Agriculture Inputs

Agriculture Inputs

This article deals with ‘Agriculture Inputs.’ This is part of our series on ‘Economics’ which is an important pillar of the GS-3 syllabus. For more articles, you can click here.



1. Land

  • India has 18% of the world population but 2.5% of the world’s land. Hence, the land is a scarce resource in India. 
  • The 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.
    • 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.
  • Small and marginal farmers account for 87 per cent of Indian farmers (source – Agriculture Census 2015-16).
Marginal farmers less than 1 ha 69%
Small farmer  1 – 2 ha 18%
Small Medium 2 – 4 ha 8%
Medium 4 – 10 ha 4%
Large Above 10 ha 1%

Average Land Holding

Side Topic: Types of Holdings

Agricultural holdings are classified into three categories:

Economic Holding Holding which ensures a minimum satisfactory standard of living in a family.
Family Holding Holding which gives work to an average size family having one plough.
Optimum Holding Maximum size of the holding which must be possessed and owned by a family

Problems due to small land holdings

  • Land Consolidation: Reallocation of holdings to create farms comprising only one or a few parcels instead of many patches. However, all states have passed such legislation, but it has been implemented only in Punjab, Haryana and some parts of UP. 
  • Land Leasing: Union has circulated the Model Land Leasing Act providing security to the owner of land against illegal occupation by a tenant farmer. Provisions of the Model Land Leasing Act will encourage owners of land who have moved to some other sector for employment to lease their land to tenant farmers for cultivation. 


Wayout

  • Land Consolidation: Reallocation of holdings to create farms comprising only one or a few parcels instead of many patches. However, all states have passed such legislation, but it has been implemented only in Punjab, Haryana and some parts of UP. 
  • Land Leasing: Union has circulated the Model Land Leasing Act providing security to the owner of land against illegal occupation by a tenant farmer. Provisions of the Model Land Leasing Act will encourage owners of land who have moved to some other sector for employment to lease their land to tenant farmers for cultivation. 

2. Seeds

  • High Yielding Varieties (HYV) of seeds is one of the most crucial factors for enhancing agricultural productivity. 20-25% of farm productivity rely on seed quality. 
  • But the issue with HYV seeds is that they need to be replaced every year for best results. It is not possible in India because 
    1. Farmers are poor, and they can’t afford to buy HYV seeds.
    2. Due to infrastructural issues, HYV seeds of the best quality aren’t available to meet the demand of all farmers.
  • As a result, India’s Seed Replacement Ratio (SRR) is low, and most farmers use farm-saved seeds.
Seeds quality in India


Side Topic: Seed Replacement Ratio (SRR)

  • SRR is the percentage of sown area covered by the certified seeds rather than the farm-saved seeds. 
  • In India, SRR is low, varying between 20-35% for various seeds.

Side Topic: Type of Quality Seeds

Quality Seeds are of the following types

Breeder Seeds Breeder seeds are produced in laboratories either by ICAR, Agricultural Universities, or MNCs like Monsanto.
These seeds can be High Yielding Variety (HYV) or Genetically Modified (GM) Seed.  
Foundation Seeds Breeder seeds can’t be produced on a large scale. Hence, the industry produces Foundation seeds from Breeder Seeds at a large scale.
In the government sector, National Seeds Corporation produces the Foundation Seeds using Breeder Seeds made by ICAR or Agricultural Universities.  
Certified Seeds

Foundation seeds are then distributed in villages to large farmers and Farmer Producer Organisations. They use foundation seeds to produce certified seeds.

Breeder, Foundation and Certified Seeds are collectively called Quality Seeds.

They are better than Farm Saved Seeds because, according to Mendel’s Laws, dominant genes will dominate in the next generation, and the efficacy of seeds reduces.


Side Topic: Hybrid Seeds and Genetically Modified (GM) Seeds

HYV seeds can either be Hybrid Seeds or Genetically Modified Seeds. The difference between them is as follows:-

Hybrid Seeds Hybrid seeds are developed by cross-breeding or cross-pollination with other plants.
GM Seeds GM Seeds are developed by transferring selected genes from one organism into another.
E.g., In BT Cotton, a gene from bacteria named Bacillus Thuringenesis (BT) is transferred to cotton so that it can produce natural pesticides to kill the insects and pests.

Benefits of HYV  Seeds

  • HYV seeds have a higher yield and productivity than ordinary seeds.
  • HYV has a shorter life cycle, allowing farmers to venture for multiple cropping.
  • Per quintal requirement of irrigation is lower in the case of HYVs.
  • It increases the income of farmers. Per hectare income of farmers increases significantly by using HYV seeds.

Government initiatives wrt Seeds

1 . Sub Mission on Seed

  • It is a scheme under Umbrella Green Revolution Scheme.
  • It aims
    1. To enhance the seed replacement ratio (SRR ).
    2. To upgrade the quality of farm-saved seeds.
    3. To increase the production of certified quality seeds.
    4. Upgradation of public sector seed producing agencies.

