Economics

Extension Services are expert services provided to the farmers that can help improve productivity by delivering timely advisory services to farmers to adopt best practices, technology, meet with contingencies, market information etc.

Explanation:  Imagine a small farmer in Bihar growing wheat. He wants to increase yield but:

• Doesn’t know about the latest high-yielding wheat varieties
• Isn’t aware of how much fertilizer to use or when to irrigate
• Doesn’t know how to deal with pest attacks or a sudden drought
• Has no idea where he’ll get the best price for his wheat in the market

👉 That’s where Extension Services come in. These are expert advisory services provided to farmers by the government or agricultural institutions to help them do farming in a smarter, more scientific, and more profitable way.

But Problems

1. In India, there is 1 Extension worker per 800-1000 farmers.
2. 60% of farmers don’t get any service from Extension workers, according to the NSSO survey.
3. Farmers depend on the progressive farmer of their area or marketing agent of some company for advice on the product they should use. But the problem is they will suggest only those products which give maximum profits.
4. There is no lab to farm connectivity i.e. research done in agricultural labs doesn’t always reach the farmers in the field.

1. Sub-Mission on Agricultural Extension (SMAE)

• The program aims to bolster agricultural extension services throughout India to improve agricultural productivity.
• The Agricultural Technology Management Agency (ATMA) is the key component of the SMAE, which focuses on sharing the latest agricultural technologies with farmers. ATMA is involved in farmer training, demonstrations, exposure visits, kisan melas, mobilisation of farmer groups, and the establishment of farm schools.

2. Various Apps

These include

• mKisan
• PUSA Krishi App

However, app usage is still limited due to literacy issues, regional language limitations, and lack of smartphone access among many small and marginal farmers.

3. Kisan TV

• Government can’t send the person to each village, but each village has TVs. Hence, the Government of India started Kisan TV in 2015.

4. Pradhan Mantri Kisan Samridhi Kendra (PMKSK)

• PMKSK works under the Ministry of Chemicals and Fertilizers (announced in 2022)
• The program aims to convert existing Fertilizer shops into Pradhan Mantri Kisan Samridhi Kendra that will act as a “One Stop Shop” for all agriculture-related inputs (like fertilizers, seeds, insecticides, pesticides, etc.) and other agricultural services.

5. AgriClinics and Agribusiness Centres 

• Agriculture Graduates set these up to provide paid advice to farmers on various issues. The Agriculture Ministry and NABARD support this scheme.
• This also helps generate rural employment for agri-graduates and promotes self-employment in the farm advisory sector.

6. Krishi Vigyan Kendras

• Krishi Vigyan Kendras are set up by the Indian Council of Agricultural Research (ICAR) and Agricultural Universities for frontline demonstration of agriculture technologies on the field, updating farmers about modern agriculture technologies and providing advisories to farmers using ICT.
• There are over 700 KVKs in India, but they are often underfunded and lack adequate staff for outreach.

7. Helplines

1. Kisan Call Centre: To address farmers’ queries regarding agriculture and allied sectors.
2. SMS portal for farmers

8. Student Ready

• Under this scheme, the village students are given Agro education.

9. Krishi Unnati Mela

• Fairs organized by ICAR to demonstrate new agricultural technologies to farmers.
• These melas also act as platforms for feedback collection and farmer-scientist interaction.

Agri credit is an essential input for agriculture to improve productivity. Access to institutional credit enables the farmer to enhance productivity by investing in machinery, purchasing variable inputs like fertilizers, quality seeds, and manure, and providing funds until the farmer receives payment from the sale of produce.

Every 1% increase in agricultural credit produces a 0.29% increase in agricultural GDP, consequently aiding in the increased income of farmers.

• Reliance on Informal Sources: 25% of agro-finance still comes from moneylenders. These moneylenders are highly exploitative and charge exorbitant rates.
• Although the quantity of Short Term Loans has increased, Long Term Investments in agro-infrastructure have decreased, both by the private and public sectors.  
• Regional Disparity: Coverage is meagre in the northeastern and eastern regions of the country. 
• Agricultural loans, also known as agri credit, are not used for the stated purpose. Primarily, they are used for marriage & consumption purposes by the farmer.
• Credit for Small Farmers: Small and Marginal farmers are not covered by banks and other institutional creditors.
• Banks indulge in coercive actions for repayment, which leads to increased instances of farmer suicides.

