Agriculture

by
Shyam S Kaggod
Topics to be covered
• Features of Indian Agriculture • Green Revolution
• Fertilizers • Storage/Warehousing
• MSP • Marketing - APMC
• Food Subsidy and Food Security • Crop Insurance
• Agriculture Census • eNAM
• Mechanization • e-Technology
• Agri Credit and Loan waivers • Questions
• Irrigation
Features of Indian Agriculture
• Majority of the population is involved in agriculture
• 49% of the households derive their daily income
• Majority of the land under agriculture is dependent on monsoon
(monsoon is erratic)
• Traditional methods of irrigation
• Lower mechanization
• Disguised unemployment
• Too much oriented towards cereal production
• Per capita availability of land and water is low
• Central problem of agriculture is productivity
Land and water availability
Productivity or crop yield
Fertilizers
• Agricultural urea is most subsidized(74%), most produced (86%), most
consumed(74%), most imported(52%), most physically controlled

• The urea subsidy accounts for 0.8% of GDP

• In case of DAP and MoP government pays the subsidy based on the quantity used
(per kg) whereas in case of urea
• Fixes maximum retail price
• Provides subsidy to the 30 domestic producers
• Provides subsidy to the importers
• Imports are canalised-only three agencies are allowed(State Trading
Corporation of India; Metals and Minerals Trading corporation of India; India
Potash Ltd)
• Half of the movement of fertilizer is directed
Fertilizers-Leakages
• Black marketing

• Impact on the small farmers

• Inefficient subsidy given to domestic manufacturers

• Disparity in the usage

Standing Committee Report
• Production & Consumption

1960s 2014-15
Agriculture Production 83 mn tn 252 mn tn
Fertilizer consumption 1 mn tn 25.6 mn tn

• Production, Consumption and Imports

2001-02 2012-13
Fertilizer Consumption 17.4 mn tn 25.5 mn tn
Domestic Production 14.5 mn tn 16.1 mn tn

• Huge Disparity
• 56% of the districts consume 85% of fertilizers
• Consumption-N:P:K::6.7:2.4:1
Standing Committee Report
• The present policy doesn’t cover bio-fertilizers, organic farming etc.
Hence there is a need for new policy

• There is a need to have a policy to promote organic farming

• There is a need to set up a new institution, to regulate the sales,

imports etc of pesticides
Minimum Support Price (MSP)
• Govt set up L K Jha Committee, the recommendations led to setting up
of Agriculture Prices Commission in 1965

• The price at which the government would purchase the food grains from
the farmers

• MSP, Bonus and FRP

Crops covered under MSP
• Paddy • Groundnut
• Wheat • Rapeseed/mustard
• Barley • Sunflower seed
• Jowar • Sesamum
• Bajra • Niger seed
• Maize • Copra
• Ragi • Jute
• Arhar/tur • Sugarcane
• Moong
• Urad
MSP – Determinants
• Demand and supply
• Cost of production
• Price trends in the market, both domestic and international
• Inter-crop price parity
• Terms of trade between agriculture and non-agriculture
• Minimum of 50 percent as the margin over cost of production
• Likely implications of MSP on consumers of that product
MSP – Cost of Production
• Three types of Costs

• A2 = covers all input expenses incurred by the farmers on seeds,

fertilisers, labour, power supply, and water

• A2+FL which in addition to A2 comprises an imputed value of

family labour

• C2 which also factors in the land rentals and interest forgone on

owned land and fixed capital assets
MSP - Concerns/Worries

• May lead to Inflation

• Limitations on procurement

• Cropping patterns will get affected

MSP – NITI Aayog
• More than 81% of the farmers have knowledge of MSP

• 67% of the farmers sell the crops through their own means
• The MSP in some states is paid late
• Long distance between the fields/farms and procurement centers
• FCI procures only rice and wheat in surplus states
• Too much of paper work

• HLC headed by Shanta Kumar has pointed out that only about 6% of the farmers get
the benefits of MSP
Food Subsidy
• Economic cost of food grains = MSP + all other costs
• Food Subsidy = economic cost of food grains - issue price
Food Security
• Food Security
• Availability
• Accessibility
• Affordability

• Food grain distribution chain

Various Programmes
Name Year Coverage Note

PDS Up to 1992 Universal

RPDS 1992 Backward blocks 20 kg of food grains

TPDS 1997 Poor and non-poor (APL and BPL) 35 kg of food grains

AAY 2000 Poorest of the poor 35 kg of food grains

APS 2000 Indigent senior citizens 10 kg of food grains

NFSA 2013 Priority households 5 kg of food grains per person per month
NFSA
• 50% of urban and 75% of rural population (two-thirds of total population)

