop failure and dipping cotton prices left farmers with no chance to repay their loans.Even a hand-to-mouth existence was rendered difficult by the State governments irregular paymentsfor the cotton it procured last year. In six weeks from early October to mid-November this year, ninesuicides were reported in two districts, five of them from Ralegaon, a core cotton-growing area. Inalmost every case the reason for the suicide was the same - mounting debt owing to a crisis in thecrop - as Frontline found out in several villages that it visited in Wardha and Yavatmal districts.Although the suicide cases have been registered at police stations, the State government refuses toput out a figure or acknowledge the reasons for them. State Agriculture Minister RohidasPatiltold Frontline that the administration had investigated the deaths and concluded that most of thedeaths were from natural causes and not because of any crisis in agriculture. While Patil at leastadmits to the deaths, the District Collectors of Amravati, Yavatmal, Buldhana and Washim — wheremost number of suicides have been reported — either deny the deaths or attribute them to the run-upof bills for marriages or medical problems. To link these household financial burdens to an irregularand low income coming from crop sale "is completely inaccurate," says Parag Jain, the Collector ofYavatmal district. "We have conducted a detailed inquiry and found that their personal andpsychological problems led them to this state. It is, therefore, not our concern."Such official unconcern flew in the face of the list of suicides compiled by the Maharashtra CottonGrowers Farmers Sanghatana.Frontline visited the families of eight persons on the list, in eightdifferent villages, and was able to confirm the deaths. Not a single official had visited any of thefamilies — even in Yavatmal. In one case, a Tehsildar had demanded Rs.15,000 from the family if itwanted the case to be registered as suicide. In many cases the Collectors were dismissive of thedeaths. "Suicides are quite common in these parts," said Wardha Assistant Collector A.E. Bansod.In 1997, the Vidarbha region faced a similar crisis when approximately 80 suicide cases wereregistered officially. Untimely rain destroyed the kharif crop that year, leaving small farmers with littlemoney and less hope to clear their debts. While the suicides both times may have been triggered bythe vagaries of the weather, it is becoming increasingly clear that the root of the problem lies in theeconomic and other policies adopted by the government."Such a crisis of mounting indebtedness and despair is unprecedented in independent India and it isthe direct result of trade liberalisation, exposure to global volatility and resulting price crashes," sayseconomist UtsaPatnaik. "The cynicism of the aggressively pro-reform government in the Stateisrevealed by its decision to stop making ex-gratia payments to the relatives of farmers who committedsuicide, on the grounds that it `encouraged suicide."UtsaPatnaik, in a paper titled "Deflation and Deja Vu: Indian Agriculture in the World Economy", saysthe majority of cotton growers are small farmers. They are highly price-responsive and have been sosince colonial times. She says that as world cotton prices improved in the early 1990s andunregulated exports were permitted, hundreds of thousands of farmers expanded the area undercotton. They took large cash advances from traders and loans from banks to meet the extra seed andinput costs on vast tracts of rain-fed land. PAGE 46
  • One and a half million hectares of land was diverted from foodgrains to cotton between 1991 and1996, according to Utsa Patnaik. "Unfortunately, the cotton crop is susceptible to a large variety ofpests and the unholy trinity of commission agents, fly-by-night pesticide dealers and seed suppliers,"she says. Cotton prices started declining in 1995-96 from 75 cents a pound to an all-time low of 35cents in October 2001. This, along with the lack of rain, spelt doom for the farmers. Worse still wasthe condition of the farmers who had bought the expensive Bt cotton seed from multinationalcompanies such as Monsanto. It did not germinate this year because of insufficient rain. Champat Raut. He owns 25 acres of land but has "no money to feed his family".Adding to the farmers problems is the increase in cotton imports, particularly from the United States.With the government lifting quantitative restrictions under the World Trade Organisation (WTO)treaties, cotton imports from the U.S. increased from 21,221 tonnes in 1999 to 48,805 tonnes in 2000."By permitting imports of cotton at 5 per cent duty, the Central government has destroyed thedomestic market. Prices have fallen drastically and the only people who have gained are those in thetextile industry," says Vijay Jawandhia, leader of