2. 100% FDI allowed in Seed Companies

  • 100% FDI is permitted through the automatic route for the development of seeds.

3 . Seed Village Concept

  • A group of farmers in a village are given the training to produce seeds of various crops to fulfil the needs of their village and neighbouring villages.

4. Seed Bank

  • It is the depository of seeds to preserve genetic diversity for future generations.

5. Protection of Plant Varieties and Farmers’ Rights Act, 2001 (PPVFR Act)

  • It protects the intellectual property rights of plant breeders and seed companies
  • Under the Indian Patent Act, seeds and plant varieties can’t be patented. To deal with that issue, the PPVFR Act was introduced, which grants Intellectual Property Rights to the company to charge royalty if others use its method to produce the seed. 
  • This issue came to the limelight in the 2019 PepsiCo Controversy. PepsiCo has developed the FC5 variety of potatoes for the production of Lays. Under the contract, PepsiCo supplied FC5 variety seeds to the farmers. But after the PepsiCo contract expired, farmers continued using the hybrid seeds and sold potatoes to rival companies. 

6. Biofortification

  • Biofortification is used to improve the nutritional quality of food crops.
  • E.g., ICAR developed CR Dhan 310 – a rice variety with higher protein and zinc content than traditional rice and Dhan Shakti – a variety of Bajra that has higher Iron content. 

Issues with the Indian Seed sector

  • India has a low seed replacement ratio and high use of farm-saved seeds, negatively impacting farm productivity. 
  • Low investment in R&D by Seed Companies: Investment in R&D is just 3-4% of profits against the international norm of 10-12 %.
  • India has a weak IPR regime to protect the rights of seed companies. Hence, companies are not interested in investing in India.
  • The efficacy of certified seeds is also doubtful in many cases.  
  • Seed Monopoly IssuesMonsanto and other MNCs indulge in seed monopolization. It has become the cause of farmer suicides in Vidarbha.
  • Issue of Terminator Genes: Seed companies use Terminator genes in the GM seeds. Such seeds can be used only once and lose their vigour next season. In this way, farmers are forced to buy expensive seeds every season. 
  • Issue of Trait Fees: Under the Indian Patent Act, Seed companies can’t patent particular seed and plant varieties. But companies like Monsanto can charge Trait Fees if other companies use their technology to produce the seeds. BT Cotton is produced by Indian Seed Companies using Monsanto’s Bollgard technology, and in return, Indian seed companies pay a type of royalty to Monsanto, called Trait Fees. The government of India decides the ceiling on Trait fees. But the government has no fixed policy in this regard, causing many legal issues.
  • Loss of genetic diversity of seeds as local varieties have not been preserved. 

3. Water and Irrigation

  • 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 and Irrigation

  • India has 18% of the world population but just 4% of freshwater resources. Hence, fresh water is a scarce resource in India. 
  • 40% of India’s total area under agriculture has irrigation facilities & the rest 60% is rainfed.
percentage of land under irrigation
  • 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. 

Schemes: Pradhan Mantri Krishi Sinchai Yojana (PMKSY)

  • 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 states. 
  • It aims to bring 2.85 million hectares of agricultural land under irrigation.

3 objectives to be achieved under PMKSY

Pradhan Mantri Krishi Sinchai Yojana
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).   
Per Drop More Crop Improve the efficiency of water usage by promoting Micro-Irrigation.
E.g., Drip Irrigation, Sprinkler Irrigation etc.  
Watershed Management It includes
1. Setting up Water Harvesting Structures like check dams, tanks etc.
2. Conserve Soil Moisture
3. Ground Water Recharge
4. Municipal Water Treatment and re-use  

Suggestions by Economic Survey to improve irrigation

  • River inter-linking project must be completed to transfer water from water surplus basins to water-deficit basins.
  • Electricity subsidies for tubewells should be eliminated as they encourage wastage of water.
  • Pulse cultivation should be encouraged in drought-prone areas.
  • There should be cost-based water pricing, and canal water theft should be dealt with strictly.
  • Rainwater Harvesting should be encouraged to capture and store rainwater.
  • Watershed Management should be promoted for recharge of surface and groundwater.


4. Fertilizer

Basics of Fertilizers

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.

Nutrient Fertilizer used
Nitrogen (N) Urea
Urea is produced using Haber’s Process using LPG as raw material.
It is the most widely consumed fertilizer in India. The Ministry of Chemical and Fertilizer gives subsidies to the Indian companies to manufacture and sell it at a lower price to farmers. 
Phosphorus (P) Diammonium Phosphate (DAP)
80% of its demand is met via imports.   
Potassium (K) Muriate of Potash (MOP)
It is not manufactured in India. Hence, 100% of its demand is met via imports.

Fertilizer Subsidies

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

1. Nutrient Based Subsidy

  • Nutrient Based Subsidy is used in the case of DAP & MOP
  • 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.

2. 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.


