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Constraints of

Small & Marginal Farmers


and
Institutional Options
October 22nd, 2010

Yogesh Bandhu
Giri Institute of Development Studies, Lucknow
The Institutions……

Institutions may be deliberately created, or they simply evolve


over time via changes, adaptation, and adjustment to changing
circumstances and growing social needs (North, 1990).
Institutional change is a continuous transformation process in
societies, which means change in the principles of regulation and
organizations, behaviour and interaction patterns (Manig, 1991).
Institutions affect performance of the economy by their effect
on the costs of exchange (transaction costs) and cost of production
(transformation costs) (North, 1990 &Bardhan,1999).
In the absence of efficient institutions the agrarian economy
continues to struggle at a very low-level income, production and
consumption equilibriums (Ruttan,1985).
The Institutions……
Small and marginal farmers are unable to adopt capital goods and HYV
technology during the mid sixties and seventies because of difficulties and
inadequacy of institutions, cumbersome institutional procedures and
network (Parthasarthy & Prasad, 1978)
Small and marginal farmers are practicing traditional methods of
cultivation since research and scientific advice and extension services are
limited. Most of time sometimes farmers depend on the informal
information providers like input dealers and comparatively progressive
farmers.
Small and marginal farmers become less competitive and more vulnerable
in open market economy compared to those in other countries. The post-
independence period marks a turning point in the history of Indian
Agriculture (Bhalla 1999) but farmers failed to respond to the opportunities
provided new developments.
Percentage of Holdings Using Hybrid Seeds

25.0

Marginal Small
20.0
Figures in Percentage

Medium Large
15.0

10.0

5.0

0.0
Percentage of Holdings Using Certified Seeds

100.0

90.0
Marginal Small
80.0
Medium Large
Figures in Percentage

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0
Percentage of Holdings Taken Foundation Programme

90.0
80.0
Marginal Small
Figures in Percentage

70.0
Medium Large
60.0
50.0
40.0
30.0
20.0
10.0
0.0
MAH MP UP WB RAJ GUJ TN PUN ORISSA HAR AP KAR
Percntage of Area Treated with Fertilizers
120.0

100.0
Figures in Percentage

80.0

60.0

Marginal Farmers Small Farmers


40.0
Medium Farmers Large Farmers
20.0

0.0
Average Quantity of Fertilizers Applied (Kg. Per Hectare)
450

400

350
Figure in Numbers

300

250

200

150

100
Marginal Small Medium Large
50

0
ORISSA MP RAJ GUJ UP MAH ALL HAR PUN WB AP KAR TAN
INDIA
Percentage of Operational Holdings Using Pest Control
120.0
Methods

100.0
Figures in Percentage

80.0

60.0

40.0

20.0
Marginal Farmers Small Medium Large
0.0
Average Number of Animal Operated Implements

8.0
Marginal Small
7.0
Medium Large
6.0
Figures in Numbers

5.0

4.0

3.0

2.0

1.0

0.0
Average Number of Power Operated Implements
10.00
9.00
8.00
Marginal Small Medium Large
Figures in Number

7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Average Number of Power Operated other
Implements/Equipments
3.50

3.00
Marginal Small
Figures in Number

2.50
Medium Large
2.00

1.50

1.00

0.50

0.00
Average Number of Milch Animal
14.0
Marginal Small Medium Large
12.0

10.0

8.0

6.0

4.0

2.0

0.0
TN AP WB ORISSA KAR MAH ALL UP GUJ MP PUN HAR RAJ
INDIA
Ownership of Other Livestock
12.0

10.0
Figure in Numbers

Marginal Small
8.0
Medium Large
6.0

4.0

2.0

0.0
Percentage of Operational Holdings that took Institutional
70.0
Credit

60.0
Marginal Small
Figure in Percentage

50.0

Medium Large
40.0

30.0

20.0

10.0

0.0
60000

50000
Marginal Small
40000
Medium Large
30000

20000

10000

0
Reasons for Poor Performance

Harvest & Post-


Pre-Harvest Marketing Soft Infrastructure
Harvest

• Poor crop selection • Poor and • Inaccessible, • Inadequate returns


and diversification inadequate incomplete and on investment in
• Low Seed mechanization delayed marketing research and
Replacement Rate • Poor packaging, information development
• Low quality seeds sorting, grading & • Presence of too • Lack of trained
• Extinction of processing many human resources
traditional variety • Poor logistics, Intermediaries • Lack of efficient
• Poor and storage and cold rural support
unbalanced use of storage infrastructure
chemicals infrastructure
• Inadequate basic
infrastructure such
as Power, Roads,
Water
Reasons for Poor Performance

agriculture not being market-driven;

distorted incentive structures;

a multiplicity of laws, regulations, and taxes;

inadequate backward and forward linkages;

poor infrastructure, especially for marketing;

the poor state of markets and the way they transact;

inadequate outreach of services and credit to farmers;

lack of modernization in storage techniques and transportation methods;

inadequate information on and linkage with standards


Emerging Challenges for Marginal and Small Farmers
Liberalization of markets

Reduction of market protection and subsidies

Stringent consumers demands (quality, safety, convenience,


CSR)

Tight legislation on food quality and food safety

Changes in technology (ICT, biotechnology, logistics)

Global agro-food grades and standards

Consumer driven market


Institutional Options

Public Sector Revision

Deconcentration Subsidiarity

Cost Recovery Partnership

Privatization Decentralisation

Dual System
MARKET REFORMS

FUNDING

Private
Public Revision of public Cost recovery
sector extension via (fee-based) systems
downsizing & some
cost recovery (OECD countries,
(Canada, Israel, USA) previously in Mexico)
DELIVERY

Pluralism, partnerships, Transfer (delegation) of


Private

Public
power sharing responsibility to other
• (Chile, Estonia, entities
Hungary, Venezuela, (Chile, Estonia,
S. Korea, Taiwan) Hungary, Venezuela, S.
Korea, Taiwan)
Non Market Reforms

Political, Fiscal and Administrative Issues

Decentralization to lower Transfer (delegation) of

Private
Public

tiers of government responsibility to other


(Colombia, Indonesia, entities
Mexico, The Philippines, (Bolivia, to farmer
Uganda & others) organizations;
Ecuador, mixed with
farmer-led NGO prog;
Peru, extension
devolved to NGOs)
The institutional initiatives call for:
linking horizontally institutions to vertical supply
chains

organizational reforms for reducing internal


transaction costs

creating financial structures capable of mobilizing


venture and equity capital

reinforcing (extra-)regional forms of cooperation

introducing mixed remuneration systems

professionalization of the management.


The institutional initiatives call for:

pluralism of extension providers, involving coordinated


partnerships with non-profit non-governmental organizations,

partnerships involving farmers and farmers’ organizations, and


other private sector extension-providers,

cost recovery options,

decentralization to lower tiers of government,

subsidiarity at the grassroots level.


Thank you
Yogesh Bandhu
yogeshacademic@gmail.com