the Kisan Sanghatana based in Wardha. "Thepowerful textile lobby is resisting any move to increase the import duty on cotton... Thirty lakh farmershave been squeezed to allow the textile industry to run profitably." In its defence, the Indian textileindustry claims that the cheaper imported cotton is better suited to the export requirements of Indiantextile mills.There is a glut of cotton in the world market at present. With more than one million tonnes of stockremaining from last year, cotton prices during the current marketing season are at their lowest since1973, says the Washington-based International Cotton Advisory Committee (ICAC), an associationcomprising 42 countries growing and consuming cotton. "These prices, along with a failed monsoon,have been crippling the Indian small farmer," says the ICAC, which assists members in framing policyand providing technical advice. PAGE 47
  • Jawandhia says the government is so dead set on free trade, but no such thing exists. Internationalcommodity prices have fallen, he says, because countries like the U.S. provide their farmers withhuge subsidies as well as impose exorbitant import duties. For instance, subsidies account for 30 percent of producer prices in the U.S. Japan levies a 1,000 per cent duty on rice imports. The WTOagreement allows India to set import duties ranging from 100 to 300 per cent on agricultural goods.But the government is adamant on sticking to single digits, pandering to the rich countries, saysJawandhia.In Maharashtra, the State government seems to pander to the sugar lobby, says Ashok Dhawale, aleader of the All India Kisan Sabha. "Why is it that the import duty on sugar is almost 60 per cent?And when the price of sugar fell, the government immediately announced subsidies for exports." It iswell-known that Maharashtras sugar lobby comprises some of the States most powerful politicians.While cotton is almost entirely a dry-land crop, sugarcane fields drink the lions share of irrigationwater in Maharashtra. The Kisan Sabha is demanding a 150 per cent import duty on cotton. Thiscould save lakhs of farmers from their present plight.MORE than 30 lakh farmers are dependent on cotton cultivation in Maharashtra. Vidarbha accountsfor 20 per cent of the cotton production in the country, which places Maharashtra second in cottonproduction in India. Approximately 30 lakh hectares, which is about 16.9 per cent of Maharashtrasnet sown area, is under cotton. The regions growth took off when Britain sourced its cotton from herefor its textile industry during pre-Independence days. It was Amravati cotton that was primarilyexported. During the textile boom, Mumbais mills used a large portion of the crop output. Theproximity to Mumbai also helped exports.Yet, for all its contribution, the State has paid little attention to the needs of this farming community.Irrigation, for instance, is virtually non-existent. Most of the area is under dryland farming. The regionis almost entirely rain-fed. Insufficient rain brought down the harvest to 42 lakh bales this year from 52lakh bales last year.The State governments neglect of cotton farmers has played a large role in their falling fortunes. Forthe past three decades Maharashtras cotton farmers have been protected by the States uniqueMonopoly Cotton Procurement Scheme (MCPS). It is the only assurance of a fair price for this cashcrop, but there was talk that it may be scrapped. If that happens, the farmers will have to compete inthe open market. They will have no guaranteed income and will be at the mercy of private traders.Citing financial difficulties, the Democratic Front government in the State announced that this year itwill buy cotton at the Central governments minimum support price (MSP). Initially, Chief MinisterVilasrao Deshmukh stated that the State could not afford to pay the MCPS bonus in advance. But onthe first day of the winter session of the Assembly in Nagpur, December 12, he relented to politicalpressure and announced that the government would pay the bonus in advance in two instalments.The price per quintal was fixed at Rs.2,300. The bonus is what makes the scheme so popular (seebox). PAGE 48