Leakages

Subsidized urea suffers from 3 types of leakages : 

  1. Inefficient urea producers.
  2. Subsidized urea is smuggled to non-agricultural uses and abroad to Nepal and Bangladesh.
  3. Larger—presumably richer— farmers consume subsidized urea. Ideally, subsidized urea should be given only to poor farmers.

Problems created by the way Urea is subsidized

1. Diversion

  • 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  
  • It is estimated that 41% of Urea is diverted to industry or smuggled abroad.

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.

Steps Already Taken

Indian Fertilizer

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. 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.   

3. 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 revolves around wheat & rice.

4. 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. 

5. Joint Venture

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

Further reforms required

1. Bring Urea under Nutrient Based Subsidy (NBS)

Bringing urea under the NBS program for DAP & MOP would encourage fertilizer manufacturers to be efficient.

2. BAPU Model 

  • Use BAPU (Biometrically Authenticated Physical Uptake) Model for selling urea.
  • Under this model, the government sets the maximum limit on subsidized Urea Bags one can buy. Small farmers will still get all urea at a subsidized rate, but big farmers will have to buy more than the set limit at full price.

3. Leveraging Soil Health Card

  • Use Soil Health Card to make Tailor-made fertilizer for a particular field.

4. Other Steps

Teach farmers about Integrated Nutrient Management which uses practices such as organic manures, plantation of legume crops, crop residue management etc.


Organic alternatives to Fertilizers

Organic alternatives to Fertilizers

1. Organic alternatives to Fertilizers

  • 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 foodleading 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.


5. Pesticides

Why Pesticides are required?

  • 15-25% of the crop in India is lost to weeds, pests, diseases and rodents.

Statistics of Pesticide Use in India

  • Total pesticide consumption is the highest in Maharashtra, followed by Uttar Pradesh, Punjab and Haryana. 
  • On the other hand, per hectare consumption of pesticides was the highest in Punjab.
  • Amongst the crops, paddy accounts for the maximum share of consumption (26-28%), followed by cotton (18-20%).

Problems in India

Issues of Pesticides in India

Even though per hectare pesticide is much lower in India (0.5 kg per ha) than other advanced economies like 7.0 kg per ha in the USA and 12 kg per ha in Japan. But there are some issues:- 

  1. The quality of the spray is substandard.
  2. Farmers use pesticides without following proper guidelines. 
  3. Use of broad-spectrum pesticides, which kills beneficial insects and pollinators as well.
  4. Residues of pesticides are found in fruits and veggies. It leads to a ban on their exports to first-world nations (especially the EU).
  5. When a pesticide is sprayed on crops, most of it bounces off the leaves, falling on the ground. It then mixes with soil and water, contaminating both, and entering the food chain leading to biomagnification. 
  6. 93 chemicals banned in most of the developed world are sold in India. 
  7. Carcinogenic pesticides like Monsanto’s Glyphosate (brand-named ‘Roundup’) are still sold in India despite the proven fact that it can cause cancer.  
  8. Pesticides like Endosulfan (used on Cashew Plantations in Kerala) have proven genotoxic.
  9. Rising usage: Warmer climate and growing population are expected to increase the use of pesticides to combat the possible rise in pest invasions and feed more people. 
  10. Pesticide poisoning: According to NCRB, in 2019, 6,962 deaths were reported out of 7,007 pesticide poisoning cases.
  11. Opaque and out of date regulatory framework: Pesticide Management Bill (PMB) has been discussed since 2008. The cabinet approved the latest draft in February 2020.
  12. The private sector monopoly: There is a private sector monopoly in pesticide trade whose decision is guided by the profit motive alone. 

Wayout

  1. Move towards Organic Farming.
  2. Use narrow-spectrum pesticides.
  3. Using biocontrol agents and biopesticides: It is a method of controlling pests such as insects, mites, weeds and plant diseases using other organisms. 
  4. Adopt Integrated Pest Management approach, which encompasses a judicious mix of pest control methods like bio-pesticides, bio-control agents and pesticides. (Vietnam Case Study: In Vietnam, almost all the farmers of Mekong Delta adopted a policy of “no-spray for first 40 days”. They used predatory beetles that prey on rice pests.)
  5. Government should pass the Pesticide Management Bill, 2017, which aims to replace the Insecticide Act of 1968 with larger penalties and jail time for selling substandard or fake pesticides. 

Note: India is a signatory to United Nations Environment Programme (UNEP) led Stockholm Convention for persistent organic pollutants and Rotterdam convention for export-import of pesticides.  


6. Mechanisation

Although India is one of the top countries in agricultural production, farm mechanization is just 40% ( & growing at a very slow pace of 5% per annum),  against more than 90% mechanization in the first world.

Mechanization of Agriculture in India

Why Mechanisation is needed?

  • Companies and governments should invest in R&D for making machinery suitable for different terrains and agro-climatic regions of India.
  • Cooperative farming: The cooperative group can buy mechanical tools instead of individual farmers.
  • Rental Model: Like ZoomCar for Tractors, Reapers etc., can also be used.
  • Custom Hiring Centers (CHCs)
  • Invent cheap machines suited to Indian conditions. E.g., small farmers can use power tiller instead of tractor and power reaper instead of Combines as they are more affordable, have low operational cost and can be used in rugged topography. 