1. Priority Sector Lending Norms for Banks

• Banks are mandated to give 10% of their loans to Agriculture & Allied Sector, and 8% of their loans should be explicitly given to Marginal and Small Farmers.

2. Modified Interest Subvention Scheme (MISS)

• Under this, loans up to ₹ 3Lakh are given to the farmer at an interest rate of 7% & if his credit history is good, then 5% additional subvention is provided by the government, making the effective interest rate of 2%.
• Government has launched Kisan Rin Portal (KRP) for faster processing of interest subvention under MISS.

3. Kisan Credit Card (KCC) Scheme

• KCC is a smart debit cum credit card for farmers. The farmer can later pay credit at a very low rate of interest.
• It was started in 2012. In 2018, the facility was also extended to farmers involved in fisheries and animal husbandry.
• The scheme aims to reduce farmers’ dependence on the informal banking sector for credit, which can be very expensive and suck them into a debt spiral.
• Recent reports suggest high default rates on KCCs, which are becoming a significant source of non-performing assets (NPAs) for banks despite their various benefits.
• As of 2024, banks have issued 7.75 crore KCCs with an outstanding loan of Rs. 9.8 lakh crore.
• In Budget 2025, the loan limit of KCC was increased to Rs 7 lakh from Rs 5 lakh.

4. Negotiable Warehouse Receipt

• Under this scheme, the farmer can deposit his produce in a warehouse & get a warehouse receipt in return. The farmer can “mortgage” this warehouse receipt to a banker to get loans or trade at the Commodity Exchange.
• Hence, these Negotiable Warehouse Receipt helps the farmer get a loan for the next cropping season on receipt & sell his produce at a later date when he receives a favourable price for his product.  

5. Loan Waivers

• Various state governments are giving loan waivers to the farmers. 
• But the efficacy of such loan waivers and their impacts on the government’s finances is highly debated.

6. NABARD Initiatives

• NABARD has started various initiatives for the farm sector, like
  1. NABARD refinances Agro Loans. 
  2. NABARD operates the Rural Infrastructure Development Fund.

7.  Pradhan Mantri Kisan Samman Nidhi (PM-KISAN)

• The Agriculture Ministry runs this scheme.
• Under this, income support of ₹6,000 / annum is given to all farmers in three instalments of ₹ 2,000 each.

The measures have reduced the share of non institutional credit from 90% in 1950 to 25% in FY22.

Plants require Nitrogen, Phosphorus and Potassium (NPK) for their balanced growth. If soil is deficient in these nutrients or if the farmer is using High Yielding Variety seeds that require more nutrients than any natural soil can supply, different fertilizers are used to boost nutrients in the soil.

Fertilizers are provided to the farmers at subsidized rates. In 2020, Rs 71,000 crore was paid in fertilizer subsidies by the Union Government.

There are two types of subsidies on fertilizers

Nutrient Based Subsidy

• Nutrient Based Subsidy is used in the case of DAP & MOP. 
• It was framed under Fertilizer (Control) Order, 1985 and issued under Essential. Commodities Act, 1955.
• The government fixes per kilogram subsidy on DAP & MOP in this system. (Cost of Fertilizer for farmer = Market Price MINUS Fertilizer Subsidy)
• But, imports of DAP & MOP aren’t controlled.

Subsidy on Urea

The case of urea is very different. The government intervenes in the sector in five ways: 

1. It sets the Maximum Retail Price (MRP).
2. It provides a subsidy to 30 domestic producers on a cost-plus basis, meaning more inefficient producers get larger subsidies. 
3. It provides a subsidy to importers.
4. Imports are canalized—only three agencies can import Urea into India.
5. Half of the movement of fertilizer is directed—that is, government tells manufacturers where to sell their urea.

These distortions feed upon each other, leading to a series of adverse outcomes.

Problems created by the way urea is subsidized

1. Leakages

• Urea is subsidized 75% of its price. 
• Due to this, it is smuggled to
  1. Industry (Ammonia-based industry) 
  2. Across the border to Bangladesh and Nepal  
• Additionally, larger—presumably richer— farmers consume subsidized urea. Ideally, subsidized urea should be given only to poor farmers

2. Shortages

• The regulation under canalization creates shortages. Under the provisions of canalization, the government orders specific companies to when to import, what quantities to import & where to sell. But estimating the demand is a difficult task & shortages can’t be addressed instantaneously (it takes 60 days at least).

