TWENTY FIRST CENTURY MISSION: Living with Nature in the Modern Form. AGRICULTURE: PROCESS AND POLICIES Appeared in KISAN WORLD February 2011 Vol 38 No.2

TWENTY FIRST CENTURY MISSION: Living with Nature in the Modern Form.

AGRICULTURE: PROCESS AND POLICIES

Appeared in KISAN WORLD February 2011 Vol 38 No.2

          We had planned to survey various technologies and the types of modern agricultural infrastructure needed for India, systematically. They are intertwined with modern energy inputs, modern manufacturing technologies, life sciences and biotechnology, information technology  - to mention a few.

          But we are making a deviation from that plan for the series to address a crucial issue: emotions around prices, mindsets of the media and urban middle class and the reactions of the political system as a whole.

          The way the issues of onion prices was whipped around, is merely symptomatic of such mindsets and non – policies (knee jerk reactions). They are dangerous to the growth of agriculture in India in a modern form leading to agricultural prosperity. It is not good for the farmers either. More of them will run away from agriculture and those who remain with it, will have to face and suffer the wrath of nature, vicious cycles of debts, and dwindling incomes.

Crocodile ears and invocation of essential commodities act to control prices are not at all in favour of farmers.

Urban middle class person and workers from organized sector have a better stability of their incomes. Not that they do not suffer from inflation. But they consume much more goods and services than the farmers or agricultural workers do in villages.

Is there a hue and cry when cement, steel and sand prices go up? Or when manufacturers up their price tags for their goods either directly or introducing a new model (by quietly pulling out an old model)? Even fees for schools, colleges and private tuitions are upped periodically. Salaried employees consider annual increments as their rights.

Even when a stores room or a godown in a factory is destroyed in fire or flood, the employees continue to get their salaries. At best some of the losses may be recouped by the business company by passing on the redevelopment costs to the consumer or else in most cases the losses are recouped through the insurance company. (Note that the payment for insurance company is taken as a operating expense by the company and is passed on to the consumer). Now taxes levied by the governments get passed on the consumer.

What about a farmer? In a good season when the farmers work hard and use better seeds and other inputs, yields (and production) go up. Better yield need not always be a very good news for the farmers. Agricultural workers may get more income. But the farmer who invests on the land and takes risk, may oftentimes be faced with a glut in market if agricultural production goes up beyond the demand of the consumers. Urban consumers may enjoy lower prices but there are not infrequent cases when farmers dump tomatoes, potatoes etc in the farm itself without harvesting, as they do not even get the return for the labour costs of harvesting for selling in the markets! Also better yield seasons may also bring in pests and rodents thus increasing the need for more expenses for pest and rodent operations.

On the other hand when there are poor rains (in their lands – not an all India average we read in newspapers!!) farmers’ yield goes down. Oftentimes, they may not be able to recover in the input costs (of seed, fertilizers, energy for pumps, water, pesticide, labour costs etc). So is the situation when there are excessive rains or floods in their fields. Recent rise in prices of onions is partly due to the loss of crops due to floods in parts of Andhra Pradesh and Maharashtra.

In fact indebtedness of the farmers can be traced to such severe uncertainties in production, yield, and markets.

Most debates in the public space in the English or local language media, almost fully ignore the fact that the sale of agricultural produce from food grains, to pulses to vegetables to cash crops, is one of the most regulated activity. From local level officers to the State Govts (multiple agencies) to the Centre can control the procurement or movement of produce under various pretexts of public interest. A delay of a few days in announcing a minimum support price by govt. can lead to distress sale by some farmers. A temporary ban on exports can affect some sections of farmers who have worked hard to enter a few foreign markets which fetch better price for their products. Such on or off mode create problems in business development in foreign markets. Will we go to a shop which has stocks but the shopkeeper denies you (a new regular customer) the sale of some products on the pretext that he has to supply to govt. designated consumers? When we accept the logic of free trade for all other economic activities why not for agricultural produce? Why does not a farmer have a right to sell to the person who pays him / her a better price (and better terms such as some advance money at the time of placing order and full down payment on receipt of goods?

After ignoring the farmers’ right in the pretext of food being essential (that starts for basic grains and extends to sugar to pulses to vegetables and even sometimes to cash crops like cotton!), we discover periodically another villain – the trader and the middle – man! Not that all of them are angels. But on – off controls, knee jerk non – policies etc encourage speculators. If there is a stability and sincerity in policies, it is possible to evolve trading systems which can judiciously utilize futuristics to remove violent fluctuations of the market. We have institutions in place for it but do not use them!