  • Over the last decade, the scheme has become heavily politicised. Successive governments tried toscrap it, yet it has survived. Ironically, when the MCPS was introduced, the free-market proponent,the BJP, labelled it protectionist and demanded its withdrawal. Now, with the media exposing theincreasing number of suicide cases, Opposition politicians and also partners of the ruling coalitionhave sprung into action to exploit the situation. The Shiv Sena and the BJP have activated acampaign against scrapping the MCPS, which, they say, is the only way to protect cotton farmers.Meanwhile, several Ministers from Vidarbha, who belong to the Nationalist Congress Party, thelargest ally of the Congress(I) in the Democratic Front, threatened to resign from the party if the MSPwas not increased and the promised bonus was not paid. Vilasrao Deshmukh, however, would notbudge. He dismissed their threats as "drama" and said that if the Ministers were serious they wouldhave tendered their resignations to the Speaker of the Assembly.These political shenanigans and vote-bank politics were seen last December too. The ShetkariSangatana, along with the BJP, had staged a rail-roko agitation demanding that the farmers be paidthe full support price and the balance of the State-guaranteed price later. The government relentedand offered to pay 90 per cent of the support price. The last payment of this was made to the farmersin early November.The MCPS is a sort of benchmark price, says S.S. Sandhu, Chairman of the Maharashtra StateCooperative Cotton Growers Marketing Federation. "Private traders will not go much below the Stategovernment price, so farmers wont be completely swindled. Unquestionably, the MCPS is the onlysecurity farmers have," Sandhu told Frontline. "But we are buying the cotton at Rs.425 more than theCentral governments MSP of about Rs.1,675 and selling the cotton at about Rs.1,500, which iscausing us a 25-30 per cent loss. The scheme will work only if it makes a profit and if the farmers arepaid the entire amount in one instalment," he says. The Federation has not begun buying this yearscrop as yet. Some farmers are holding back from selling their crop because the MCPS price is asecurity. "We will wait and see what the price is, otherwise private traders can swindle us," saysNamdev Kamble, a cotton farmer from Wardha. PAGE 49
  • Some farmers cannot afford to wait for too long. Farmers like Champat Raut, who are in deep debt,have been forced to sell their produce to private traders, who often double as moneylenders. "I needthe money to feed my family, pay workers, buy seeds, pesticide and fertilizer. I cannot wait for thegovernments instalments. Interest is accumulating at 50 per cent annually on my loan," says Raut."Besides, the government deducts the bank loan amount from the payment. That leaves me with verylittle, so I might as well sell it to a private trader." Raut, who owns 25 acres (10 ha) of land, says thatnormally the moneylender is prepared to take the crop if he cannot repay the loan. "But this year themoneylender wants only cash."Raut has sold 12 quintals of cotton to a private trader at Rs.1,875 a quintal, much lower than what hewould get if he sold it to the Federation. He has a Rs.50,000 bank loan, on which he pays nearly 16per cent interest. He owes another Rs.30,000 to a moneylender and has several credits pending atshops that have sold him seeds, pesticide and fertilizer. Raut attempted selling some of his land topay his debts. But he found no takers. "I think it is better to leave this world than to carry on like this,"he says. While his cost of production has gone up substantially, the price of cotton has only reduced.His cultivation costs are about Rs.3,000 an acre and this year he got hardly three quintals an acre. Ascotton is highly susceptible to pest attack, a substantial amount of money is spent on pesticide."There is a growing sense of desperation this harvest season," says Jawandhia. "Unless thegovernment declares the region drought-hit, there are very few options available." Farmers pay an 8per cent premium on their bank loans towards crop insurance. Only if the drought is declaredofficially, the banks will allow them to claim insurance.Furthermore, says Jawandhia, if a farmer wants to switch to a crop like soybean, he cannot afford itbecause the banks will not give him a loan until he repays the pending loan. But with no pressuregroups to influence the government on their behalf, and with little sign of the Central governmentamending its liberalised policies, the future looks bleak for the cotton farmers of Vidarbha.AbstractFor last few years every other day we read the news of farmers committing suicides. Thenumber of farmers who have committed suicides since 1997 has crossed 1 lakhs. In thiscontext the actual problems being faced are to be understood and analyzed. Innovativeremedies have to be thought of which are to be implemented with sincerity by theGovernment and the implementing agencies, along with putting in place ways to rehabilitatethe affected farmers. An attempt has been made in this article to address the issue of farmersplight leading to suicide and measures to address the issue have been suggested.Several studies have been conducted by the Government and social science organizations toanalyse the agrarian crisis and farmers suicides. Based on my experience as DistrictDevelopment Manager (DDM) in District Betul of Madhya Pradesh, which incidentally isadjacent to, identified distress districts in Maharashtra. I have tried to summarise causes ofsuicides and suggested remedies in the paper.Central and State Government have announced the relief packages to the suicide affectedfamilies in Maharashtra. NABARD is the implementing agency of the package provided byCentral Government. In the budget of 2008-09 Honourable Finance Minister has alsoannounced massive write off to the tune of Rs.60000 crore of the outstanding loan of small& marginal farmers and OTS for other farmers. PAGE 50