3. Inefficient Fertilizer Manufacturers

• Earlier, the main objective of the Indian government was self-sufficiency  & this led to Subsidy on Cost Plus Basis, where the subsidy a firm receives is based on its cost of production: greater the cost, the larger the subsidy. Consequently, inefficient firms with high production costs survive, and the incentive to lower costs is blunted.

4. Environmental & Health Externalities

• Since Urea is cheaper than other Fertilizers, it creates a situation of urea overuse which is detrimental for the soil. Consequently, the soil’s N:P: K ratio is disturbed (Rajasthan – N:P: K = 25:12:1 instead of 4:2:1). 
• The declining response ratio or marginal productivity of fertilizers since the 1970s is a pointer to their inefficient use in Indian agriculture.
• Fertilizer use is leading to harmful effects on the human health such as respiratory diseases, cancer etc.

1. Direct Benefit Transfer 

• Earlier, the government used to give subsidies to the fertilizer company when fertilizer left the company’s godowns. 
• This system has been changed. Now, Fertilizer companies are paid subsidies only after the retailer has sold the fertilizer to the farmer through a Point of Sale (PoS) device.
• This system prevents the diversion of subsidized urea towards non-agricultural purposes and smuggling to Nepal and Bangladesh.

2. Pradhan Mantri Bhartiya Janurvarak Pariyojana (PM BJP) – One Nation One Fertilizer Scheme

• The scheme aims at marketing fertilizers in the country under ‘Bharat’ brand name.
• The uniform design of bags across the country will now mention them as ‘Bharat Urea’, ‘Bharat DAP’, ‘Bharat MOP’, ‘Bharat NPK’.
• Under the scheme
  • The new “Bharat” brand name and PMBJP logo will cover two-thirds of the front of the fertilizer packet.
  • The manufacturing brands can only display their name, logo, and other information on the remaining one-third space.

3. Neem Coated Urea

• The government started this scheme in 2015.
• Under this scheme, urea is coated with neem, which has the following benefits
  1. It stops diversion to industrial consumers as neem coated urea cant be used in Ammonia-based industry due to adverse reactions that neem can cause.
  2. It helps in slowing down the Nitrification of urea & increasing the efficacy of urea.
  3. Due to the pesticidal properties of neem, the amount of pesticides required is reduced.   

4. Soil Health Card

• Soil Health Card Scheme is a component of NMSA (National Mission on Sustainable Agriculture).
• In this, farmer’s land is tested for 12 parameters and given Soil Health Card (updated every 3 years).
• The card also advises the farmer about the type of crops that can be grown and fertilizer requirements to achieve maximum yield for various crops.  

Importance

• Assist farmers in supplying proper fertilizer mix, which is currently dominated by urea. 
• It will help the farmer to select the most appropriate crop pattern.
• This will lead to a diverse crop pattern that currently revolves around wheat & rice.

5. Size of Urea Bag  reduced

• In 2018, the size of the Urea Bag was reduced to 45 kg instead of earlier 50 kg.
• Reason: Neem Coated Urea has increased the effectiveness of urea. Since farmers mainly assess the requirement of urea in terms of bags, the government has decided to reduce the size of the bag. 

6. Nano Urea

• Nano Urea is made by IFFCO.
• It comes in liquid form and needs to be sprayed on the crop.
• It is more efficient than normal urea. Nutrient Use Efficiency (NUE) of nano urea is over 80% against 30-50% of conventional granular urea. Hence, farmer can achieve the same efficiency by applying lower quantity, thus reducing the overall cost per hectare.
• Nano Urea’s limitation is that, being a liquid fertiliser, it can only be sprayed after the crop has developed leaves.

7. Urea Gold

• Urea Gold is developed by Rashtriya Chemicals and Fertilizers Ltd.
• Urea Gold combines urea with sulphur.
• Benefits
  • Indian soils lack Sulphur and Urea Gold provides Nitrogen and Sulphur as single package.
  • Enhance plant nutrient uptake as coating Urea with Sulphur increases the Nitrogen Use Efficiency (NUE) due to gradual release of Nitrogen.

8. PM PRANAM Scheme

• PM PRANAM: PM Program for Restoration, Awareness Generation, Nourishment and Amelioration of Mother-Earth
• Aim: To reduce the use of fertilizers in the farming
• The scheme aims to encourage the state governments to reduce the consumption of fertilizers in their state. If state government is successful in reducing the consumption of fertilizers in their state, the Union government will transfer some percentage of the savings in the subsidy bill arising due to decrease in fertilizer consumption as grant.