According to the  Dalwai  Committee,  the adoption of agricultural mechanization would reduce the input costs by  25%,  enhance productivity by  20%  and increase the farmers’ incomes by  25-30%.


Problems in mechanisation

  • Soil, Terrain & Agro-Climatic Diversity: Machines used in Punjab can’t be used in North East. There is a need for Tailormade products. 
  • Small farmers with limited income can’t buy Tractors.
  • Low loan support by the banks to the agriculture sector compared to the Industrial sector.
  • Due to Small and fragmented Indian landholdings, it is uneconomical to buy individual machines.
  • Credit procedure: The procedure to avail agriculture term loan for various activities helping farm mechanization is very cumbersome. Also, the interest rate is higher for such loans than crop loans.

Issues with Agriculture Mechanisation

  • Higher Agricultural Mechanisation has led to higher water usage, stubble burning, smoke from machines and soil erosion, thus impacting the environment negatively. 
  • Higher use of agriculture machines leads to displacement of unskilled labour from the rural areas. 
  • The agricultural tools in the market are not gender friendly. 
  • The agricultural tools are costly, and since the farms are small, they are not utilized to their full potential. 
  • Regional Disparities: Northern India has higher mechanisation levels than other regions. (Rice and Wheat crops having the largest extent of mechanization).

Solution

  • Companies and governments should invest in R&D for making machinery suitable for different terrains and agro-climatic regions of India.
  • Cooperative farming: The cooperative group can buy mechanical tools instead of individual farmers.
  • Rental Model: Like ZoomCar for Tractors, Reapers etc., can also be used.
  • Custom Hiring Centers (CHCs)
  • Invent cheap machines suited to Indian conditions. E.g., small farmers can use power tiller instead of tractor and power reaper instead of Combines as they are more affordable, have low operational cost and can be used in rugged topography. 

Scheme

1. Sub-Mission on Agricultural Mechanisation (SMAM)

  • It is a sub-part of Umbrella Green Mission.
  • Aims: promote agricultural Mechanization among small and marginal farmers.

2. State Scheme: Rajasthan Free Rental Scheme for Farm Tools   

  • The government of Rajasthan has started a scheme under which small farmers (having land less than 2.5 acres) can use tractors and sowing machines without paying any rent.

3. “FARMS-app”

  • It was developed by Agriculture Ministry. It connects farmers and Custom Hiring Service Centres so that farmers can rent agricultural machinery.


7. Agro-Credit

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.


Issues

  • The predominance of informal sources44 % of agro finance comes from money lenders. These money lenders are highly exploitative and charge exorbitant rates.
Agro-Credit
  • Although Short Term Loan quantity has increased, Long Term Investment in agro infrastructure has decreased both by private & public sectors.  
  • Regional Disparity: The coverage is meagre in the north-eastern and eastern regions of the country. 
  • Agri credit /Agricultural loans are not used for the stated purpose. Primarily, they are used for marriage & consumption purposes by the farmer.

Steps taken by the government in giving loans to farmers easily

Agro Credit in India

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.
  • Budget 2021: Farm loan disbursal target was increased to Rs 16.5 lakh crore (10% increase)

2 . Interest Subvention

  • 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% 

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.
  • 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 its various benefits.

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 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 of 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 Rural Infrastructure Development Fund.

Problems

  1. Although Short Term Loan quantity has increased, Long Term Investment for building Agriculture infrastructure has decreased.
  2. Loans are not reaching the intended beneficiaries. 
  3. It isn’t easy to monitor the end-use of funds. It is not used for agricultural purposes but for marriage or consumption in most cases.
  4. 44% of agricultural finance is still coming from money lenders and informal sources. 
  5. Banks indulge in coercive actions for repayment, which leads to increased instances of farmer suicides.

8. Insurance

Main problems with previous Farm Insurance Schemes

  1. Low Penetration: Only 22% of agricultural land was covered under crop insurance in 2014.  
  2. Low Sums Insured (SI): The sums insured (SI) were low. It was based on the cost of inputs rather than prospective income. 
  3. High Premium: Huge premium was charged. It was as high as 10% of the sums insured.  
  4. Delayed claims settlement: Claims used to lie unclaimed till six months & beyond.
  5. Low literacy: Farmers don’t know about these schemes and their benefits.
  6. Inadequate Infrastructure: Absence of infra to measure data accurately at farm level.

Pradhan Mantri Fasal Bima Yojana (PMFBY)

PMFBY has been formulated according to the One Nation–One Scheme theme. It replaced the existing two schemes (i.e. NAIS (National Agricultural Insurance Scheme and Modified NAIS) by removing their inherent drawbacks and incorporating the best features of all previous schemes.

