Move over Industry. Agriculture is the next frontier. The US and EU are currently supporting agriculture the way they promoted industry in the 1930s. Which was, to put it in a nutshell: using the latest technology to maximise output, high tariffs to discourage imports and massive subsidies to push exports.
Outsmarting everyone, China has acquired large tracts of land along the proposed “New Silk Road” to grow food and avoid food imports from the US and Oceania. And the UN’s Food and Agriculture Organisation says that by 2030, most developing countries will be dependent on imports from developed countries for their food requirements. Where does India stand?
These developments add a ticking clock to our plans to transform agriculture. Doubling farmers’ income in next five years can be an apt metaphor and goal for this transformation.
Indian agriculture suffers from low productivity, low quality awareness and rising imports. To improve, we must understand the underlying causes for each of these.
Droughts in 2014-15 reduced agricultural income substantially as over 60% of farming is rain dependent. Mechanised farming is not possible in over 65% of land holdings as they are less than one acre in size. And most farmers cannot buy quality seeds or expertise as they have little money. Together these factors result in low crop yields or productivity for most farmers.
On quality awareness, offering fresh and cheap produce for sale is no more enough. One cannot just buy fruits from a mandi and export. Food safety and quality regulations of most countries need proof of traceability. This means keeping records that prescribed norms have been followed at farm, storage, packaging and transportation levels.
India could export more grapes by improving quality standards and creating an integrated supply chain. We account for 4% of global production of grapes but our share in global exports is 1.6%. The case of bananas is even starker: our share of global output is 30% but of exports is less than 0.4%. Creating product-specific integrated supply chains is the most critical factor in increasing exports.
Agriculture imports have increased six times faster than exports in the past 20 years. Large imports in FY2017 are edible oil ($10.9 billion), pulses ($4.2 billion) and apples, kiwi fruits, almonds and cashews ($3 billion). These three groups account for 73% of India’s agriculture imports. They must be cultivated in India as we have the required soil and climatic conditions.
The following four initiatives will transform the sector and make it profitable to farmers and other participants.
One: Encourage contract farming. Much of India’s exports and supermarket supplies originate from Contract/Corporate Farming Ventures (CFVs). A CFV takes land on lease from a group of farmers and pays an agreed amount and a share of profits to them. Or it may supply inputs and expertise to farmers, supervise production and buy the products.
CFVs apply knowledge and latest techniques and oversee an integrated supply chain. No wonder most CFVs have reported higher yields for wheat, rice, sugar, cotton, potato, gherkin, tomato, groundnut, safflower, marigold, poultry and milk.
CFVs benefit farmers and increase quality and productivity, hence are welcome. But it is not easy to start a CFV and despite many decades of operation, they cover less than 3% of arable area.
Simplification of land pooling laws, online verification of land records, standard contract format, and streamlined contract registration and dispute settlement process will make the CFV process transparent and nudge many to venture into this area. CFVs will ultimately lead to collaborative farming where a group of farmers who benefited from the CFV experience will pool land to start their own venture.
Two: Convert the top 10 agriculture universities into centres for excellence. They will make region-specific strategies to raise crop yields, advise on the creation of integrated supply chains, and prepare a plan to promote exports and cut imports. The centre will also publish product reports after extensive field and market trials for use by farmers.
Three: Create 2,000 farmer centres, one in each sub-district. These should be the go-to places for all farmers’ needs. Here he can meet representatives from banks, insurance companies, seed and equipment suppliers and buyers. Farmer centres would integrate with the electronic National Agriculture Markets (e-NAM) to help farmers sell direct to the consumer. Each centre will also have free water, soil and nutrient testing labs.
Four: Ensure active monitoring of government schemes. For example, many of the 35 million farmers who opted for the Pradhan Mantri Fasal Bima Yojna in the last kharif season got their compensation late, as more than half the states did not pay the premium on time. The e-NAM, another useful initiative, needs to check wrong reporting. Many mandis show normal sales as e-NAM sales.
Also, we need to divert funds towards drip and sprinkler irrigation systems. Such micro-irrigation techniques use far less water than open canals and flood irrigation systems, on which most of our irrigation money is being spent. Many countries including the US and Israel have already switched to micro-irrigation techniques.
A rising agriculture sector will upgrade the lives of 70 crore people, most of whom live on the margins. The results will be humbling and transform the entire fabric of nation building.