• 5 kgs of food grains/person/month

• Poorest of the poor will continue to be covered under AAY

• For issuing ration cards eldest woman of the house will be considered

• Redressal mechanism-DGRO and SGRO

• States have to identify eligible households

• Proposes using AADHAR, ICT for better implementation

Land Holding Pattern
Land holding pattern - fragmentation
Land Holding Pattern
• All the farmers put together the average landholding declined from
1.15 hectares to 1.08 hectares
• UP has the highest number of operational holdings followed by Bihar
and Maharashtra
• The highest are under farming is in Rajasthan followed by
Maharashtra and UP
• The proportion of farms that are operated by women increased by
12.8%
Agriculture Mechanization
Agriculture Mechanization-case study
• Madhya Pradesh-Custom Hiring Centers (CHCs)

• CHCs
• Centre to be set up at a cost of ₹ 25 lakh (government to give a subsidy of ₹ 10
lakh or 40% of the cost)
• Each centre to serve 200 to 300 farmers within a radius of 10 kms

• Same model is followed in AP and Punjab

Agriculture Credit
• Types
• Based on the source
• Based on the term

• Vyas Committee
• Direct lending must be increased to 18%
• Reducing the cost of agricultural loans
• Banks to increase their disbursements to small and marginal farmers under
Special Agriculture Credit Plan (SACP)

• Issues
• Access to formal credit
• Lack of collateral
Agriculture Credit (As per Report on Medium Term Financial Inclusion by RBI)

Size of the land Co-op society Bank Informal Sources

Marginal 10% 27% 63%
Small 15% 48% 37%
Semi-Medium 16% 50% 34%
Medium 18% 50% 32%
Large 14% 64% 22%

Report on Medium Term Financial Inclusion – RBI

Previous Loan Waivers
Year Points
1990 - Announced by V P Singh Government
- Total expenditure of over ₹ 10000 Cr
- Covered loan waiver of up to ₹ 10000
2008 - Announced by UPA government
- Applicable to small and marginal farmers
- Expenditure incurred was over ₹ 70000 Cr
2012 - Announced by Samajawadi Party
- Waived loans up to ₹ 50000
- Expenditure incurred was around ₹ 1650 Cr
2014 - Elected governments in AP and Telangana announced loan waiver
- In case of Telangana it was announced for ₹ 17000 Cr
- In case of AP it was announced for loans up to ₹ 1.5 lakh
2016 - AIADMK government announced loan waiver
- Small and marginal farmers owning up to 5 acres were covered
- The expenditure incurred was ₹ 5700 Cr
2017 - UP government has announced a loan waiver of ₹ 36359 Cr
Arguments in Favour of Loan Waiver
• Agriculture is in distress

• Agriculture distress is one of the contributing factors for the farmer

suicides

• Two successive droughts in FY15 and FY16 followed by good monsoon

in the next two years

• Why not for agriculture?

Arguments Against the Loan Waiver
• Moral Hazard Argument
• Not all the farmers are covered
• Creates a conflict between lenders and borrowers

• The fiscal deficit of the states/central government

• It’s a temporary solution

• Domino effect

• Implementation concerns
Do loan waivers work?
• CAG Report 2013
• Commission and Omission errors
• Issue with the certificate
• Issue with the design of the scheme

• World Bank Report 2012

• The debt waiver reduces the debt on the households but does not
increase the investment and productivity
• The program failed to re-integrate the households into formal
credit relationships
Warehousing
• Uses / Need
• Price stabilization
• Scientific storage reduces wastage
• Continuous supply

• Type

• Criticism
• Not enough storage
• Storage by FCI does not include storage of pulses, oilseeds etc
• Location disadvantages
• Complicated and time consuming procedure of depositing and withdrawing the
produce
• Lack of knowledge amongst the farmers
• Lack of credit accessibility on the produce stored
Shanta Kumar Committee Report
• FCI must transfer procurement operations to states which have made
considerable expenditure in infrastructure

• There must be rationality and uniformity in procurement operations

• centre not to accept additional/surplus food grains from states

announcing bonus over MSP

• Stringent quality checks before accepting food grains

• Encourages NWRS (Negotiable Warehouse Receipt System)

Shanta Kumar Committee Report
• Prioritize pulses and oil seeds and their MSP

• Reduce coverage under NFSA from 67% to 40%

• 6 months advance food grains to be issued so that the cost of storage

comes down

• End to end computerization

• Cash transfers in PDS to be operationalised in cities with population over

1 million
Buffer stocks
Irrigation
• Need/Importance

• Classification of Irrigation Projects

• Minor – up to 2000 hectares
• Medium – 2000 to 10000 hectares
• Major – more than 10000 hectares

• Types of Irrigation-Traditional and Micro

• Evaluation
Evaluation-Micro Irrigation
Evaluation-Micro Irrigation
Promotion of Micro-Irrigation
Faster completion of ongoing major and
medium irrigation projects

- Creation of new water sources through

minor irrigation
- Repair, restoration and renovation of
water bodies
- Command area development

- Usage of ICT
- Promotion of micro-irrigation

- Effective management of runoff water

- Improved soil & moisture conservation
activities
- Converging with MGNREGS
APMC
Problems with APMC act of states
• Only few of the states have amended their APMC acts on the lines of model act

• Presence of very large vested interests which prohibit changes in the present mandi
system

• State APMCs have been unable to improve the infrastructure, provide access to
information, modernization of market facilities etc

• The modernization of market infrastructure requires huge investment which can be

obtained with the assistance of private players

• The middlemen (or licensed traders) make a huge gain (As per the findings of Mr
Ashok Gulati, the farmers get 25% of the price that the consumers pay)
eNAM
• Objectives
• To promote genuine price discovery
• Increases farmers’ options for sale and access to markets
• Liberal licensing of traders / buyers and commission agents
• Harmonization of quality standards of agricultural produce
• Single point levy of market fees
• To promote stable prices and availability of quality produce to consumers
• Provision of Soil Testing Laboratories in/or near the selected mandi

• Small Farmers Agribusiness Consortium (SFAC) has been selected as the

lead agency to implement it

• The Scheme is being funded through Agri-Tech Infrastructure Fund (AITF)

eNAM
eNAM
Agricultural Produce and Livestock Marketing Act 2017
• State government will declare the whole state as a Unified market area and in such an area,
a single license will be applicable for the trade of agricultural produce and livestock

• A Market Committee will be set up which will manage market yards in these specified areas.
These committees will also be responsible for
• Regulating the auction of agricultural produce and livestock
• Providing facilities for marketing of agricultural produce and livestock
• The committee may also use digital technologies to link consumers with farmers
• The committee may be involved in managing these market yards through PPPs
• The committee will be responsible for levying and collecting single market fee (it cannot
be over 2% of value in case of non-perishables and over 1% of value in case of
perishables and livestock) from buyer on sale of notified agricultural produce and
livestock

• Apart from these market yards, the private market yards could be set up by private
individuals, which will facilitate operations of traders, agents etc
PMFBY (Pradhan Mantri Fasal Bima Yojana)
• Launched in 2016

• All the funds for the scheme come from the Krishi Kalyan Kosh

• Objectives
• To provide financial support to farmers who suffer crop loss / damage that
arise out of unforeseen events
• To stabilize farmers income to ensure that they continue their farming
activities
• To encourage the farmers to adopt modern agricultural practices and also
make use of innovative agricultural practices
• To Ensure the flow of credit to the agriculture sector which contributes to
food security, crop diversification and enhancing growth and competitiveness
of agriculture sector besides protecting farmers from production risks
Pradhan Mantri Fasal Bima Yojana
 NAIS MNAIS PMFBY

Premium rate Low High Lowest (government to

contribute the maximum)

One season one premium Yes No Yes

Coverage Full Capped Full

Localized risk coverage No Hailstorm, landslide Hailstorm, Landslide,

Inundation

Post harvest loss coverage No Only coastal areas (cyclonic rain) Pan India (cyclonic and
unseasonal rains)
Use of technology No Intended Mandatory

Awareness No No Yes (target to double the

coverage to 50%)
PMFBY – Issues / Concerns
• Usage of technology

• Delay in claims compensation

• Coverage issue

• Gaps in assessment
PMFBY – Changes introduced
• The farmers will be paid 12% interest by insurance companies for the delay in
settlement claims beyond two months of prescribed cut-off date

• State Governments will have to pay 12% interest for the delay in release of
State share of subsidy beyond three months of prescribed cut-off date

• Inclusion of hailstorms in post-harvest losses, besides unseasonal and cyclonic

rainfalls

• Separate Budget Allocation for Administrative expenses (at least 2% of budget

of scheme)

• Appointment of District Level Grievance Redressal Officer; and State and

District Grievance Redressal Cells for fast redressal of grievances.
Pulses
Pulses
Pulses
Pulses
Pulses
Pulses
Technology in Agriculture
• Application of ICT in agriculture = E-agriculture

• E-agriculture involves-Conceptualization, Design, Development,

Application and Evaluation of innovative methods to use ICT

• ICT provides people to information and assists them to make informed

decisions

• e-agriculture is a component under NeGP

Technology in Agriculture - Need
• Food security

• Sustain the growth in agriculture

• Poverty reduction

• Assist farmers-majority of farmers are into small and marginal farming

• Helps rural and under-developed markets to become efficient and productive

• ICT helps in dissemination of information-technology, market demand, price

information; weather, pest and best practices etc
Some technologies
• eNAM

• GM technology

• Mridaparikshak

• Soil Health Card

• Kisan call centre

• Kisan SMS portal

• Kisan credit card

• AGMARKNET Portal
Problems / Issues
• The reach of the technology is still very poor and large chunk of farmers
are still ignorant about such advancements.