  • 1. Introduction:-Agriculture provides the principal means of livelihood for over 60% of India‘s population.Despite a steady decline in its share to the gross Domestic Product (GDP) agricultureremains the largest economic sector in the country. Low and volatile growth rates under thesector and the recent escalation of an agrarian crisis in several parts of the country pose athreat not only to national food security but also to the economic well being of the nation asa whole.In 1947 the share of Agriculture in total GDP was 50%. Gradually it declined and has nowcome down to about 20%. Still however 60% population depend on agriculture for thesurvival. In 1988-89 i.e. prior to introduction of Financial Sector Reforms, growth rate inAgriculture in India was 15.4%, which has come down to 9.4%(2006-07). Due to rapidgrowth of rural population and division of families the farmland has undergone rapidfragmentation. Presently 80% of the farmland holding are with the small and marginalfarmers owning land up to 5 acres. For these category of farmers cost of production by wayof farm inputs has increased manifold over the years while the productivity of the landremained at the same level and sale price of farm produce has not commensuratelyincreased. These factors have driven farmers to the debt trap and have caused distressleading to suicide. My experience in the field has shown that smaller the landholding higheris the cost of production. The distressed economy of small scale crop cultivation is furtheraccentuated by lack of knowledge, scientific application of crop management, diversificationpractices, inappropriate system such as non availability of quality input material in time,inadequate irrigation facility, non-remunerative prices, dominance of middlemen inAgricultural Marketing Structure. It is encouraging to see that our country is one of thefastest growing economies in the world. Reform process in most of the economic sectors isin place. There is healthy competition in almost all the sectors leading to cost reduction.GOI has planned to achieve 10% growth by 2012, but all this cannot be achieved unless thetargetted growth is ensured for Agriculture sector.2.StudiesOn Agrarian Crisis:-(i) Case study on farmer’s suicides by Prof. K.Nagraj (Madras Institute of DevelopmentStudies)According to the Report of Prof. K. Nagraj of Madras Institute of Dev. Studies, the GeneralSuicide Rate (GSR) (overall suicides per 1 lakh population) in the country between theperiod 1997 to 2005 was 10.6, whereas the Farmers Suicide Rate (FSR) was 12.9 and theRatio of FSR to GSR was 1: 1.2. In Maharashtra the position was alarming with GSR at15.1 and FSR at 29.9.According to Prof. Nagraj Annual Compound Growth Rate (ACGR) for all suicides at2.18% is lower than the Population Growth Rate. The data reveals that the worst position ofthe farmers in Maharashtra is in Vidarbha region. The Study also shows the alacrity of theproblem, so much so that on an average one farmer took his/her life every 53 minutesbetween 1997 and 2005. State wise position of suicides in other States in critical group wasAndhra Pradesh–16770, Karnataka–20093 & Madhya Pradesh (including Chattisgarh) –23588. PAGE 51
  • (ii) Study of Agricultural Indebtedness by Expert Group – Prof. RadhakrishnaAccording to the study Agricultural indebtedness is not the main cause of farmers‘ suicidesbut stagnation in agriculture, marketing risks, collapse of extension system, growinginstitutional vacuum and lack of livelihood opportunities are the primary causes. Accordingto the Report the decline in returns from agriculture has resulted in inability of farmers torepay debt and this has triggered Farmers suicide.Important measures suggested by thestudy group to address the issue includes following:► Design and delivery system of credit should be strengthened.► Rescheduling of loans and waiving of interest up to two years where farmers areaffected by natural calamities in rain fed areas.► Creation of `Moneylenders Debt Redemption Fund‘.► Timely and hassle free delivery of credit by reducing transaction costs.► Increase in deployment of Rural Infrastructure Development Fund. (RIDF)► Government should make efforts to facilitate the Formation of Federation of SHGs ofsmall and marginal farmers.► Allocation for expenditure on health of distress farmers and their family members.