Ushering in the dawn of diversification in agriculture

While the Supreme Court has constituted an expert committee, it is yet to make progress.
Farmers of Punjab moving towards Delhi to take part in their January 26 tractor rally as part of the ongoing agitation against agri laws. (Photo | PTI)
Farmers of Punjab moving towards Delhi to take part in their January 26 tractor rally as part of the ongoing agitation against agri laws. (Photo | PTI)

The farmers’ agitating on the Delhi borders are preparing to take out a tractor rally on the Republic Day in the backdrop of a deadlock in negotiations with the Centre over the three farm laws. While the Supreme Court has constituted an expert committee, it is yet to make progress. The current agitation has sparked a debate on the systemic problems plaguing agriculture. Bottlenecks at each stage have contributed to the stagnation of farm incomes.

This is in stark contrast to that of the Netherlands, the second biggest exporter of vegetables. It has achieved this despite its proximity to the Arctic Circle and a higher population density than India. The Dutch balanced the latest technology with market requirements to achieve per acre yields double the global average. The mantra of “twice as much food resources using half as many resources” adopted in 2000 has guided their experience.

One could view the Centre’s agenda of doubling farmers’ incomes by 2022 similarly. However, this vision will not materialise because our agricultural policy has not yielded the desired results. Moreover, the unintended environmental and health consequences of a policy aimed at maximising wheat and rice production have come to the fore.

In a 2018 report, the Central Groundwater Board stated that 80% of Punjab has overexploited its groundwater resources. Research by ICRIER’s Dr Ashok Gulati has shown that over-application of chemical fertilisers due to their artificially low prices has damaged soil health and increased diseases like the blue baby syndrome.

Incentives that heavily subsidise inputs like water, electricity and fertilisers can be traced back to the food shortage era of the 1960s. During that time, farmers from Punjab and Haryana took it upon themselves to turn India into a foodgrain surplus nation. Enabled by input subsidies and an assured market in the form of government procurement at MSP, they tripled India’s total food grain output from 82 MMT in FY1961 to 297 MMT in FY2020.

However, now these subsidies have started giving diminishing returns. Farm income has stagnated along with growing health and environmental concerns. For instance, Punjab was the richest state in 1980 but has since fallen to the 13th place in FY2019, behind states like Maharashtra, Haryana, Gujarat, Tamil Nadu, Kerala and Karnataka. The Punjab Economic Survey 2019-20 says agriculture and allied activities contribute to almost 30% of the Gross State Value Added (GSVA). However, in recent years, the sector’s growth has slowed down to just 2.3%. This is due to the falling yields of paddy and wheat.

The Survey notes that agricultural income growth can be kick-started only by diversifying into high-value commodities like horticulture, pulses, oilseeds and livestock. This will allow farmers to tap into the higher growth in demand for these products and optimise resource usage. The Dalwai Committee found that by shifting from staples to horticulture, farmers can earn an additional income of `80,000 per hectare. Farmers in different regions have already witnessed the benefits of diversification into livestock—poultry in Maharashtra, dairy in Moga district of Punjab and shrimp in Andhra Pradesh have all brought prosperity.

Farm diversification will require broad-based policy support. However, as the current agitation shows, the bid will fail if done by fiat. In the absence of judicial safeguards, farmers fear exploitation at the hands of private traders. Further, passing the Bills without building consensus across the political aisle is in stark contrast to the reform method of the past, be it passing the GST in 2017 or the 1991 Budget that was supported by other parties.

For the farm diversification policy to be successful, it will need to have three elements—consensus among stakeholders, well-designed incentives and execution support. First, to build consensus, recognise the pivotal role of states. Much of agriculture is a state subject but Central governments of all political hues have actively recommended reforms. This makes it an ideal subject to embody the spirit of cooperative federalism. In its Eighth Report, the Parliamentary Standing Committee on Agriculture recommended establishing a Committee of State Agriculture Ministers that can create a framework for agri-marketing. The mandate of this Committee can be expanded to develop a diversification policy that incorporates the different priorities and objectives of each state.

Second, roll out incentives to nudge farmers towards diversification. Haryana has made progress with the Mera Pani, Meri Virasat scheme where farmers receive `7,000 per acre for planting crops like cotton, maize and pulses instead of paddy. This can be enhanced to act as a minimum guarantee for the farmer shifting from a staple. To shield them from price volatility in the market, the Price Deficiency Payment Scheme (PDPS) launched under the PM-ASHA scheme in 2018 can be extended. This gives farmers the difference between the market price and MSP. It has a lower fiscal outlay than government procurement 
but has higher coverage.

Third, anticipate execution challenges and be proactive with solutions. The foremost is likely to be a lack of information on the benefits of diversification among farmers. Agriculture commentators rarely focus on intangible inputs like information about suitable alternatives, cultivation methods and market conditions. Strengthen the local community integration of the 686 Krishi Vigyan Kendras set up across the country to administer advice and undertake farmer capacity development. Supplement this by setting up a model farm in each gram panchayat that demonstrates modern cultivation practices.

Finally, while these are aimed at strengthening the supplier (the farmer), the demand side must grow as well. A strong agri-processing industry will reduce post-harvest losses and increase value addition for exports, generating lakhs of non-farm jobs in the process. 

The farmer agitation has highlighted many challenges. Farmers who have worked hard to provide for food security now face the prospect of stagnating income. Diversification must be the path forward. To convince farmers of the benefit of this will require careful consensus building as well as a diversification package. I have no doubt that with well-designed incentives and execution support, Indian farmers too will be able to double their produce with half the resources, yielding the desired impact on income.

Lavu Sri Krishna Devarayalu

YSRCP MP from Narasaraopet, Andhra Pradesh

(Assisted by Raghav Katyal, LAMP Fellow)


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