• Due to low literacy rate among farmers and digital divide

• Usage of regional languages

• Duplication of the efforts

• The rural infrastructure for the use of ICT is also not uniform and lot of
regional disparity persists
Issues / Problems
• As per the the world bank data
• All countries across the board have increased production between 1961 and 2017
• The progress in western countries such as US have been been possible because of
their focus on the agriculture research and early introduction of these
methods/technologies in the farms
• As per Economic Survey 2017-18. Lack of literacy stands in the way of
absorbing technologies and adopting risk-mitigating measures. In India,
around 30% of the small and marginal farmers are illiterate, which
compromises their ability to manage the farm inputs as per the
requirements of a specific crop. If done then the farmers can increase the
productivity without any loss in the soil fertility
• In this area China is placed at a better position compared to India as it has
spread literacy amongst its farmers and also provided effective extension
services
Doubling the income - Seven Point Strategy
1. Emphasis on irrigation along with end to end solution on creation of resources for ‘More crop per drop’

2. Provision of quality seeds and nutrients according to the soil quality of each farm

3. Large investments in warehouses and cold chains to prevent Post-harvest losses

4. Promotion of value addition through food processing

5. Implementation of National Agricultural Markets and e-platforms (e-NAM) to eliminate shortcomings of

all the 585 centers

6. To mitigate the risk, introduction of crop insurance scheme at a lower cost

7. Promotion of allied activities such as Dairy-Animal Husbandry, Poultry, Bee-keeping, Horticulture, and
Fisheries
Doubling of Farmers’ Income by 2022

Inputs
Storage and Marketing
•DBT in Fertilizer
Transportation •eNAM
•Quality Electricity
•Increase the storage •Amending APMC
•Micro Irrigation
capacity acts
•Pooling of resources
•NWRS •Food Processing
•HYV seeds-GM crops
•Rationalize MSP Parks
•Cheaper Credit-Small
•Procure pulses •Contract Farming
Finance Bank
•Increase cold storage
•Higher Mechanization
transportation
•Higher usage of ICT
•Land Leasing Act
Question
In India, which of the following have the highest share in the
disbursement of credit to agriculture and allied activities?

(a) Commercial Banks

(b) Cooperative Banks
(c) Regional Rural Banks
(d) Microfinance Institutions
Question
Priority Sector Lending by banks in India constitutes the lending to

(a) agriculture
(b) micro and small enterprises
(c) weaker sections
(d) All of the above
Question
Which of the following is/ are possible benefits of farm mechanization?

1. Increase in crop productivity

2. Increase in capital productivity
3. Increase in labour productivity

Select the correct answer using the codes given below

(a) Only 1 and 2 (b) Only 1 and 3

(c) Only 2 (d) All of the above
Question
The Fair and Remunerative Price of Sugarcane is approved by

a. Cabinet Committee on Economic Affairs

b. Commission for Agriculture Crops and Prices
c. Directorate of Marketing and Inspection, Ministry of Agriculture
d. Agriculture Produce Marketing Committee
Question
Among the agricultural commodities imported by India, which one of
the following account for the highest imports in terms of value in the
last five years?

a) Spices
b) Fresh fruits
c) Pulses
d) Vegetable oils
Question
The economic cost of food grains to the Food Corporation of India is
Minimum Support Price and bonus (if any) paid to the farmers plus

a) Transportation cost only

b) Interest cost only
(c) Procurement incidentals and distribution cost
d) Procurement incidentals and charges for godowns
Question
Consider the following statements regarding the Minimum Support Price
policy of Indian Government

1. The Government of India started announcing the Minimum Support

Prices (MSP) in 1966–67 for wheat which was expanded to cover many
more crops in the coming years in the wake of the Green Revolution
2. It is a minimum price at which the government will purchase farmers’
crops irrespective of the market price for the crop

Which of the following statement(s) is/are correct?

a. Only I
b. Only II
c. Both I and II
d. Neither I nor II
Questions
• “The government has to make an investment in irrigation to prevent Indian
Agriculture from dancing to the tunes of monsoons”-elaborate

• What measures can be taken by then government to double the income of

the farmers

• The APMCs set up under state government acts have not only impeded the
development of agriculture but also have been the cause of food inflation in
India. Critically examine.

• What are subsidies? Critically examine the importance of subsidies with the
background of the fiscal discipline of GoI

• The technology is essential to achieve food security in India. Discuss

Questions
• Agriculture marketing is important for the farmers to get better returns

• Importance of new crop insurance scheme

• Discuss the issue of GM crops in India. Is it an imperative for India to

adopt the GM crops to achieve the food security and what would be the
pitfalls in the process of achieving it