Govt. procurement of grains at the time of green revolution did a great help to support the farmers adopting high yielding varieties. It was a bold decision by CS (C.Subramanian) to procure the large production of wheat from farmers in Punjab through FCI (Food Corporation of India). Had he not done it they would have suffered a market failure – oversupply and fall in prices. Those who produce more will suffer losses! But today’s India is different. Also our experience with govt. procurement systems and public distribution systems has been very bad. In spite of a number of inadequacies and govt. controls, it is the private sector trading which is maintaining the flow of agricultural produce to ultimate consumers.

One may point out the subsidies to the farmers for fertilizers, electricity etc. Some subsidies are required. But these policies are more used for political ends and not for building up a robust infrastructure for the farmers to be resistant to the vagaries of monsoon and weather; for building up some sustained future trading systems; and to create a protective insurance cover against natural disaster. For all these three items, a stable policy system which allows amongst other things a free market trading system which can help farmers and which can look at traders also as good economic citizens, is essential.

If such policies are implemented then corporate sector can also invest in agriculture and assure a profitable price to the farmers, bring them good technologies and inputs and above all free them from continuous indebtedness. Govt, also can attempt forming a few such major corporate entities run on professional lines to compete with private sector and be able to act as a regulator by making others to emulate them.

Some persons may be totally cynical about govts capability to set up such corporate entities. Some others may continue to insist that corporate sector entry into agriculture will spell a disaster for farmers and will further worsen the current levels of exploitation of poor and marginal farmers. Experience in Maharashtra and southern part of India in terms of sugar cane producers and sugar mills is encouraging, as also many green vegetable outlets which are operating in southern part of India.            

The model we suggest is not an extreme swing from total govt. control to total free market. But we should have some vital elements of free market – not to interfere with prices and supply chains through knee – jerk fiats. To buttress the swings and the normal business cycles (if demand of a agri produce increases supply of it increases to a point of over supply and then starts reducing to a level below real demand. This is so in all sectors be it steel, cement, cars etc), scientifically managed futuristic systems can help the trading by farmers. The corporates who invest in agriculture may work with farmers’ cooperatives, NGO’s and / or   local trading chains. Of course, there will be some disturbance to exiting vested interests – in the private and public (govt) sectors which operate now.

But our approach and policies should be to educate people that some price rise fluctuations are inevitable and we cannot expect farmers to keep on giving their produce at a low price while other sectors enjoy growth and better consumption. Farmers need more income; intermediating supply chain managers like traders, transportaters etc also need to be profitable in their business. Agricultural produce is perishable; therefore things have to move fast.

If good futuristic systems and scientifically planned information systems (to be funded by Govt. but run by professionals) are in place, all over India data can be speedily and efficiently collected to inform the farmers, traders, govt. etc in advance so that unnecessary supply (and production) bottlenecks do not develop. If free trade is allowed with better information, it will help the producer, supply chain manages and consumers.

Also public regulators can use technology to even out supply chain distortions – under supply or hoarding through release of agri produce preserved over longer period. (Let us not tinker with control of exports. We should encourage exports also. That will help Indian agriculture in the long run by giving newer challenges). In a keynote address given by Dr.R.Chidambaram, DAE Homi Bhabha Professor (currently Principal Scientific Adviser to Govt. of India) at Chennai, June 25 – 28, 2001 he describes about food preservation by radiation being used by 40 countries for over 100 food items. He has described that DAE has set up commercial food irradiation facilities for potatoes and onions at Nasik. What about using them for storing potatoes and onions for a large time and release them only at a few selected times when normal supply from farmers is low? It is about a decade after his talk. What are the public systems doing to make it large scale in other places and run them commercially?

Freeing agriculture is a complex issue. Our main focus had been on the need to free the farmers from draconian and knee – jerk market controls. We are aware that there are other critical issues like the large scale debts in which many farmers are already locked up. How to salvage them? Then how to make the money flow to them being maintained from pre – sowing time onwards to post harvest sale? Once debts are “released” as one – time action and also free – market mechanisms and corporate sector activities are set in place it is possible to maintain the money flow. Also creation of a good insurance cover for all farmers is a must. Govt. has a major role. Many currently marginal farmers may get upgraded or they may shift to other professions. We will address these some time later.

The above suggestion does not mean that we should expect the farmers to create enough surplus to upgrade their infrastructure for water, seeds etc. For many of these as one time investment, govt ought to provide as they invest for urban infrastructure,  and as they used to do far dams. Also support key R & D needed for them through different responsive mechanisms. We will address these later.

First and foremost let us look at agriculture as a modern economic activity and learn to treat the actors in it as important as we all are. They need their economic freedom and not be mere plowers and suppliers of “cheap food” and other agri produce. They need to earn more taking advantage of market mechanisms.

Let us begin thinking in these lines. Then we can aim at an agricultural growth 6 to 7% and also importantly more wealth to the producers and agri supply chain managers.

 

Y.S.RAJAN