9. Joint Venture

• To reduce the cost of imported urea, the Indian government is setting up Joint Ventures with companies of oil rich countries like Oman, where gas prices are low, resulting in cheaper production of fertilizers. 

1. Manure

• Manure is a natural substance made by the decomposition of organic waste.
• Apart from nutrients, it also provides humus to the soil.
• But manure is less rich in nutrients compared to fertilizers.
• The government is promoting the use of manure via schemes like
  1. Gobar Dhan Yojana: For converting cattle dung and solid waste from farms and fields to manure, biogas and Bio-CNG (India has 300 million cows generating 3 million tons of dung).
  2. City Compost Scheme: Fertilizer companies and marketing entities will also co-market City Compost with chemical fertilizers.

2. Vermicompost

• Vermicompost is a mixture of earthworms and decomposed food, leading to the breakdown of organic matter.
• Benefits of Vermicompost:
  1. Increase in soil aeration by earthworms.
  2. Enriches soil with microorganisms.
  3. Water retention of soil capacity increases.
  4. Easy to produce at an affordable cost.

3. Biofertilizer

Biofertilizer uses Micro-Organisms to produce impact similar to Fertilizers. Eg

1. Rhizobium Bacteria for Nitrogen Fixation.
2. Mycorrhiza Fungi for Phosphorus.

• Water is a critical input for successful agriculture. This water can be provided naturally through rainfall or artificially through human efforts. 
• Irrigation is the process of supplying water to the crops by artificial means such as canals, wells, tubewells, tanks, etc., from freshwater sources such as rivers, tanks, ponds, or underground reserves.

• India has 18% of the world population but just 4% of freshwater resources. Hence, freshwater is a scarce resource in India. 
• 55% of India’s total area under agriculture has irrigation facilities & the rest 45% is rainfed.

• There are regional disparities in irrigation facilities. While Punjab, Tamil Nadu and UP have more than 50% of agricultural land under irrigation, other states like Maharashtra and Rajasthan have less than 50%.
• Due to lower levels of irrigation,
  1. Indian agriculture is vulnerable to the vagaries of nature. E.g., due to El-Nino induced drought conditions in 2014, the agriculture growth rate dipped to -0.2%. 
  2. Farmers can’t grow multiple crops, reducing the overall productivity of farms and farmers. 

• The Ministry of Agriculture launched it in 2015.
• It is a core scheme in which the Union give some funds, and the rest of the funds are to be provided by the states. 
• It aims to bring 2.85 million hectares of agricultural land under irrigation.

3 objectives to be achieved under PMKSY

Objective 1: Har Khet ko Paani

• Increase Irrigated Area so that every farm gets an irrigation facility.
• It is to be achieved through Accelerated Irrigation Benefit Program (AIBP). 

Objective 2: Per Drop More Crop

• Improve the efficiency of water usage by promoting Micro-Irrigation.
• E.g., Drip Irrigation, Sprinkler Irrigation etc.
• Financial assistance is provided at 55% of the total project cost for small and marginal farmers, and 45% for other farmers for installation of micro irrigation

Objective 3: Watershed Management

It includes

• Setting up Water Harvesting Structures like check dams, tanks etc.
• Conserve Soil Moisture
• Ground Water Recharge
• Municipal Water Treatment and re-use

• India has 18% of the world’s population but 2.5% of the world’s land. Hence, land is a scarce resource in India. 
• Net sown area in India is 141 million hectares out of India’s total geographical area of 368 million hectares.
• Due to the tradition of equal division of land among heirs each passing generation, the issue of small-sized farms and land fragmentation has come to the forefront.
  • The average size of farm holdings has declined from 2.3 hectares in 1970-71 to 1.08 hectares in 2015-16 to 0.512 hectares in 2019 (SAS,2021)

• The distribution of land is not a consolidated one, but its nature is fragmented. Different tracts have different levels of fertility, and it is distributed accordingly. If there are four tracts to be distributed between two sons, both sons will get smaller plots from all four tracts. Hence, landholdings have become fragmented.
• According to Situation Assessment Survey, 2021 (SAS, 2021), 86% of agricultural household ownerships are small and marginal while just 0.1% are large.

Agricultural holdings are classified into three categories: