In April 2016, the Government of India constituted an Inter-ministerial Committee to suggest ways to double farmers income by 2022. The target is to double the incomes of farm households in real terms (or inflation adjusted) between 2015–16 and 2022–23. The committee submitted 14 volumes related to status and strategies covering various facets of the farm sector—from marketing and value addition to risk management and sustainability. The 14th and final report of the committee was submitted on September 17, 2019.
For attaining the objective, the strategy is focussed on income approach to agriculture as a new paradigm, as it appears that production-based growth rate estimates do not show the true condition of the sector. As per the chairman of the inter-ministerial committee, Ashok Dalwai, “the strategy for doubling farmers’ income encompasses higher productivity at cost efficiency and enabling the farmer to capture maximum value on every grain, every drop, and every ounce of his produce.”
The committee recommends to improve value realisation from farmers due to the fact that there is an inverse relationship between farm incomes and production: prices and incomes tend to fall with higher levels of production. In order to improve post-production value addition, the committee recommended pooling of land and aggregation of farmers’ produce so as to enable them to have a better bargaining power in the market. It further suggested a shift towards demand pull cropping pattern in place of a supply push pattern. In demand pull pattern, cultivators grow as per the demand of consumers. The committee suggested that there is a need to upgrade and harmonise agri-logistics, agro-processing, and marketing to maximise the earnings of the growers. This is to be done along with creating a new market infrastructure by replacing existing market laws which are restrictive and where prices are opaquely determined by traders.
Increasing farm GDP twice over requires a remarkable rate of farm growth, expressed as ‘gross value added’, i.e., GDP minus taxes. In this regard, the committee on Doubling Farmer’s Income had calculated that agriculture GDP needed to grow 10.4 per cent per annum in real terms (adjusted for inflation) from 2016–17 to 2022–23 for incomes to double. But agriculture grew only at the rate of 2.9 per cent a year during the period from 2014–2019. According to a prominent economist, to compensate for the shortfall, the sector needs to grow at a rate of 15 per cent for the remaining period until 2022–23.
The target is quite an ambitious one, considering that in the past four-five years, farm incomes have remained stagnant and the current growth rate of the sector is much below what is needed to fulfil the objectives.
It was in 2016 when the government announced the plan to double farm incomes by 2022–23, by raising them by 100 per cent! This is to be done in a scenario where about half of the population relies on farm-based livelihood. It surprised economists as increasing farm GDP two-fold would involve achieving unthinkably high rate of farm growth, expressed as ‘gross value added’ (i.e., GDP minus taxes).
This goal was mentioned in the budget presentation in 2016 as one that involves re-orienting government interventions in both farm and non-farm sectors.
A draft proposal of the government, released in August 2019, stated that it would take into account a much wider measure of earnings of farm households than what was then captured in the gross domestic product (GDP) figures, to calculate farmers’ income in 2022–23 (the year by which it has promised to double farmers’ income). In a rush towards achieving the target, it has been devising policy majors and finalising a methodology to access change in farmers’ income.
The gross total earnings of a farm household will be calculated on a base year of 2016–17, and a third of a farm houehold’s income is targeted as coming from non-farm sources like rural enterprises.
The income calculation is to include income transfer as. under the PM-KISAN scheme, that lends ` 6,000 per year to landed farm households.
But even with non-farm sources of income, the target of doubling the farmers’ income would require a massive increase in agricultural productivity. According to the draft proposal in this regard, the aim is to increase the share of farm to non-farm income to 70.30 from 60.40.
Farmers usually have some form of non-form income, although for calculating agriculture GDP value of output from four core sectors—agriculture (crops), agro-forestry, fishing, and livestock—is taken into account.
As per the first NABARD All India Financial Inclusion Survey (NAFIS) conducted in August 2018, which had a reference year of 2015–16, agricultural households which accounted for 48 per cent of rural households, earned ` 107,172 during 2015–16 from cultivation, livestock, non-farm sector activities, and wages or salaries.