► Health Insurance Scheme `for the benefit of farmer‘s livelihood.► Better monitoring and implementation of the existing package of relief.► The committee also recommended that the Banks should introduce the positive repaymentculture by rewarding prompt repayments.(iii) Tata Institute of Social Science (TISS) Report-(submitted in March 2005 study on sample of 36 (5%) of 644 suicide cases)As per the direction of Mumbai High Court on a Public Interest Litigation, Tata Institute ofSocial Science (TISS) conducted a study on an agrarian crisis and the report was submittedin the year 2005.The salient features of the report are as under:► Suicides occurred among large landholders & down to the landless► Cycles of debt and destitution led to suicide of the head of the family. The survivorswere reduced to landlessness due to debt. Among those committed included mediumand large landowners who were also affected by a high level of un-payable debt.► Farmers did not have access to extension machinery of the government in givingsound information on how to deal with pests and declining productivity of land.► Farmers are dependent on agents of fertiliser and pesticide companies for advice onseeds and crop care. The information base of the farmers is, thus, limited to the dataprovided by the agents and their products. A false perception of prosperity is beingcreated in the minds of the cultivators that prompt them to take serious risks in terms of fertilizer based cropping pattern. PAGE 52
  • ► Minimum Support Price has not been available to all farmers, particularly the smalland marginal farmers.Causes common across categories were: Repeated crop failure, Inability to meet the rising cost of production (farmers have been spending more on fertilisers even while crop performance has been showing a decliningtrend), and Indebtedness due to a host of reasons ranging from a daughters marriage todigging a well which eventually bore no water,These causes arose out of a larger picture of globalization & the resultant neglect of agriculturalcommunity in India.Short-term suggestions/ Recommendations for immediate relief andrehabilitations: Immediate (adequate) compensation given on a priority basis to families of victims; Ex-gratia payment of Rs.2.5 lakh for families to meet loan repayments and live withsome level of dignity; Comprehensive insurance safety net; Revamping of extension services in lines with e-choupals; and , Dissemination of information such as agricultural prices and methods of low-costorganic farming.Long-term recommendations : Fundamental policy changes to factor in the fluctuating production cost in theMinimum Support Price mechanism; To integrate surface and groundwater irrigation schemes and integrate the linedepartments in order that the schemes are implemented efficiently; Policy changes to focus on farmers rather than seed and fertilizer corporations; and Set up of a commission with statutory powers that takes decisions on issues such asgenetic modification technology and its impact on Indian agriculture, agriculturepricing policy and cropping pattern.Indira Gandhi Institute of Development Research (IGIDR) Report onSuicide ofFarmers in Maharashtra (Jan 2006):For the study, interview of 116 suicide case households spread across 109 villages wasconducted covering mainly Wardha, Washim and Yavatmal. PAGE 53
  • Major findings of the study are indicated in the following paragraph :Farmers in the selected districts were exposed to both yield as well as price shocks for theircotton crops. In 2004, the selected districts experienced acute water problems due to deficitrainfall. However, there was record production in the state and rest of the country. Increasedsupply of cotton in 2004 was worldwide leading to a fall in its prices. Price risk in cotton gotfurther compounded due to large subsidy provided in USA, low import tariff of only 5% inIndia and failure of Monopoly Cotton Procurement Scheme (MCPS) in providing a fair priceto farmers in Maharashtra. In the absence of government extension service, farmers wereadvised by input traders leading to an increase in input costs through supplier-induceddemand.Share of input costs for seed, pesticide and fertilizer in cotton is higher than that fortheir crops. 