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Multi-pronged strategy for doubling farm income

The first four volumes out of fourteen volumes of the  Report of the Committee on Doubling Farmers’ Income (DFI) was released recently by the Ministry of Agriculture and Farmers Welfare. It clearly defined who are farmers and clarified that focus should be real income rather than nominal income. The report futher mentioned that it may not be possible to double incomes across all the regions uniformly, rather approach should be region specific with higher growth in less developed states and lower growth in more developed states, which ultimately reduce regional inequalities. The report also said that in the past policy bias has impacted the overall conditions of peasants in terms of declining income, low output prices, and increased dependence on markets for the purchase of inputs.

Farmers get income from multiple sources

An average agricultural household derive income from cultivation, livestock, non-farm business and wages and salaries. At the national level, the average agricultural household income is targeted to be doubled in seven years by 2022-23 over 2015-16. The aggregate base year’s (2015-16) all-India average income of an agricultural household is estimated at Rs. 96,703 at current (2015-16) prices. The doubling would imply that the average farmer’s household income would go up to Rs.1,93,406 measured at 2015-16 prices.

Key is effective implementation of government programmes

Although, central and state governments have announced and are implementing many development programmes like interest subvention on crop loans, National Food Security Mission (NFSM), Rashtriya Krishi Vikas Yojana(RKVY), Soil Health Card Scheme, Pradhan Mantri Krishi Sinchai Yojana(PMKSY), National Agricultural Market for Electronic Trading(eNAM) and Pradhan Mantri Fasal Bima Yojana (PMFBY), on the ground their effectiveness was not visible. A recent CAG report said that Rs. 2,800 crore was unspent under Rashtriya Krishi Vikas Yojana over five year period. States should develop their own development projects like Mission Kakatiya (Rejuvenating Tanks) and the proposed financial aid of Rs.8000 per acre per year for farmers in Telangana to meet the local demands.

Farm Diversification with risk mitigation

Although studies show that diversification to high value crops like fruits and vegetables are main sources of income growth, they are also major cause of farmers’ distress due to high fluctuations in prices. Farmers can only gain from diversification, if risk mitigating strategies are popularized among them. Farmers also need non-exploitative markets for both inputs and outputs to facilitate diversification to commercial and horticultural crops. Right seed in right time at reasonable cost, availability of fertilizers, micro-nutrients including bio-fertilizers at cheap rate, custom-hiring centres and farm machinery is the key for technological diffusion and increased incomes. It also requires better management of post-harvest transport, processing, storage, packaging, marketing and price realization.

Shift from price support to income support

Now announcement and procurement at Minimum support Price is the only policy instrument to help farmers, that too only effective in case of paddy and wheat. But already most of the developed countries and even some developing countries have moved to income support policies. India needs to shift to income support policy to achieve doubling farmers’ incomes by 2022. Without income support policies this goal cannot be achieved in rainfed and backward districts, where the scope for increasing farmers’ incomes is limited even with full efforts.

Meeting the needs of tenant and small farmers

There is a growing number of tenant farmers, they hardly get any support from government. About 67% of the farm land is held by small and marginal farmers with holdings below one hectare, while their share in total private agricultural investment is less than 10 percent. Even for these small investments, they depend on informal sources of credit at exorbitant interest rates, resulting in uneconomic holdings. This indicates that there was a need for encouraging private investment among these farmers through easy credit and innovative community-Public-private Partnerships.

Minimum land required to be get out of poverty

To cross international poverty line of USD 1.9 per capita per day, a five member farm-household should get annual net income of Rs.2,25,000. Assuming that the farm-household gets 40% of income from non-farm sources, still his net returns should be Rs. 1,35,000 from farm. If we consider Rs.20,000 net income per hectare per season, with two crops per year, the farm-house hold needs to have a minimum of three hectare to cross poverty line. It indicates that not only small farmers, but majority of the medium farmers will also be in poverty, if they don’t lease-in land with the existing productivity levels.

Opportunities in non-farm incomes

DFI report mentioned that on an average 60 per cent of farmers’ income is from agricultural output (including livestock) and the remaining 40% is from non-farm incomes. The report also said that the Ratio of farm and non-farm income should be raised from the existing 60:40 to 70:30 by 2022. It seems unrealistic as economy develops there were more opportunities in non-farm sector and share of farm sector will reduce as experienced by Punjab, Haryana, Tamil Nadu and Kerala.  Hence there should be a strategy to increase rural non-farm incomes within the doubling farmer’s income target.

Public Investment

The DFI report estimated that an additional Rs.6,39,900 crore investment is needed for doubling farmers’ income.  The size of public spending on agriculture and irrigation as a percentage of the GDP should be raised from existing 2 percent to four 4 percent as public investment bears a strong relationship with private investment and income. For a targeted 10.41 per cent annual increase in farmers’ income, the estimated increase in weighted public investment (together in agriculture, irrigation, rural roads and transport and rural energy) would be 14.17 per cent per year and the private investment has to grow at 8 per cent per year.

Post-harvest infrastructure

India can save huge post-harvest losses (Rs.35,000 crore per annum assuming a conservative estimate of 15% loss of total production) by investing about one lakh crores in cold chains, this investment can be recovered within three years. Farmers should be made partners in the cold-chain/agri-logistics to enable them to benefit from access to bigger markets (beyond the local market) and realisation of remunerative prices.

Overall, effective implementation of government programmes, farm diversification towards high value crops, competitive price, enhanced investments and income support should be the strategies for doubling farmers’ incomes.

 (The author is the Director of National Institute of Agricultural Extension Management (MANAGE), Hyderabad)

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