The proposal mentions setting up large monolithic farm clusters, where each will grow specific crops. Around such clusters, a value chain would be established, including markets, warehouses and processing units. The proposal also talks of livestock rearing especially of small ruminants, upping credit to self-help groups in rural areas, rationalising further inter-state farm trade, and doing away with mandi fees.
Initiatives Taken
Several initiatives are being taken in this regard. An electronic national agriculture market (eNAM) was launched in April 2016. This would enable online trade of agriculture produce so that farmers get the best deal by choosing among a number of buyers. A new agriculture marketing act was introduced in 2017 for making wholesale markets more competitive and transparent. In May 2019, a Model Contract Farming Act was finalised for the purpose of integrating farmers with bulk purchasers and agro-industries. It was reported in the budget of 2019 that the government would set MSP for crops in such a way that farmers can get at least 50 per cent returns over the cost of production. A new scheme called Operation Green Top was also launched. It is meant for setting up value chains for the most commonly consumed horticulture products—tomatoes, onions, and potatoes. A scheme known as PM-AASHA was launched in September 2019 to ensure that farmers get the promised MSP for oilseeds and pulses. The scheme aims at direct procurement, reimbursement of losses to farmers when they sell their produce at prices lower than MSP, and at encouraging private participation in MSP-based procurement.
PM-KISAN
In mid-2019, the government extended the PM-KISAN, the assured income support scheme for farmers, to benefit large landholders as well as more than 8 lakh big landholders with a landholding size of 10 hectares (about 25 acres) and more. The scheme was extended by removing the ceiling of 2 hectares (for eligibility), thus making around 14 crore farmers eligible for benefits. It was launched by the centre in 2019 but made effective retrospectively from December 1, 2018 to assuage agrarian unrest by reducing financial burden on farmers. The scheme provides each landholding farmer eligibility to get ` 6,000 per annum in 3 equal instalments (amounting to only one-tenth of the production cost per hectare or consumption expenditure of a poor household). Landless farmers and sharecroppers are not included in the scheme.
Landholder farmer families from the list of whose one or more members are either farmer or present MPs, MLAs, mayors, chairperson of district panchayats or holders of constitutional posts are also not included. It is projected to cater to nearly 2 crore additional farmer (including 8 lakh big ones). An additional 10 per cent of rural landed households would be included under the scheme.
The PM-KISAN website shows that of the 13.79 crore farmers (agri-census) data eligible to join the scheme, only 5.41 crore had been registered (by July 2019). West Bengal remained the only state that had not registered any farmer under the scheme by mid–2019. About 79 per cent of the current beneficiaries have received the first installment while 59 per cent had received the second installment. A total of about 7 lakh payments failed.
According to the agriculture census 2015–16, which is used as base data to implement PM-KISAN, large landholders make up only about 0.6 per cent of total farmers in the country but they are of a high proportion in 12 states, including Rajasthan, Punjab, Maharashtra, Madhya Pradesh, Haryana, Gujarat, and Karnataka. These 12 states account for 93 per cent of total big farmers in the country (in comparison, 13 states/union territories including Delhi, Sikkim, and Goa, and states from the north-east have a negligible number of big farmers).
Analysis The scheme’s support is yet to reach farmers in most of the regions. A majority of the intended beneficiary households are yet to receive their first instalment. Two major drawbacks of the scheme are: (i) the cash transfer is not linked to land size; (ii) it leaves out landless tenants (mostly poor rural households that do not own land) constituting 13.7 per cent of farm households and incurring the additional input cost of land rent.
The scheme is not uniformly implemented across regions. It is also wrongly assumed to be a fix for larger structural issues plaguing the agriculture sector. Cash transfers cannot help if the state withdraws from its long-term budgetary commitments in infrastructure like irrigation and agricultural markets (food security is closely allied to government interventions in grain markets).
It is felt that such direct benefit transfers should transition into investment support that would, at a later time, subsume market distorting subsidies towards food procurement, fertilisers, power, and so on. Progressively shrinking such subsidies can help in increasing investment in other areas like agricultural R&D. But with PM-KISAN, this is not happening. Rather, there has been a near 4-fold rise in allocation from around ` 20,000 croe in 2018–19 to ` 75,000 crore in 2019.
Over 86 per cent of farm holdings have less than 2 hectares of land. These farmers have little of marketable surplus and bargaining power but high transaction cost. The idea is to have them form farmer producer organisations (FPOs), self-help groups (SHGs) or cooperatives that would take up contract farming and connect with the top rungs of the marketing and supply chain.
FPO/ Cooperative For grid connected solarisation to work, discoms would need to keep the feeder ‘on’ during perhaps 10 hours a day as against the situation now when there is supply of only 4 to 6 hours to contain subsidy (the entire agricultural electricity line-feeder will require to be energised throughout the day for injection of solar power by farmers). Keeping it ‘on’ during the day would mean more power and water consumption by farmers including those who are not willing or are unable to solarise. under the scheme KUSUM, for instance. this has the government vexed, as its subsidy burden would drastically rise. Therefore, the idea of a farmer producer company (FPC) or a cooperative has been suggested. At least 70 per cent of farmers should be ready to participate in the scheme. They can form an FPC that would sign the PPA, aggregate power from the farmers, maintain the feeder and perform energy accounting based on farm use of power and even act to check theft of power.
The private sector can be roped in to set up FPCs. The government has set up a ‘KUSUM Mission’ with organisation at the centre and in the states to ensure smooth implementation of the scheme. Drawing staff from the water, agriculture, energy sectors, and financial sectors, it should work for the clear target of achieving 20 per cent solar conversion within 5 years.
A lot of efforts would be necessary to mobilise farmers and form FPCs even while reducing the financial burden on farmers. But that would likely ensure a sustainable model of doubling farm income in an open manner, saving water, and doing away with an anarchical set-up in the agricultural power supply sector.
Industrial Training Institutes (ITIs) in rural places can train youth in agricultural activities and related skills that can help in farm mechanisation and use of modern technological methods. Thus, jobs can be created in villages and towns, instead of encouraging migration to the already burdened cities. The government should set up warehouses with grading facilities along highways that should be linked to processing units for easy marketing access to farmers. Without much transportation cost, farmers can avail of better remuneration of goods even as the ‘point of sale’ problem is addressed.
The minimum support prices (MSP) trade policies should be harmonised and the agricultural policy must ensure the farmer gets a better price for their produce, for instance, if domestic prices are higher than global prices for a commodity, import duties should be upped to ensure farmers’ benefit.
The agro-chemical and seeds industry needs to offer good quantity products. In this context, rating on products will speed up competition among companies. They should also carry out programmes for assisting farmers on using the fertiliser and seeds—the right way to mix substances, keeping in view crop varieties and seed types, usage-regulated advice, etc.
There needs to be a data-matching system by which estimated farm produce may be compared against the actual produce from farms. Where food safety standards are concerned, an inter-ministerial committee should be set up to suggest ways to ensure farm produce is sustainable—from the farm to the stages in the supply chain.
KUSUM Scheme
One solution to transform the agricultural economy is offered by the Kisan Urja Suraksha evam Utthaan Mahabhiyan (KUSUM) scheme of the centre, announced in 2019. KUSUM can be an effective way to solve the agriculture distress, water crisis, and fiscal distress caused by the power sector. With proper implementation and design, it can help achieve two very crucial objectives—doubling farm income and improving India’s water security.
The aim of the scheme is to provide energy sufficiency and sustainable irrigation access to farmers. It offers promising prospects in the present conditions of rapidly falling prices of solar technology. It has a budget allocation of ` 34,000 crore, and the states are expected to provide an equal contribution towards it.
The scheme has three components: (a) private sector led large-scale solar at sub-station; (b) off-grid solar irrigation; and (c) grid-connected solar irrigation.
As per the analysis done by experts, the first two components do not address the real concerns of the nexus linking agriculture, water, and energy—the 3 factors fuelling agrarian distress. Even as they can improve power supply, they can cause damage to groundwater resources. Component (c) of the scheme can offer a lot in terms of achieving the target of doubling the farm income, saving groundwater, saving subsidy for the state government, and generating jobs. Connecting the solar irrigation pumps to the grid to sell surplus electricity provides an additional source of income for the farmer.
With grid-connected solarisation of pumps, farmers can get day-time, reliable power supply that is free, which can reduce their production risks. A one-time capital subsidy can replace the recurring power subsidy to the agricultural sector. Discoms can avail of cheap decentralised distributed generation that can reduce their network losses.
To tackle drought, during such a condition, farmers can rely on money earned from the sale of power. The government can pay a drought premium for power sale so that the farmer optimises use of water. The premium can be directly paid to the farmers.
This proposition has been satisfactorily demonstrated by the International Water Management Institute (IWMI) through a pilot project in Dhundi (Solar Power as a Remunerative Crop-SPaRC) and National Dairy Development Board’s (NDDB) solar cooperative in Majikuva (Gujarat).
It is to be noted that despite massive farm power subsidies, about 30 million farmers, mainly marginal ones, rely on diesel for meeting their irrigation requirements as they do not have access to electricity. Moreover, more than half of India’s net sown area remains unirrigated. KUSUM has the potential to transform irrigation economy if the scheme is implemented prudently by adopting an approach of equity over populism. It should not woo a certain section of farmers based on narrow objectives.
There is disparity among states in the form of solar pumps deployments and access to irrigation (Rajasthan and Chhattisgarh have as much as half of the 2 lakh solar pumps deployed in the country in spite of poor groundwater situation in the former and low irrigation demand relatively in the latter). Bihar, West Bengal, and Uttar Pradesh do not have a significant number of solar pumps though they need it. Equitable deployment of some 17.5 lakh off-grid pumps can be ensured by 2022 if the central government can incentivise states through financial assistance that is target-linked. Farmers with small land holdings and belonging to socially disadvantaged groups should be targeted for financial assistance. This is because SMF receive only some portion of government subsidies, such as for solar pumps (in Bihar, only 50 per cent received though they constitute 90 per cent of farmers in the state). KUSUM current ratio of 60.40—i.e, 60 per cent subsidy for pumps borne by the Centre and the states and remaining 40 per cent by the farmers—may not help as there is inequity in access to credit and capacity of repayment. A higher capital subsidy should be given to SMF in preference over medium and large landholders.
Where solarising of existing grid-connected pumps is concerned, grid-connected farmers would benefit much as they would receive central financial support (just as an off-grid farmer would), and regular income from DISCOMs on feeding surplus electricity. But this would mean an inequitable distribution of resources. It is suggested that the centre’s subsidy for solarisation of pumps should be a maximum 30 per cent; DISCOMs should be incentivised to procure power from the farmers. To boost pump efficiency, pumps need to be replaced and the solar pump capacity could also be used for post-harvest processes in the farm.
New Pension Scheme The Centre has launched a social security programme, Pradhan Mantri Kisan Maandhan Yojana to improve the income needs of farmers. Implemented from August 2019, the voluntary pension scheme is aimed at 120 million small and marginal farmers (SMF) who have less than 2 hectares of land. Those between 18 and 40 years of age can enrol for the scheme, which, on completion of 20 years, will provide them a monthly pension of ` 3,000. As farmers, especially poor cultivators, do not have sufficient savings, the scheme provides a measure of social security.
Comments
Despite several steps taken in this regard, the objective of doubling farm incomes by 2022 appears to be a distant dream due to the dismal rate of growth of agriculture in the country. It will take a while for the new schemes, launched by the government, to show results on ground.
Jump in agricultural growth from 2.5 per cent per year to the needed 13 per cent growth in real incomes of farmers in the remaining years (till 2022), is not possible, especially with the existing set of policies. The inter-ministerial committee, set up in 2016, presented 619 recommendation, in its 14-volume report, all of which may never be seriously considered, leave alone implementing it. It would have been far more useful if they had presented a summary in a few pages listing some 10–15 recommendations to be studied on priority.
The government also announced a lot of schemes but as the farmers’ leaders/organisation admit, the new schemes are yet to show results on ground. Lack of a prioritisation strategy or resource plan is among the many woes. In reality, farmers have been forced to sell their kharif harvest of pulses, oilseeds, and coarse grain at less than minimum support price (MSP)!
Is Shifting Farmers to Non-farm Activities a Solution?
As per a study, done by a member of the NITI Aayog, Ramesh Chand in 2017, real farmer incomes could be doubled by 2022, in a different way—without going in for thorough strategies and well-drawn-out programmes. Cultivators could be simply shifted to non-farm and subsidiary activities! The study states that if the population of farmers were to decline in the same rate as during 2004–05 to 2011–12, their numbers would decrease by 13.4 per cent between 2015-16 and 2022-23. So, the farm income will be distributed among 13.4 per cent fewer farmers, thus increasing their incomes. But the question that rises is, how can farmers be removed from farm activities and encouraged to follow non-farm and subsidiary activities. What alternative source of livelihood will these 13.4 per cent farmers have?
The findings of the latest agriculture census 2015–16 showed the average size of operational holdings in the country is 1.08 hectare, and this continues to decrease, however, there has been an increase in total number of operational holdings in the country from 138 million in 2010–11 to 146 million in 2015–16, i.e., an increase of 5.33 per cent. The fragmentation of operational holdings is rendering farming a less favourable option for the small and marginal farmer (0–2 hectares), who constitute 86.21 per cent of the total holdings in 2015–16 against 84.97 per cent in 2010–11. But it is very unlikely that every small and marginal farmer will shun farming and migrate to cities. This is also not going to help as cities are already overpopulated, and any increase in availability of labour will only result in cheap labour in urban centres.
A better way to deal with it would be to create micro, small and medium enterprises (MSMEs) around rural clusters, which could provide employment opportunities to rural labour. There should also be a provision regarding ensuring a decent minimum monthly income to farmers through Direct Benefit Transfer, and by ensuring minimum support prices. The step towards the disbursal of direct income to farmers has already been initiated with the initiation of PM-KISAN scheme. It will need to be fine-tuned further in order to achieve the desired outcomes. Apart from income support, the government would do well to create a robust procurement mechanism, which includes price deficiency payments. There is also a need to ensure that the farmer gets a fair share of the price being paid by the consumers for his produce. For this, the number of agri-markets must be increased.
Direct income disbursement appears an appropriate remedy in the present scenario, but it should also be borne in mind that doles in the form of direct income transfer and debt-waiver tend to become unsustainable in the long run. They should best be thought of as short-term measures to tackle the agrarian distress. other remedies which are self-sustaining and have the potential to increase real farm income must be explored.
Sustainable Farming
Sustainable farming can also go a long-way in addressing agrarian distress and attaining the aim of doubling farmers’ income. The need is to find new ways of using technology that is designed in accordance with the requirement of smaller landholdings. Natural or alternative farming method is an important approach towards the target of sustainable farming. The current method of flooding agricultural land must be replaced with micro and drip irrigation so as to stop the erosion of nutrients of the soil.
The age-old practice of multi-cropping has proven to be of economic and agronomic benefit to farmers. Practised in remote rainfed areas of Telangana, it has been a fall back option for farm families, adding to the income and generating year-long food supply as well as yielding benefits like pest management.
Unlike mono-cropping, multi-cropping involves planting as many as 12–15 crops (or even 20-25 crops), in a single plot of 1–2 acres—a variety of crops suited for rainfed agriculture. It helps small and marginal farmers safeguard against crop failure—even if 4 or 5 crops fail, the rest are enough to harvest and generate food for the year. a number of female member farmers in the Deccan Development Society (Telengana) follow this practice. Such inter-cropping enough fodder stocks for the cattle. Seeds of various crops are stored so that farmers do not have to approach seed banks for seeds.
A study by the Centre for economic and social studies along with the society has highlighted the importance of multi-cropping as it ensures not just grains but also fuel wood, fodder, medicinal plants, and uncultivated greens.
New farm policies must be drafted to empower farmers to enhance yields and double their incomes.
More than anything else, policy framework has the most prominent effect on realisation of any goal. A well-laid out policy and its proper implementation are a sure shot towards target achievement. The government has already started working in this direction, the need is to quicken the pace of reforms so as to reach the destination within stipulated time.