90% of the total insecticide/pesticide usage in the five major crop groups inMaharashtra was in cotton. Cottons share of gross value addition in Maharashtra s agriculture is much lowerthan its share of gross area under cultivation. Estimated cost of cotton cultivation in2004-05 would at best break- even with the price under Monopoly CottonProcurement Scheme. Expenditure under public intervention programmes like the MaharashtraEmployment Guarantee Scheme (MEGS) is not commensurate to the regions share ofpoor. Suicide/ mortality rate among male farmers in Maharashtra trebled from 17 in 1995to 53 in 2004. This is much more intensive in the selected districts of Vidarba region. Farmers suicides was neutral to education and social groups. The most important reason was found to be heavy indebtedness to both institutionaland non- institutional sources. Reliance on the non-institutional sources has beenincreasing in the recent past. Agricultural credit as a proportion of total credit disbursed by the CBs has beendeclining. Credit lines of co-operative societies are chocked. Data on credit flow through PACS indicate that loan per hectare gross cropped areais the lowest in the Vidarbha region. Breakdown of formal credit structures has led to increased reliance on informalprivate sources of credit with greater interest burden. Interest charged by private moneylenders was around Rs.25 or Rs.50 for a loan ofRs.100 that is to be repaid in 4-6 months time.3. Major Factors contributing to suicides in Maharashtra:-"Farmer takes the birth in debt and dies in the same condition". This was the position offarmers before independence and it still continue after 60 years of independence. If weanalyze the suicides by farmers in Maharashtra it is revealed that it is higher in Vidarbharegion of the State where farmers preferred cultivation of "white gold" i.e. cotton - a riskyventure that suffered due to non-availability of quality seeds coupled with the farmers orincapacity to buy costly Bt. cotton seeds. They could also not get remunerative price fortheir produce. PAGE 54
  • According to Dr. M.S. Swaminathan, although 60% people in India depend on agricultureand Agriculture Sector contributes 25% of National Income over the period investment andproduction in agriculture has declined. In developed world the percentage of dependence ofpopulation on agriculture is much less e.g. in USA it is only 2% and income from agricultureis just 4%.There are related issues of quality for export and competition in global market.The answer to the question as to why the farmers are committing suicides, lies in acombination of factors such as crop failure, shifting to more profitable but risky (in terms ofoutput, quality and prices) cash crops like cotton/ sugarcane/ soyabean, exorbitant rate ofinterest and other terms and conditions of loans availed from money lenders, lack of nonfarm opportunities, unwillingness to adopt to scientific practices, non availability of timelycredit from formal channel, absence of proper climate/ incentive for timely repayment ofbank loan, etc. At some places even though water is available but cant be exploited fullydue to insufficient power supply. Huge expenditure on childrens education and suddendemand of money for health considerations and marriage, etc. in the family are also majorcontributors for stress in farming community. Inconsistency of rainfall during monsoon,absence of support mechanism for marketing of agriculture produce also contributed touncertainty and financial risk of the farmers.To commit suicide is not normal but generally occurred for farmers due to fear of pressure ofmoneylenders e.g. if they fail to repay the loan their land will be forcibly taken away. Theireconomic condition in many cases changes to such as extent that the farmers are unable toface the society. In this situation of loneliness and in absence of any institutional or socialmechanism to fall back upon, farmers were forced to commit suicide. For farmers to comeout of the stressful situation a system to address the various issues discussed in the earlierparagraphs have to be evolved through an institutional mechanism with necessaryarrangement for review and follow up. A rehabilitation programme which addressesrepayment of overdue interest, supply of quality inputs for next crop, insurance againstnatural calamity, opportunity of supplementary income through non farm activities,provision of forward linkage such as marketing and storage, extension services, etc. has to bedevised and implemented.4. Rehabilitation PackageFor rehabilitation of distress farmers and their family members Central as well as StateGovernment has announced the special packages in the State of Maharashtra.i) Package of Central GovernmentPrime Minister visited the Vidarbha region in July 2006 and announced a package ofRs.3750 crores to the families of the farmers in Maharashtra. Under the package, anAdditional credit of Rs.1275 was earmarked for disbursement in the identified region. Entireinterest on overdue loan was waived and principal rescheduled for 3 to 5 years . PAGE 55
  • The other important components of the package are as under:PM’s Package – Goal & Means Establishment of sustainable and viable farming, livelihood support system through :a. Complete credit cover through institutional credit sourcesb. Debt relief by restructuring overdue loans and interest waiverc. Assured irrigation facilitiesd. Effective watershed managemente. Seed replacement programf. Subsidiary income opportunities through horticulture, livestock, dairying, fisheries,etc.g. Better extension and farming support services and improved marketing facilities Components & targets:a. Ex-gratia assistance from PMNRF – Rs. 50 lakh per districtb. Debt relief to farmers – Re-scheduling of OD loan as on June 30, 2006c. Fresh credit to farmers.d. Interest waiver – Entire OD interest as on July 1, 2006,to be shared equally by Center and Statee. Assured irrigation facilities – Completion of all major, medium and minor irrigation projectssanctioned under AIBP and RIDF in 3 years‘ time. Seed replacement program:50% subsidy for quality seed over 3 years (entitlement 1 ha / farmer) Watershed Development:a. Construction of check dams – 500 per district per year for 3 yearsb. Area treatment under watershed development - 15000 ha per district per year for 3years,c. Construction of rain water harvesting structures by SC/ST/SF/MF beneficiaries. With 50% bank loan and 50% back ended subsidy - 1000 beneficiaries per district peryear for 3 years Horticulture Development:a. All districts to be covered under National Horticulture Missionb. Launching of a Technology Mission on Citrus Micro Irrigation– All districts to be covered under Scheme of Micro Irrigation forpropagation of Drip and Sprinkler Irrigation Extension Services– All districts to be covered under ATMA (AgricultureTechnology Management Agencies)to ensure extension support and convergence at district level. PAGE 56
  • Package of the State GovernmentGovernment of Maharashtra announced the special package of Rs.1075 crores for theaffected families as under :-∎ Immediate relief to the family members of the farmers who committed suicide (Rs. 1lakh to each family)∎ Rescheduling of the outstanding crop loan and subsidy on interest to the indebtedfarmers (Rs.225 crores).∎ Ban on illegal private lending and legalizing of licensed moneylenders, limiting the interest payable to the original principal amount.∎ Disbursing crop loan through Farmers Self Help Groups.∎ Enhanced subsidy on crop insurance premium (Rs. 30 crores).∎ Financial assistance (for land development) to acquire farm equipment, inputs likeseeds/ pest control measures & bio-fertilisers (Rs.150 crores)∎ Promotion of agro based subsidiary livelihood options (Loans to farmers for Dairy,Goatery and Poultry) (Rs.30 crores).∎ Promotion of agro-processing industries through cooperative system (Govt. share1:5)∎ Promotion of Joint cotton farming.∎ Financial assistance for mass community marriages (Rs.6 crores)∎ Repayment of amount of Capital Operation Fund (Rs.370 crores)∎ Financial assistance to cotton growers (Rs.134 crores)∎ Organic Farming Technology Mission (Rs.30 crores)∎ Vidarbha Watershed Mission (Rs.100 crores)∎ Establishment of Helpline for farmersLoan Waiver Proposed in Budget 2008-09Highlights:- All agricultural loans disbursed by scheduled commercial banks, regional rural banksand cooperative credit institutions up to March 31, 2007 and overdue as onDecember 31, 2007 will be written off in respect of small and marginal farmers. In respect of other farmers, there will be a onetime settlement (OTS) scheme for allloans that were overdue on December 31, 2007 and which remained unpaid untilFebruary 29, 2008. Under the OTS, a rebate of 25 percent will be given againstpayment of the balance of 75 per cent. Agricultural loans were restructured and rescheduled by banks in 2004 and2006through special packages. These rescheduled loans, and other loans rescheduled inthe normal course as per RBI guidelines, will also be eligible either for a waiver or anOTS on the same pattern. The implementation of the debt waiver and debt relief scheme will be completed byJune 30, 2008. Upon being granted debt waiver or signing an agreement for debtrelief under the OTS, the farmer would be entitled to fresh agricultural loans from thebanks in accordance with normal rules. PAGE 57
  •  Government estimates that about three crore small and marginal farmers and aboutone crore other farmers will benefit from the scheme. The total value of overdueloans being waived is estimated at Rs.50,000 crore and the OTS relief on the overdueloans is estimated at Rs.10,000 crore. It is proposed to create a fund of Rs.5,000/- crore in NABARD to enhance itsrefinance operations to short term cooperative credit institutions.5.Conclusion:-For upliftment of the farmers there is need for a joint initiative by State Government, CentralGovernment and Financial Institutions.There is need of :i) Timely and adequate support by way of credit to farmers with focusing small and marginalfarmers to have them modern equipment for improved agricultural productivity.ii) To issue Kisan Credit Cards to all the eligible farmers to have them access to get ST, MTand LT loan from all the banks.iii) To form the SHGs of Tenant farmers/ share croppers & agricultural workers and givethem micro-credit through banks.iv) Encourage the farmers to adopt allied activities like dairy, fishery, poultry etc. withfarming activities.v) Diversification/crop rotation in agricultural production in changed Adoption of upgraded technology inputs alongwith provision of infrastructure inputs likepower at subsidized cost, supply of inputs like seeds, fertilizers, tractors and credit provisionthrough all nationalized banks.vii) Adoption of Non-Farm activities with allied agricultural activities.viii) Arrangements of marketing /forward linkages /contract farming to sell their produce atremunerative prices.If these facilities are given to farmers they may achieve self-sufficiency in agriculturalproduction. There is need for major review of agricultural policy to meet the changing needsof both producers and consumers. PAGE 58
  • Importance of agriculture and investment in agricultureThe idea of food security is basically important, and for that cause, agriculture is important. The taskof nourishing its people has been possibly the main concern of its rulers throughout history. As such,agriculture is measured to be the very basis of political and social steadiness of a nation since timesimmemorial.In addition, the agricultural division plays an important role in the sphere of given that large scaleemployment to people. Large and fairly large farms employ workers to undertake the various jobsrelating to farming of crops and care of farm animals. In most of the countries of the world, agriculturestill remains the biggest division responsible for the employing and feeding a large percentage of thepopulation.Agriculture is also important from the viewpoint of assessing the standard of a countrys development,based on the capability of its farmers. Poorly trained farmers cannot apply the higher methods andnew technologies. The importance of science and technology in the development of agriculture isfairly clear from the words of Deng Xiaoping -The growth of agriculture depends primary on policy, and next on science. There is neither any limitto developments in science and technology, nor to the role that they can play in the field ofagricultural growth.Even if agriculture frequently plays a contributory role in the Gross Domestic Product - GDP - ofmost countries, it nevertheless requires a substantial increase from both the local and theinternational community.Agriculture is conventionally based on bulk manufacturing. Harvesting is done once a season, most ofthe times, and stocked and used later. In fact, some thinkers opine that people have begun to adoptbatch processing and stocking in manufacturing, as a result of the practices from agriculturalthinking. Before industrialization, people with the biggest stocks of food and other supplies wereconsidered more stable, and they were able to face challenges of nature without having to starve.So important is the role of agriculture that new concepts keep cropping up to give the traditionalactivity a modern turn. One such new idea the world is gibbering about these days is - the importanceof organic farming. There is evidence that, apart from their numerous other benefits, organic farmsare more sustainable and environmentally sound, giving agriculture a new measurement.The importance of agricultural practices was further established when Organic food began as a smallmovement decades ago, with gardeners and farmers refusing the use of conservative non-organicpractices. With the growth of the Organic food market now outpacing much of the food industry, manybig companies have ventured into it. With the emergence of multi-national companies, and with thecreation of a legal certification structure such as the Soil Association, there is every hesitation that thevery definition of natural food will change, making it more of a commercial activity than ever before! PAGE 59
  • In fact, modern agriculture has already undergone a sea-change from the olden times. Nowadays, theimportance of agriculture lies in the fact that it is practiced both for survival as well as profitablereasons!Investment in Agriculture is now an ordinary managed investment option for investors with a focus ona number of key Australian agricultural commodities such as forestry and horticulture. A key featureof agribusiness investing is the tax effectual feature providing substantial tax deductions supported byan Australian Taxation Office Product Ruling. Agribusiness is an alternative asset class that offersreturns generated from a traditional income source. Agribusiness offers investors another level ofdiversification because it is not correlated with interest rates, sharemarkets, bonds or propertymarkets. THANK YOU PAGE 60