Features of PMFBY

Pradhan Mantri Fasal Bima Yojana
  1. Target: To bring at least 50% cropped area under Insurance Cover.
  2. PMFBY removes any artificial capping of the Sums Insured(SI). The SI will be calculated by multiplying the MSP of a crop by the average seven-year yield for the particular village panchayat area where it is grown.
  3. Uniform premium: Farmers will pay a uniform premium of
    • 2 per cent for all Kharif crops
    • 1.5 per cent for all Rabi crops
    • 5 per cent for annual horticultural and commercial crops.
  4. Governments to fully meet the gap between the actuarial premiums and the rates payable by farmers at Union and State levels. 
  5. Use of technology: Government will encourage the use of technology, especially mobiles and remote sensing, for quick estimation and early settlement of losses. 
  6. The scheme is extended to cover post-harvest losses as well.
  7. In 2018, the Centre allowed States to set up their own insurance companies for implementing Pradhan Mantri Fasal Bima Yojana (PMFBY). The move comes after several requests from states.

Working of PMFBY 

  1. Area insured has increased by 38%. It fares well in this regard.
  2. Earlier risk assessment was done at the district level, which was later changed to block level. Now Sum Insured (SI) is measured at Village level, which is closer to reality.

But issues

  1. The critical factor of analyzing the efficacy of an insurance scheme is the ability to settle its claims quickly. PMFBY failed in this aspect as it took several months to pay compensation to the farmers.
  2. There are allegations of profiteering by Insurance Companies.
  3. It is alleged that most of the increase in insured areas is due to mandatory insurance for loanee farmers.  
  4. PMFBY does not cover tenant farmers.
  5. No governance reforms have been initiated. This scheme is also implemented with the help of rusted old machinery consisting of Patwaris and revenue officers.
  6. Lack of farmer awareness: According to the CAG, out of 5,993 farmers surveyed, only 37% were aware of the schemes.
  7. One-size fits all approach: All the farmers in the country have been treated as similar without any option to choose an insurance that meets the specific needs of their region.
  8. No provision for competitive pricing: As per the scheme guidelines, every cluster has a specific insurance company selling insurances, creating infrastructure and manpower for three years. Lack of competition creates a monopoly over the scheme. 

Due to the above issues, various states are replacing PMFBY with their own insurance schemes. E.g., Jharkhand has started its own insurance scheme (in 2021) called Kisan Fasal Rahat Yojana, which will be implemented by Jharkhand’s Department of Agriculture, Animal Husbandry and Co-operative. Gram Sabha has been assigned a major role in accessing crop loss.


Beed Model of PMFBY

The Beed is drought prone district in Maharashtra. The private insurance companies hesitate to do agricultural insurance in the district because many times the insurance claims paid is more than premium collected.

The government has come up with novel solution under which Maharashtra Government has roped in Agriculture Insurance Corporation (AIC) under which the private insurance company will insurance claims upto 110% of premium. On the other hand, if the insurance claims are lesser than 80% of premium, the private insurance company will share part of its profit with AIC.


9. Extension Services

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

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.

Steps by the Government

Helplines 
AgriCIinics 
Student Ready

Government is well aware that there is an Extension Worker deficit in India. To bridge the gap, the government has taken various steps.

1. Various Apps started

These include

  • mKisan
  • PUSA Krishi App

2. 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.

3. 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.

4. 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.

5. Helplines

  1. Kisan Call Centre schemes
  2. SMS portal for farmers.

6. Student Ready

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

7. Krishi Unnati Mela

  • Fairs organised by ICAR to demonstrate new agricultural technologies to farmers.

10. R&D in agriculture

R&D in Agriculture is facing problems in India because

1. Lack of funds

  • The private sector doesn’t contribute much investment in agriculture research, and Government funding to R&D is decreasing considerably. This funding needs to be increased. 
  • Allocation for agri-R&D in Budget 2021 was just Rs 8,514 crore. It is even lower than a single private global company like Bayer, whose annual spending on agri-R&D is almost Rs 20,000 crore.

2. Problem with ICAR

The problem with ICAR is that a single body does several roles starting from education to research to extension. Hence, it has become the jack of all trades but master of none.  

3. Problem with Agriculture Universities

The agriculture universities have been plagued & not able to do much because of

  1. Resource crunch
  2. Difficulty in attracting talented faculty
  3. Limited linkages and collaborations with international counterparts
  4. Weakening of the lab-to-land connect
  5. Lack of innovation

4. Low quality research

The R&D sector is suffering from ‘technology fatigue’, i.e. no innovative invention done by the scientific community in the previous two decades.

5. Cereal Centric Research

Indian agriculture research has become too much ‘cereal centric’. Instead, Indian farmers must to focus on pulses, oilseeds, horticulture and animal husbandry.


What can be way ahead

  1. Increase expenditure on R&D in Agriculture by Government sector. 
  2. Kremer’s HIV Vaccine Idea / Government Pull System of Research: Private research in crops grown at a small scale can be boosted by offering the winner proportionately large cash, but the IPR for that innovation is transferred to the government.
  3. Address the regulatory lacunae in GM Crops technology: Pass BRAI Act (Biotechnology Regulatory Authority of India) to remove the issues associated with the present regulatory framework under the aegis of Genetic Engineering Appraisal Committee (GEAC).

Introduction to Indian Agriculture

Introduction to Indian Agriculture

This article deals with ‘Introduction to Indian Agriculture.’ This is part of our series on ‘Economics’ which is an important pillar of the GS-3 syllabus. For more articles, you can click here.


Introduction 

  • Word “Agriculture” is a combination of two words, ‘Agri’ means ‘field’ and ‘Culture’ means ‘cultivation’. Hence, Agriculture is the art or science of producing crops and livestock on a farm.
  • India is considered an agricultural economy because 42 % of its population is still dependent on agriculture for livelihood. Recognizing the importance of agriculture in the Indian economy, Mahatma Gandhi considered agriculture as the “Soul of India”. Pandit Jawahar Lal Nehru said, “Everything can wait, but not agriculture.”

Statistics about Indian Agriculture

With the development of the economy, the percentage of people engaged in agriculture is decreasing, and its contribution to the net GDP of India is decreasing as well.

a . Percentage of Indians employed in Agriculture Sector

  • In 2018, 42% of Indians were employed in the Agriculture sector.
  • According to Agriculture Census 2015-16, there are 146 million holdings, an increase from 138 million in 2010-11, resulting from further fragmentation
Percentage of Indians employed in Agriculture Sector

b . Contribution of Agriculture in India’s GDP

  • Its contribution to India’s total GDP has decreased from 51% (in 1951) to 17% (in 2018).
  • It means that 42% of the population lives with only 17% of the total income, clearly substantiating the reason why the people who depend on agriculture are poor. 
Introduction to Indian Agriculture

c . Growth rate of the Agriculture Sector

  • The growth rate of Indian Agriculture is highly volatile because Agriculture in India is vulnerable to market forces and vagaries of climate.
  • Agriculture was the only bright spot during the Covid pandemic as the sector continued to grow even during a pandemic.
Growth rate of Agriculture Sector

d . Target = Doubling Farmer’s Income till 2022

  • Modi government has announced to ‘Double the income of farmers till 2022 wrt their 2015 income’. But this seems impossible considering the growth rate trends in previous years.

e . Production of Crops

  • The production of crops has seen significant growth. India has become a food surplus country in contrast to a food deficit country in the 1950s.
Grain Production of India

Agriculture: Prime Moving Force?

  • The Industrial Sector was selected as PMF of the economy in the late 1940s (i.e. sector which will take the economy forward). But due to market failure, that sector failed to lead the economy.
  • The policymakers understood that without increasing the income of people who depend on agriculture for their livelihood, the market would not support the industriesAs a result, in 2002, the Government of India announced agriculture as the PMF. 
  • It has been observed that 1% growth in the agriculture sector leads to 0.5% growth in the industrial sector & a 0.7% increase in national income.

Ministries related to Agriculture

Two ministries are related to Agriculture and Allied activities

1. Ministry of Agriculture and Farmer’s Welfare

  • This Ministry looks after the agriculture sector in India.
  • It has two departments viz. 
    1. Department of Agriculture and Farmers Welfare: It is concerned with all the issues of agriculture and farmers.
    2. Department of Agriculture Research and Education: Mainly concerned with research work through the Indian Council of Agricultural Research (ICAR) and agricultural education through Central Agricultural Universities at Imphal (Manipur), Pusa (Bihar) and Jhansi (UP).

2. Ministry of Fisheries, Animal Husbandry and Dairying

  • The government separated this department from the Ministry of Agriculture and made it a full-fledged ministry.
  • It has two separate departments 
    1. Ministry of Animal Husbandry and Dairying 
    2. Ministry of Fishery 

3. Ministry of Co-Operation

  • A separate ministry named the Ministry of Co-operation was set up in 2021. Earlier, it was under the Ministry of Agriculture. 
  • The rationale of separate Ministry
    1. To cleanse the politicization, corruption and inefficiencies prevailing in the cooperative sector.  
    2. Use cooperative societies to increase farmers’ income in a more efficient way.

4. Jal Shakti Ministry

  • Ministry of Jal Shakti looks after the irrigation needs of farmers.
  • It has two separate departments
    1. Department of Water Resources, River Development and Ganga Rejuvenation
    2. Department of Drinking Water and Sanitation


MS Swaminathan Commission

Official NameNational Commission of Farmers (2004-06) headed by MS Swaminathan.

Main Recommendations

1. Farmer’s Income

  • MSP should be at least 50% more than the weighted average cost of production. (Most Important)
  • The “net take-home income” of farmers should be comparable to civil servants. 

2. Land Reforms

  • Distribute ceiling surplus and wastelands to the landless farmers.

3. Irrigation Reforms

  • There should be more emphasis on rainwater harvesting.
  • Aquifer recharge should become mandatory. 

4. Credit and Insurance

  • Establish an Agriculture Risk Fund to provide relief in natural calamities.  
  • Issue Kisan Credit Card.
  • Develop an integrated Crop-Livestock-Human health insurance package for farmers. 

5. Governance

Set up State level Farmers’ Commission with the representation of farmers for seeking dynamic government response wrt farmers’ problems. 


Important Schemes

From Core Schemes, those related to agriculture are

1. Rashtriya Krishi Vikas Yojana (RKVY) – Raftaar

  • Rashtriya Krishi Vikas Yojana was started in the UPA regime to achieve 4% annual growth in the agriculture sector.
  • In 2017, the Modi government renamed and rebranded it to RKVY-RAFTAAR.
  • It provides 
    1. Funding for Infrastructure development (warehouse, cold storage, market facility etc.)
    2. Training & skill development (for beekeeping, floriculture, mushroom cultivation etc.)
    3. Financial support to farmers to start Agri-enterprise after getting the training. 
    4. Fund Agri start-ups.

2. Green Revolution – Krishi Unnati Yojana

  • It is an Umbrella Scheme consisting of 11-schemes or missions.
  • The Ministry of Agriculture runs it.
  • Schemes under this are

2.1 Mission for Integrated Development of Horticulture (MIDH)

  • Under it, there are 6 sub schemes
1 National Horticulture Mission (NHM)
2 Horticulture Mission for North East & Himalayan States (HMNEH)
3 National Bamboo Mission (NBM)
4 National Horticulture Board (NHB)
5 Coconut Development Board (CDB)
6 Central Institute for Horticulture (CIH)

2.2 National Food Security Mission (NFSM)

  • To increase the production of rice, wheat, pulses, coarse cereals, and commercial crops and augment vegetable oils’ availability.

2.3 National Mission for Sustainable Agriculture (NMSA)

  • To encourage organic manures, bio-fertilizers, cropping practices for soil and moisture conservation measures. 
  • Soil Health Card and Paramparagat Krishi Vikas yojana have been started under this scheme.

2.4 Submission on Agriculture Extension (SMAE)

  • To provide extension services to farmers like Kisan Helplines, Kisan TV, information about market price, weather forecast etc.

2.5 Sub-Mission on Seeds and Planting Material (SMSP)

  • To promote new technologies in seed production, processing, storage, certification etc.

2.6 Sub-Mission on Agricultural Mechanisation (SMAM)

  • To increase the farm mechanization to increase the productivity of Indian farmers.

2.7 Sub Mission on Plant Protection and Plan Quarantine (SMPPQ)

  • To minimize the crop damage by insects, pests, nematodes, weeds, rodents, etc. and to protect agricultural biosecurity from alien species like Lantana (Congress Grass).

2.8 Integrated Scheme on Agriculture Census, Economics and Statistics

  • For agriculture data collection, which can be used for R&D and policymaking.

2.9 Integrated Scheme on Agricultural Cooperation (ISAC)

  • To provide financial assistance to farmer cooperatives for agricultural marketing, processing, storage etc.

2.10 Integrated Scheme on Agricultural Marketing (ISAM) 

  • To do marketing of Indian agriculture.

2.11 National e-Governance Plan – Agriculture (NeGP- A)

  • To enhance the reach of extension services- about cropping methods, market prices etc., to the farmers.

3. Agriculture Infrastructure Fund (AIF)

  • It is a central sector scheme operational from 2020-21 to 2029-30. 
  • Aim: Provide medium- and long-term debt financing to create post-harvest management infrastructure and farming assets.
  • Under the scheme
    1. Rs 1 lakh crore is planned to be given to banks and financial institutions, which will provide loans to farmers, cooperative societies, Farmer Producer Organizations etc., for the creation of assets.
    2. Interest subvention of 3% is provided if the loan is lesser than Rs 2 crore.
    3. The government provides a credit Guarantee if the loan is lesser than Rs 2 crores.

4. PM Kisan Sampada Yojana

  • SAMPADA = Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters 
  • It is an umbrella scheme formed by incorporating all the schemes of the Ministry of Food Processing. These schemes include 
    1. Mega Food Parks
    2. Integrated Cold Chain Infrastructure Scheme
    3. Food Safety Infrastructure Scheme
    4. Infrastructure for Agro-processing Clusters
    5. Creation of Backward and Forward Linkages
    6. Creation of Food Processing & Preservation Capacities. 
    7. Operation Green for Tomato, Onion and Potato (for combating inflation in these vegetables)
  • Objectives of Sampada Scheme
    1. To create jobs in the food processing industry
    2. Reduce food wastage 
    3. Boost Mega Food Parks and Cold Chain Infrastructure

5. Pradhan Mantri Krishi Sinchai Yojana

  • Dealt in Chapter

Strengths & potential of Indian agriculture

  • 17% share in GDP of Agriculture & allied activities.
  • 42% population depends on agriculture & allied activities for employment.
  • First rank in milk production accounting for 17% of world production.
  • India is the largest producer of fruits like banana, coconut, cashew, papaya, pea, cassava, pomegranate etc.
  • India is the largest producer & exporter of spices. 
  • India is the second-largest producer of vegetables, fruits & fish.
  • Weather permits multiple crops throughout the year.  

Characteristics of Indian Agriculture

  1. Indian agriculture is mainly of the Subsistence type. 
  2. Intensive farming is carried out in a limited area. 
  3. Less-mechanized: The level of mechanization is deficient.
  4. Low per person productivity. 
  5. Division of land throughout generations has led to land fragmentation. 
  6. Poor forward & backward linkages. 
  7. The underdeveloped food processing industry leads to low-value addition.
  8. Poor agro-infrastructure like cold storage, refrigerated vans etc.
  9. Indian agriculture is more focused on food grains (cereal crops). 
  10. Diversity of crops: The variety of inter-crop and intra-crop is large. 
  11. India is the highest percentage of the geographical area under cultivation globally.
  12. Mixed agriculture is practiced in India, where farmers practice agriculture and livestock /fishery/ poultry.
  13. Indian agriculture is heavily dependent on rainfall for irrigation.
  14. Climate and edaphic factors in India are favourable for agriculture.
  15. Minimum attention is paid to fodder crops.

Problems of Indian Agriculture Sector

Indian agriculture has come a long way since independence, with chronic food scarcity giving way to grain self-sufficiency despite a two-and-a-half fold increase in population. In 1966-67, before India’s Green and White Revolutions, Indian wheat and milk production were just about one-third of US output. Presently, Indian wheat output is 60 per cent higher than America’s, while Indian milk output is 50 per cent higher. However, these tremendous increases in aggregate production do mask some disquieting trends. 

1. Excessively Cereal Centric

  • Indian agriculture is, in a way, a victim of its success, becoming cereal-centric and, as a result, regionally biased and input-intensive, consuming generous amounts of land, water, and fertilizer. 

2. Reducing Per Capita land

  • In India, 87% of farmers are Small and Marginal (i.e. owning less than 2 ha land).

3. Marketing Problems 

There are a large number of marketing problems wrt Indian agriculture like

  1. APMC Act issues
  2. Lack of Warehouses
  3. The Food Processing Industry is not developed.
  4. Significant price fluctuations, especially sharp fall in prices.

4. Monoculture

  • Monoculture uses the land to cultivate one crop type, usually for multiple years in a row. E.g., Punjab’s 83% land is devoted to rice and wheat alone.
  • Impact 
    1. It decreases land productivity.
    2. It leads to an inadequate response to fertilizers. 
    3. It decreases the health of the soil.
    4. Crops become more susceptible to pest attacks. 
    5. It impacts nutritional security.

5. Water Challenge

  • India grows water-intensive crops like sugar which uses 2000 lt, and rice which uses 5000 lt of water to produce a kilogram.
  • Although water is one of India’s most scarce natural resources, India uses 2 to 4 times more water to produce a unit of major food crop than China and Brazil. 
  • 70% of fresh water in India is used for Agriculture which is the highest globally. 
  • India uses a “flood” irrigation method using canal and well irrigation facilities, which is highly inefficient.
  • Subsidies on power for agricultural use incentivize wasteful use of water.
  • According to an analysis by NASA, India’s water tables are declining at a rate of 0.3 meters per year.

6. Climate change

The increased frequency of extreme weather events adversely affects agricultural production through soil erosion, pest attack, crop failure etc. 


7. Low Productivity

  • India’s per hectare yield is very low in all crops. 
  • Except for Punjab & Haryana, all other states fare poorly wrt China. Analysis of per hectare yield of rice corroborates this fact.
China 6700 kg/ha
Punjab 6000 kg/ha
India 2400 kg/ha

8. Second Generation problem of Green Revolution

  • Misuse and abuse of the technologies responsible for the Green Revolution, like fertilizer, groundwater, etc., have negatively impacted natural resources (soil, water, biodiversity) and, consequently, challenged the long-term sustainability of agriculture. 

9. Faulty Government policies 

  • The government keeps increasing the Minimum Support Price of wheat, rice and sugarcane due to vote bank politics. On the other hand, MSP is not announced for vegetables and fruits, especially tomato, onion etc.
  • Fertilizer subsidy, especially on Urea, leads to wrong usage practices & harm the fertility of the soil in the long run, apart from increasing the government’s fiscal deficit. 

10. Minimum Export Price (MEP) issue

  • Whenever International prices are higher than Indian prices, the Government sets the Minimum Export Price high so that farmers cannot export their products and benefit from higher international prices. It is mainly done to protect Indian consumers from inflation. 
  • E.g., if the Onion price in India is ₹50/kg and that in the international market is ₹100/kg, the Government will set MEP at ₹125/kg.  

11. ECA (Essential Commodities Act)

Whenever the price of any agricultural product (like an onion) increases, the government use provisions of this act to harass those farmers who have stored their product in warehouses for better price realization.


12. Inflation Targeting Policy

In the new Inflation Targeting Policy, CPI is used in setting monetary policy (which has a 46% food component). Hence, inflation increases when the price of food crops increases, and RBI takes steps to decrease agro product prices.